OCC Improves Treatment for Servicemembers, Lauds Cyber Security Efforts and Urges ”Responsible” Financial Services Innovation

Deputy Comptroller for Compliance Operations and Policy Grovetta Gardineer asserted that the OCC has taken steps to supervise and enforce better treatment of members of the armed forces under the Servicemembers Civil Relief Act of 2003 (“SCRA”) and under amended rules implementing the Military Lending Act (“MLA”). In a speech delivered before the Association of Military Banks of America, Ms. Gardineer discussed OCC directives to banks to improve SCRA compliance policies and procedures. She also discussed the expanded coverage of MLA rules under recent Department of Defense final amendments, including (i) creating a private right of action, (ii) giving administrative enforcement authority to the federal banking agencies and the Consumer Financial Protection Bureau (“CFPB”) and (iii) applying the rules for MLA protections to payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, and unsecured open-ended lines of credit and credit cards.

Ms. Gardineer reported that “cyber threats against financial institutions of all sizes are increasing and becoming more and more sophisticated.” In this regard, she mentioned the development by the Federal Financial Institutions Examination Council (“FFIEC”) of a cybersecurity assessment tool to help banks and examiners assess the maturity of cybersecurity programs. The tool (i) provides a common framework for assessment across institutions, (ii) allows regulators and bankers to track their progress and have a better view of the industry’s ability to withstand cyberattacks, and (iii) helps bankers and examiners to talk through issues facing individual bankers.

Finally, Ms. Gardineer suggested that the lack of innovation in the financial services industry threatens business, and added that more “responsible” approaches to meet the changing needs of consumers, businesses and communities will help banks continue to be a source of strength for the nation’s economy and for local communities. “We are seeing customers turn to alternative service providers in droves when traditional financial service providers can’t satisfy their appetites,” she said. “If the current financial service industry participants fail to innovate, someone else will, and today’s service providers will become historical footnotes.”

Lofchie Comment: In her criticism of banks’ failure to innovate, Ms. Gardineer suggested that “we can eliminate the misperception that it is too difficult to innovate in the regulated space – a perception that may be contributing to more and more innovation occurring outside the regulated financial industry.” That description of the problem completely misses the point. Is it really the case that banks do not innovate because of the “perception” that the regulators discourage innovation?

Ms. Gardineer reports that the OCC will address the question by assembling a “team of representatives . . . that includes policy experts, examiners, lawyers and others. . . .” Perhaps a different team with a different composition would be better suited to consider the subject of how to encourage innovation.