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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 Federal Financial Institutions Examination Council published proposed revisions to call reports for banks and thrifts to address collection of information on subprime consumer lending programs. Banking institutions that engage in subprime consumer lending would be required to complete some or all of the proposed new schedule depending on the institution’s volume of subprime business.

Generally, borrowers will be deemed “subprime” if they display credit risk characteristics that may include one or more of the following:

  • Two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months;

  • Judgment, foreclosure, repossession or charge-off in the prior 24 months;

  • Bankruptcy in the last 5 years;

  • Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood; and/or

  • Debt service-to-income ratio of 50% or greater, or otherwise limited ability to cover family living expenses after deducting total monthly debt-service requirements from monthly income.

Comments must be submitted on or before September 10, 2002.

In a related matter, the Office of the Comptroller of the Currency, the Board of Governors of the Federal System, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision have developed draft account management and loss allowance guidance for credit card lending. Final guidance is expected to be issued on August 16, 2002 by the Federal Financial Institutions Examination Council.

The guidance applies to institutions that offer credit card programs and are subject to supervision by one of the above named agencies. The guidance deals with credit line management, overlimit practices, workout and forbearance practices, income recognition and loss allowance practices.

Responses to the July 22 draft are requested by August 9, 2002.

If you would like additional information regarding this Alert or a copy of the proposals, please contact Elizabeth Anstaett at (614) 628-1604 or [email protected] .