The Board emphasizes that its examiners will completely review every aspect of a bank’s deposit advance system for conformity with relevant legislation (like the UDAP provisions of Section 5 of this FTC Act). Moreover it tips to dangers due to the installment loans Kentucky utilization of third-party contractors, specially where fee-sharing or other arrangements create incentives for improper overuse of DAP loans. Further, it directs State user banking institutions to mitigate dangers through item design also to implement procedures closely observe third-party merchant techniques and results. It doesn’t, but, enforce new measures that are prescriptive the usage of supervisory tools.
The value for this huge difference just isn’t completely clear. It may possibly be a question that is timing.
As the banks supervised because of the Board that offer DAP loans tend to be adequate become at the mercy of CFPB legislation, the Board may just be deferring policy-making in the problem towards the CFPB. The Board may feel its approach comports positively because of the allocation of main duty for customer security dilemmas into the CFPB underneath the Dodd-Frank Act.
The OCC additionally the FDIC, but, each supervise a lot more banks that are underneath the $10 billion limit for entities at the mercy of direct CFPB regulation. The Agencies’ action may stem from a desire to restrict the spread of DAP beyond those supervised banking institutions currently providing such services and products. No matter what inspiration, the Agencies’ proposed Supervisory Guidance is a far more use that is assertive of authority compared to the Board’s Statement.
Regardless of the divergence in regulatory approach, it really is obvious that deposit advance services and products is supposed to be attracting a greater amount of regulatory scrutiny. (more…)