On August 4, 2014 the Office of the Comptroller of the Currency (“OCC”) issued new Risk Management Guidance to all National Banks and Federal Savings Associations regarding the sale of consumer debt. The OCC bulletin issues guidance on best practices and procedures for the sale and resale of debt from banks to debt buyers.
In addition to describing the internal policies and procedures that a bank must develop and implement regarding debt-sale arrangements the bulletin also describes the due diligence that a bank must go through when selecting a debt buyer. Banks are expected to “fully understand the debt buyers’ collection practices, including the resources that debt buyers or their agents use to manage and pursue collection.” This includes the requirement that the bank review the debt buyers audited financial statements and confirm all required licenses and insurance policies are in place. The bank must also assess the debt buyers’ reputation and confirm that the debt buyers’ staff is “appropriately trained to ensure that it follows applicable consumer protection laws and treats customers fairly throughout the collection process.” Banks are required to perform all due diligence before entering into a sale agreement with the debt buyer.
Further, the bulletin also lays out the documentation that a bank must provide to a debt buyer “at the time of sale.” This is required to ensure that the debt buyer has “accurate and complete information necessary to enable them to pursue collections in compliance with applicable laws and consumer protections” at the time of sale. The bulletin requires the bank to provide the debt buyer with:
– A copy of the signed contract or other documents that provide evidence of the relevant consumer’s liability for the debt in question
– Copies of all, or the last 12 (whichever is fewer) account statements
– All account numbers used by the bank (and if appropriate its predecessors) to identify the debt at issue
– An itemized account of all amounts claimed to be owed in connection with the debt to be sold, including the loan principal, interest and all fees.
– The name of the issuing bank, and if appropriate, the store or brand name.
– The date, source, and amount of the debtor’s last payment and the dates of default and amount owed.
– Information about all unresolved disputes and fraud claims made by the debtor. Information about collection efforts (both internal and third-party efforts, such as by law firms) made through the date of sale.
– The debtor’s name, address, and Social Security number.
The bulletin concludes by listing certain types of debt and certain situations under which debt should not be sold by the bank and also a requirement that policies and procedures be in place to ensure all parties involved in the debt-sale arrangement comply fully with all applicable consumer protection laws.
The Full Text of the OCC’s August 4, 2014 Bulletin may be found: HERE