WASHINGTON — The Office of the Comptroller of the Currency is asking lawmakers to expand its authority to take enforcement actions against independent contractors that it requires banks to hire.
In prepared remarks for a Senate Banking subcommittee hearing scheduled for Thursday, Daniel Stipano, the OCC's deputy chief counsel, said the agency would like the power to seek sanctions against independent contractors. The request comes just after regulators, including the OCC, called off the independent foreclosure review process — which relied primarily on outside consultants — because it was too expensive and time-consuming.
"Under the current statutory scheme, the OCC faces significant jurisdictional obstacles if it seeks to take an enforcement action directly against an independent contractor," Stipano said in prepared remarks to the hearing, which will look at the role of bank consultants. "Such a legislative change would be useful not only with respect to the use of independent contractors in an enforcement context but also, and perhaps more importantly, in cases where a bank has chosen to outsource significant activities to an independent contractor."
The OCC typically requires banks to hire consultants, particularly when there's an enforcement action, but the process proved faulty when the massive independent foreclosure review was halted in favor of a $9.3 billion settlement in January.
"The use of independent consultants as part of the independent foreclosure review differed substantially from the agency's normal practice in many significant ways," Stipano said. "Our failure to fully appreciate the breadth, scale, and complexity of the reviews and to define a comprehensive and effective project plan at the outset hampered the process."
Still, Stipano maintained the OCC's authority to require banks to retain independent consultants is valuable in ensuring the safety and soundness of banks.
"While we have found the use of independent consultants useful in many circumstances, it can be particularly valuable for community banks, which may lack the necessary expertise and resources to correct the problem on their own," Stipano said. "In such cases, the use of independent consultants is not only helpful, but necessary, to ensure that the bank takes the requisite corrective action to operate safely and soundly and in compliance with the law."