# O **NEWS RELEASE**

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| ## Comptroller of the Currency      | ##### NR 2000-37               |
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| Administrator of National Banks     |                                |
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FOR IMMEDIATE RELEASE Contact: Robert M. Garsson

May 24, 2000 (202) 874-5770

### Comptroller Hawke Outlines Program to Combat Predatory Lending

WASHINGTON \-- Comptroller of the Currency John D. Hawke Jr. told
Congress today that the OCC will use the supervisory process to combat
predatory and abusive lending at any national banks found to engage in
such practices.

Mr. Hawke said the Office of the Comptroller of the Currency will deter
such activity through safety and soundness, fair lending and consumer
compliance examinations; the licensing and chartering process; and
individual enforcement actions.

"One common characteristic of predatory lending that we can address
through our supervisory process is the practice of making home equity
loans under circumstances where the lender cannot reasonably expect
repayment other than through a foreclosure sale of the borrower's home,"
Mr. Hawke said in testimony before the House Committee on Banking and
Financial Services. "This is a classic type of unsafe and unsound
lending."

To address the problem, the Office of the Comptroller of the Currency
plans to issue guidance directing examiners to carefully review bank
lending policies and practices to ensure they would not permit loans to
be made without a reasonable expectation of repayment without resort to
the borrower's collateral. If examiners find problems, they will be
directed to take further action, Mr. Hawke said.

"Loans predicated on home equity where the borrower does not demonstrate
the capacity to repay the loan as structured would be adversely
classified and further accrual of interest may be disallowed," the
Comptroller added.

Mr. Hawke said the OCC plans to issue guidance in the near future
emphasizing that abusive lending practices can involve unlawful
discrimination. "This guidance will help set the scope and focus for our
fair lending examinations and may lead to targeted fair lending
investigations," he said.

The Comptroller also said that abusive lending practices have been
viewed as inconsistent with the Community Reinvestment Act's mandate to
meet the credit needs of an institution's entire community. The bank
supervisory agencies should address on an interagency basis how

-more-

predatory loans might be identified in a CRA exam and whether an
institution should receive no \-- or even negative \-- CRA credit for
such loans.

Mr. Hawke commended the banking committee for beginning work on
predatory lending and said that because of the limitations in existing
law, it is important that Congress review this issue.

The Comptroller said it is also important that any reform measures be
carefully crafted to avoid unintended consequences.

"While we clearly need to address real abuses that exist, particularly
in connection with home-secured loans, any changes in law or regulation
should preserve and encourage consumer access to credit, meaningful
consumer choice, and competition in the provision of financial services
to low- and moderate-income families," he said.

"Determining how to draw the line between predatory and legitimate
credit practices in a way that will both combat abuses and advance these
other objectives is a major challenge," Mr. Hawke added.

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  The OCC charters, regulates and examines approximately 2,400 national
  banks and 58 federal branches of foreign banks in the U.S., accounting
  for more than 57 percent of the nation's banking assets. Its mission is
  to ensure a safe and sound and competitive national banking system that
  supports the citizens, communities and economy of the United States.
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