Not Obama's OCC: Agency sets ambitious reg relief agenda

Comptroller of the Currency Joseph Otting took office only late last year, but he is wasting little time in tackling a series of hot-button topics, including easing anti-money-laundering regulations and lowering national bank fees.

In so doing, he's also making it clear that the agency is going in a different direction than in the Obama era, when Thomas Curry was comptroller. Curry's agenda was focused on ensuring examiners are not too close to the institutions they oversee and offering fintechs a charter so they can comply with national standards. Otting has scrapped Curry's plan to move examiners out of the bank and seems lukewarm at best on the fintech charter.

Following is a look at Otting's agenda.

Community Reinvestment Act

Among the most controversial issues is CRA reform. Lenders and consumer groups alike have long argued the regulations governing the law, which have not been updated in more than two decades, are stale. But finding a reform plan that can satisfy both sides is tricky.

The OCC is expected to release an advanced notice of proposed rulemaking soon which will ask commenters to weigh in on a number of questions. Among them will be what metric can be used to determine if a bank has met its CRA obligations.

"There’d be no magic,” Otting said last week. “And so every three years, when the CRA exam occurs, you’d know where you were so you wouldn’t have any questions.”

Exactly what that metric will be is unclear. He also wants to speed up the process, which typically lags by more than a year, so that the OCC can release real-time data.

The OCC “will have real-time data every quarter, where we can basically certify that you’re in compliance with CRA," Otting said.

Otting has also suggested that regulators should move away from using geographic location as a core part of CRA, noting that many banks offer digital offerings that are not tied to branch locations.

Otting now runs an OCC that is significantly more receptive to banks being active in small-dollar lending. Before he was sworn in, the agency rescinded a 2013 guidance that had effectively banned banks from offering deposit advance products. More recently, the OCC ended its 2002 regulatory order against the payday lender Ace Cash Express, allowing the Texas company to partner with national banks.

The recent moves are a marked change from the agency’s views on payday lending over a decade ago. In 2003, then-Comptroller of the Currency John D. Hawke Jr. told payday lenders, “Stay the hell away from national banks.” Otting has sung a different tune, saying that banks should become active in small-dollar lending once again.

“We forced banks out of that small-ticket and consumer lending” business, where some rules required “full underwriting for a $500 loan that just don’t make sense,” he said at an industry conference on April 9. “We really want more banks back in that space, because you will do it at a fairer, cheaper and with better rates issued than anybody else.”

The OCC is working on a set of recommendations for the Treasury Department's Financial Crimes Enforcement Network to give banks more flexibility when it comes to compliance with the Bank Secrecy Act and other anti-money-laundering laws.

Otting has argued that the system is too focused on penalizing institutions when they let something slip through, and not enough on the overall risk management process.

"We’ve agreed we would come back to them with recommendations on how we would like to offer bank flexibility and some variances on the examination process,” Otting said last week. “There’s a lot of things we can do to solve this BSA/AML issue without disrupting the intent. It’s kind of gotten to a ‘gotcha’ system. I think we need to step back from that and say what can we do to not put all that onerous responsibility on financial institutions.”