In its efforts to encourage banks to offer responsible short-term, small dollar installment loans to
help meet the credit needs of consumers, the
Office of the Comptroller of the Currency (OCC)
issued Bulletin 2018-14 Core Lending Principles
for Short- Term, Small-Dollar Installment Lending
on May 23, 2018.
The Bulletin serves as a reminder of the
core lending principles for prudently managing
risks associated with offering short-term, small
dollar installment loan programs. The three core
■ ■ ■ All bank products should be consistent with
safe and sound banking, treat customers
fairly, and comply with applicable laws and
■ ■ ■ Banks should effectively manage the risks
associated with the products they offer,
including credit, operational, compliance, and
■ ■ ■ All credit products should be underwritten
based on reasonable policies and practices,
including guidelines governing the amounts
borrowed, frequency of borrowing, and
Reasonable policies and practices specific to
short-term, small-dollar installment lending
would generally include the following:
■ ■ ■ Loan amounts and repayment terms
that align with eligibility and underwriting
criteria and that promote fair treatment and
access of applicants. Product structures
should support borrower affordability and
successful repayment of principal and
interest in a reasonable timeframe.
■ ■ ■ Loan pricing that complies with applicable
state laws and reflects overall returns
reasonably related to product risks and costs.
The OCC views unfavorably an entity that
partners with a bank with the sole goal of
evading a lower interest rate established
under the law of the entity’s licensing
■ ■ ■ Analysis that uses internal and external
data sources, including deposit activity, to
assess a consumer’s creditworthiness and to
effectively manage credit risk. Such analysis
could facilitate sound underwriting for credit
offered to consumers who have the ability
to repay but who do not meet traditional
■ ■ ■ Marketing and customer disclosures that
comply with consumer protection laws and
regulations and provide information in a
transparent, accurate, and customer-friendly
■ ■ ■ Loan servicing processes that assist
customers, including distressed borrowers.
To avoid continuous cycles of debt and costs
disproportionate to the amounts borrowed,
timely and reasonable workout strategies
should be used.
■ ■ ■ Timely reporting of a borrower’s repayment
activities to credit bureaus. Borrowers
should have the ability to demonstrate
positive credit behavior, build credit history
or rebuild credit scores, and transition into
additional mainstream financial products.
OCC Issues Core Lending Principles for
Short-Term, Small Dollar Installment Lending
By Leah Hamilton, J.D.
ABOUT THE AUTHOR
LEAH M. HAMILTON, J.D., is a Vice President and Senior Consultant with
ProBank Austin’s Education Division. With nearly 25 years of experience in
the financial services industry, her compliance knowledge spans Lending,
Deposits, BSA/AML and Compliance Management. As a compliance expert,
Leah has served as a lead advisor on consent order remediation engagements
and management responses to examiner concerns. She is often called upon
to assist in potential RESPA Section 8, UDAAP and Overdraft matters. Leah
has trained more than 1,000 lenders on TRID and served as a TRID and 2018
HMDA expert for the American Bankers Association.
Prior to joining the firm, Leah has served as the Chief Compliance Officer for
a $4 billion community bank, a start-up mortgage company and, most notably,
for TriComply, Temenos’ compliance division. Additionally, she has served as
in-house counsel and worked for several leading banking software firms. Leah
received her Juris Doctorate from Northern Illinois University College of Law
and her Bachelor of Arts in General Studies degree from the University of Texas
at Dallas where she majored in law and minored in business management.
Leah also serves as a faculty member of Southern Methodist University’s SW
Graduate School of Banking in Dallas where she teaches Compliance 101, Fair
Lending and the Mortgage Loan Process. Reach her at email@example.com.