NR 96-105
September 26, 1996
  
  OCC Issues Guidelines On Preapproved Credit Card Solicitations
                                 
  WASHINGTON, D.C. -- The Office of the Comptroller of the
  Currency today reminded national banks of the risks in
  preapproved solicitations of credit cards and identified
  specific steps to address weaknesses in their credit card
  portfolios. 
  
  "While there is no evidence of systemic consumer credit quality
  problems in the banking system at this time," Comptroller of
  the Currency Eugene A. Ludwig said, "there are some problems
  with credit card lending that neither regulators nor the
  banking industry can ignore."
    
  In an advisory letter on preapproved credit card solicitations
  sent to national banks and national bank examiners, the OCC
  said it had identified weaknesses in some preapproved
  solicitation programs, including:
  
  o  Lack of a comprehensive and independent risk management
       function;
  
  o  Failure to adequately test and analyze potential markets
       for credit card solicitations;
  
  o  Poor choice of solicited customers resulting in a higher
       than expected overall risk profile of booked accounts;
  
  o  Changes in underwriting criteria to increase card
       originations without proper testing and follow up or
       without analysis of prior experience; and
  
  o  Failure to adequately monitor the actual performance of
       new products compared with initial projections.
  
  The advisory letter said that appropriate responses to
  deteriorating credit card portfolios may include:
  
  o  Limiting solicitations;
  
  o  Tightening credit standards;
  
  o  Performing more thorough analysis of potential
       creditworthy borrowers;
  
  o  Upgrading the bank staff assigned to perform that
       analysis;
  
  o  Ongoing monitoring of the payment performance of high-risk
       customers in existing accounts; and
  
  o  Strengthening collection efforts.
                                
  In managing the risks associated with credit card lending, the
  OCC advised banks to identify and monitor risks for credit card
  operations; perform adequate tests of potential markets for
  credit card solicitations; ensure that targeted customers for
  preapproved solicitations are creditworthy; properly test
  solicitations that involve changed underwriting criteria; and
  monitor the actual performance of cardholder accounts booked
  through solicitations in comparison with original projections
  of performance.
  
  For a copy of OCC Advisory Letter 96-7 -- Credit Card
  Preapproved Solicitations: write to Comptroller of the
  Currency, Communications Division, Washington, DC 20219; or fax
  your request to (202) 874-4448; or go to the OCC's web page at
  http://www.occ.treas.gov; or call (202) 974-5043 to order by
  phone; or visit the OCC's Public Reference Room at 250 E
  Street, S.W. in Washington, D.C. (9 a.m. - noon and 1-3 p.m.,
  Monday-Friday).
  
                             # # #
                                 
  The OCC charters, regulates and supervises approximately 2,800
  national banks and 66 federal branches and agencies of foreign
  banks in the U.S., accounting for more than half the nation's
  banking assets.  Its mission is to ensure a safe, sound and
  competitive national banking system that supports the citizens,
  communities and economy of the United States.