The Office of the Comptroller of the Currency on Tuesday cleared up a key part of a recent bulletin issued on consumer debt sale arrangements between third parties.
Darrin Benhart, appointed a day earlier to serve as the OCC's deputy comptroller for Supervision Risk Management, spoke at Collections & Credit Risk's 22nd annual Financial Services Collections & Operational Risk conference in Las Vegas. His full speech is available here.
The guidance details the types of debt that are not appropriate for sale, such as debts of borrowers that have involved in bankruptcy proceedings. The OCC's bulletin came after the agency reviewed collection and sales activities from the largest banks it regulates. The idea was to develop best practices for financial institutions, debt buyers and collectors, consumer and community advocates and other governmental groups.
"The guidance indicates that certain types of debt are not appropriate for sale because they likely fail to meet the basic requirements to be an ongoing legal obligation of the borrower," Benhart said. "The guidance offers a couple of examples of the debt that we had in mind, including debt of borrowers that have sought or are seeking bankruptcy protection.
Benhart was heavily involved in the OCCs efforts to implement the recommendations of a Supervision Peer Review, which brought together a group of senior international regulators to evaluate the OCCs supervision of large and midsize banks and make recommendations on how that work could be improved.
He was named deputy comptroller for Credit and Market Risk in 2011 and previously served as director for Commercial Credit in the OCCs Credit and Market Risk division, where he oversaw a team responsible for commercial credit policy issues and commercial credit analytics.
The OCC's guidelines for the sale of consumer debt issued in August outlined the steps banks must take before selling charged-off consumer loans. Federal and state regulators increasingly have targeted debt buyers that violate consumer protection laws, but banks generally have not been held responsible for these companies' conduct.
The debt-sales guidance was intended to expand on and formalize the best-practices guidance on debt sales that the OCC released in 2013. While the best practices were recommendations geared to large banks, the new guidance applies to all institutions regulated by the OCC, regardless of size.