Alert June 14, 2011

OCC Proposes Guidance on Deposit-Related Consumer Credit Products

The OCC proposed guidance on deposit-related consumer credit products including automated overdraft protection and direct deposit advance programs. The proposal details the principles the OCC would expect national banks to follow in connection with such products to address potential operational, reputational, compliance, and credit risks. The OCC anticipates that the guidance would be applicable to federal savings associations once they become subject to OCC supervision and regulation on July 21, 2011. The principles include (1) providing clear and conspicuous disclosures concerning alternative products; (2) conducting legal compliance; (3) enrolling customers in the credit product by affirmative request, not automatically; (4) analyzing the customer's ability to repay the credit obligation; (5) placing prudent limitations on credit extensions, customer costs, and usage; (6) regularly monitoring programs to identify risks; (7) having appropriate oversight by management on new products and services; and (8) adhering to applicable guidelines on account management and charge-offs. Appendices to the proposal illustrate how these principles apply to automated overdraft protection products and deposit advance products. Comments on the proposal are due July 8, 2011.