Appeals of Material Supervisory Determinations: Guidelines & Decisions
SARC-2007-03 (March 10, 2008)
The Bank appealed the downgrades of its Compliance Rating and its Community Reinvestment Act (CRA) Rating assigned to it as a result of the concurrent Compliance Examination and the CRA Evaluation in 2006. The examiner had determined that the Bank failed to supervise adequately its relationship with a third-party vendor of subprime credit card products. The Report of Examination (ROE) cited numerous instances of credit card practices that violated provisions of consumer protection laws, including the Federal Trade Commission Act, the Equal Credit Opportunity Act, the Truth in Lending Act, and the Fair Credit Reporting Act, among others. Additionally, the Banks compliance management system failed either to forestall or detect the violations.
Bank management argued that the violations were not supported by the record and in fact were no more than allegations by the examiner. Further, the Bank argued that the findings were inconsistent with the Banks prior examination history; that its compliance management system was robust, containing refined policies, practices, and procedures designed to prevent such violations; and that the CRA Rating was a misapplication of the FDICs regulations.
The Committee concluded that the solicitations, collection practices, and the workout programs for the credit card products were unfair and/or deceptive and that the violations were catalogued in detail in the ROE, properly cited and documented. The Committee also found the Banks compliance management system weak, monitoring practices ineffective, and training for Bank personnel deficient. Finally, the Committee determined that the Banks CRA Rating, as a result of the findings of unfair and/or deceptive practices and violations of consumer laws and regulations, was consistent with regulatory requirements.