On October 28, the Deputy Comptroller for Supervision of Risk Management Darrin Benhart of the Office of the Comptroller of the Currency discussed auto and home equity lending risks and consumer debt sales. A copy of his remarks, which were made before the Financial Services Collections and Credit Risk Conference, can be found here.
Benhart said that the OCC is seeing greater consumer risk that can be attributed to increased competition. “Competitive pressure is driving some auto lenders to pursue growth by lengthening terms, increasing advance rates, and originating loans to borrowers with lower credit scores,” explained Benhart. The most significant signal of increasing risk is that the average loss per vehicle has risen significantly over the past 24 months. The OCC will continue to monitor product terms and risk layering practices to ensure that lenders manage this growth responsibly.
Benhart reported that the OCC has seen a very positive response by the industry with regard to Home Equity Lending, or HELOCs. Between December 2011 and December 2013, the volume of HELOCs was reduced by just over 20 percent. The OCC believes this decrease shows active risk management efforts on behalf of banks.
Finally, Benhart addressed the risks associated with selling charged-off debts. The OCC has seen significant risk taken in this area that arises from poor planning and oversight by banks and shoddy service on behalf of the debt buyer. Benhart stated that “both bank and debt buyer may see increased compliance issues that result in higher legal costs, enforcement actions, and potentially, loss of business.”
It is clear that these are three areas on which the OCC is planning to focus its attention in the future. It is important to follow OCC guidance to avoid increased regulatory scrutiny and potential enforcement actions by the OCC and other federal agencies.