Warning: Cannot modify header information - headers already sent by (output started at /home/content/28/9933528/html/infinityfinancialservices/index.php:2) in /home/content/28/9933528/html/infinityfinancialservices/wp-content/themes/leafy/functions.php on line 434
InfinityFinancialServices.com » Blog Archive » Regulatory Implications

Regulatory Implications

Recently, bank examinations have disclosed that a number of institutions involved in payday lending have failed to properly assess and control the risks associated with payday lending, and federal banking agencies have taken swift action to address the identified problems. For example, in September 2002, the FDIC entered into a formal enforcement action with one of its state nonmember institutions involved in payday lending. The FDIC required the institution, in part, to strengthen risk management practices associated with payday lending and to significantly augment capital to cover the greater risks associated with payday lending activities. The Office of the Comptroller of the Currency also has recently entered into formal agreements with several national banks, in some cases requiring the institutions to exit the payday lending business as a result of their failure to properly manage the attendant risks.

Depository institutions involved in payday lending should implement risk management programs that appropriately identify, measure, monitor, and control the risks associated with payday lending. The FDIC has recently developed draft guidelines for payday lending that would apply to all institutions under the FDIC’s supervision that offer payday programs. The guidelines describe the FDIC’s expectations for prudent risk management practices for payday lending activities, particularly with regard to capital, allowance for loan and lease losses, and loan classifications. The draft also addresses guidelines for recovery practices, income recognition, and managing risks associated with third-party relationships, as well as compliance with consumer protection laws.

source: fdic.gov

Comments are closed.