OCC Formalizes Rules for Selling Consumer Debt

August 5, 2014
American Banker 
debt settlement news
The U.S. Office of the Comptroller of the Currency (OCC) has issued new guidelines governing the sale of consumer debt, which could help improve a practice that consumer advocates say is rife with errors and abuses.

Under the guidance, which formalizes best practices recommended by the OCC last July, banks are expected to analyze the risks of consumer-debt sales and provide accurate data to debt buyers. The OCC also plans to make banks responsible for performing due diligence on debt buyers prior to a sale. The guidelines dictate that a debt buyer "should be able to demonstrate that it maintains tight control over its network of debt buyers and that it conducts activities in a manner that will not harm the bank's reputation." Banks that are considering a relationship with debt buyers "should first assess the debt buyer's record of compliance with consumer protection laws and regulations."

Banks must now provide debt buyers with signed customer contracts as well as account numbers; copies of the last 12 account statements; and the date, source, and amount of the last payment. They cannot sell categories of debt that "fail to meet the basic requirements to be an ongoing legal debt" and should avoid selling debt that poses compliance and legal risk, such as debt covered by the Servicemembers Civil Relief Act.

The guidelines stem from the OCC's three-year review of large banks' debt collections and sales, which largely confirmed claims of serious problems with banks' internal controls over consumer-debt sales. There were instances when banks transferred customer files that lacked basic information, such as account numbers or customer payment histories. Banks often sold debt without first investigating the buyers.









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