Joint Statement
By
John D. Hawke, Jr., Comptroller of the Currency
Ellen Seidman, Director, Office of Thrift Supervision

The Office of the Comptroller of the Currency and the Office 
of Thrift Supervision today are releasing supervisory 
guidance to national banks and federal thrifts relating to 
so-called “title loans” and “payday loans.”   Title loans 
are short term, small denomination loans, made at extremely 
high interest rates and secured by liens on borrowers’ 
titles to their automobiles.  Payday loans also are short 
term, small denomination, loans that borrowers promise to 
repay out of their next paycheck or deposit of funds. 

These types of lending appear to be responsive to a demand 
for short-term, low-balance credit.  But many times, 
particularly when loans are rolled over repeatedly, the cost 
of such credit can become extremely high.  We urge banks and 
thrifts to give serious consideration to how they can serve 
this market in a safe and sound manner that responsibly 
meets consumers’ needs.

The OCC’s and OTS’s supervisory concerns are not limited to 
these particular products, however. Title loans and payday 
loans are examples of types of products being developed by 
non-bank vendors who have targeted national banks and 
federal thrifts as delivery vehicles.  These include check 
cashing services and “secured” credit cards.

Many vendors of such products engage in practices that may 
be viewed as abusive to consumers.  They seek out national 
banks and thrifts as participants in the marketing of their 
products in an effort to avoid the application of state and 
local consumer protection laws that would restrict the ways 
in which these products are offered.  In many cases, the 
national bank or thrift is not significantly involved in the 
marketing of the product and may have a relatively 
insignificant economic interest in the business generated by 
the vendor.  The OCC and OTS are concerned that such 
situations may represent an abusive use of the benefits of 
the national bank and federal thrift charters.

We urge national banks and federal thrifts to think 
carefully about the risks involved in such relationships, 
which can pose not only safety and soundness threats, but 
also compliance and reputation risks.  We intend to 
scrutinize carefully any such arrangements and to use our 
supervisory authority to examine the operations of vendors 
who act as service providers to national banks and federal 
thrifts that are sought out to deliver such products. Under 
a regulation being issued for comment today, the OCC will 
clarify that it may assess the costs of any such examination 
against the bank entering into such an arrangement.  The OTS 
has the authority to assess these costs already.

Finally, vendors who have targeted national banks and 
federal thrifts as a means of marketing such products free 
from state and local consumer protection laws should not 
automatically assume that the benefits of the bank or thrift 
charter will accrue to them by virtue of such relationships, 
or that the OCC or OTS will support such a position if 
challenges are raised.