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Dreher Tomkies LLP
Attorneys at Law
2750 Huntington Center
41 South High Street
Columbus, Ohio 43215
Telephone: 614-628-8000
Fax: 614-628-1600

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The Office of the Comptroller of the Currency has adopted a new Part 37 to its regulations which adds consumer protections and establishes safety and soundness standards for debt cancellation contracts (DCCs) and debt suspension agreements (DSAs). The regulation (i) codifies the OCC’s longstanding position that DCCs and DSAs are permissible banking products and (ii) requires national banks to provide disclosures on issues that are likely to be most important to customers in deciding whether to purchase DCCs or DSAs. The regulation also prohibits national banks from:

  • Requiring a single lump-sum payment for a DCC or DSA purchased in connection with a mortgage loan;
  • Conditioning the availability of credit upon a customer’s purchase of a DCC or DSA;
  • Engaging in misleading practices or using misleading advertising;
  • Retaining a unilateral right to modify a DCC or DSA unless either (i) the modification is favorable to the customer and is made without additional charge or (ii) the customer is notified of the modification and had a reasonable opportunity to cancel the contract before it takes effect.

One section of the new regulation imposes very specific disclosure rules. Moreover, the regulation addresses important safety and soundness issues by requiring national banks that sell DCCs or DSAs to establish and maintain effective risk management and control processes over DCCs and DSAs, including appropriate recognition and financial reporting of income, expenses, assets and liabilities associated with the products. National banks are also required to assess the adequacy of their internal control and risk mitigation activities. The rule takes effect June 16, 2003.

For more information regarding this Alert or to obtain a copy of the proposed rule, please contact Mike Tomkies at (614) 628‑1603 or [email protected] .