Magazine article American Banker

OCC Warns on Offering Preapproved Credit Cards

Magazine article American Banker

OCC Warns on Offering Preapproved Credit Cards

Article excerpt

Responding to the rise in credit card losses, the Office of the Comptroller of the Currency on Thursday issued a warning about the risks of preapproved solicitations.

In a seven-page advisory letter, the national bank regulator said weaknesses have cropped up in card marketing campaigns.

The agency suggested a number of remedies, which raised industry representatives' concerns about new compliance burdens.

"There are things in this letter that make my skin crawl," said American Bankers Association chief economist James F. Chessen. "I worry that ... a bank will have to create a huge file that sets out in writing every reason for its decisions."

For example, to help monitor the performance of accounts acquired through direct mail, the OCC recommended that bankers collect delinquency, bankruptcy, and account-usage data about their customers.

Allen Sanborn, president and chief executive of Robert Morris Associates, said the bulletin "is stronger than we had anticipated, particularly since we feel banks are taking actions already to remedy" the deteriorating quality of credit card loans.

But in an interview Thursday, Jimmy Barton, chief national bank examiner at the OCC, defended the document that went out to examiners and national bank executives.

"As we have watched this explosion in the growth of credit cards, we begin to see small weaknesses in the process," he said. "While there's no evidence of systemic credit quality problems, we want to keep it that way."

Some national banks are not adequately testing markets before they plunge in with preapproved lines of credit, OCC examiners have reported. …

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