WASHINGTON — Regulators are scrutinizing national banks' online and offshore relationships with payday lenders, Comptroller of the Currency Thomas Curry said Wednesday.
The agency is particularly interested in how some payday lenders use banks to circumvent state laws, he said.
"This is a significant issue that we're looking at closely at the OCC from a variety of angles," Curry said at a conference hosted by the National Community Reinvestment Coalition. "There's also a larger issue under what appropriate safeguards or traditions that mainstream banks …are appropriately assessing and addressing the numerous risks — whether they're consumer compliance related or risk management related."
He said the OCC is reviewing guidance issued last year on bank payday lenders and overdraft practices.
Some large banks were criticized recently for allowing automatic withdrawals for payday loans after depositors attempted to stop it. Consumer advocates have also criticized the regulatory guidance for not being broad enough to stop problems with online and off-shore payday lenders.
"That is something we're revisiting closely and likely to make an announcement in the future," Curry confirmed.
But Curry focused a majority of his remarks on another proposal put out by regulators this week that would amend Community Reinvestment Act regulations.
The proposals are meant to clarify how banks can further earn CRA credit, including by going outside of a bank's immediate assessment area to do community development activities in more rural and low-income areas.
"Often we have observed that multiple institutions are competing with one another to find community development projects in cities, particularly the urban banking centers, while compelling lending and investment needs in less populated areas are going unmet," Curry said. "Some banks have told us that these imbalances stem in part from the lack of clarity in our existing CRA guidance: that they have confined their community development lending and investment activities to their assessment areas, because they can't be certain they will receive CRA consideration for activities outside of their assessment areas."
Curry vowed that their examiners would use consistency when examining banks for CRA compliance, a comment for which he received loud applause.
"When I meet with bankers and community groups, I commonly hear that the existing rules and guidance are not applied consistently and there is a lack of transparency about how they are applied," Curry said. "As the new guidance is adopted, the agencies will revise examination procedures and introduce examiner training, to ensure that the rules will be applied consistently within and among the three agencies."
The comment period on the proposals for the guidance ends on May 17.
Curry also received applause for acknowledging issues that have not yet been addressed, particularly on whether banks that draw customers outside of their branch-based assessment areas should have increased CRA responsibilities.
"As you can imagine, this is not a simple issue to resolve," Curry said. "We must engage in a serious discussion regarding how to define assessment areas and achieve the right balance to ensure that CRA keeps pace with the banking industry that we have today."