Retail Lending Examination Procedures

Collection Activities

Objective: Evaluate appropriateness of collection activities and adherence to FFIEC Uniform Retail Credit Classification and Account Management Policy. Note: Refer also to the checklist in appendix C.

Re-ages

Sample size – 30 Open-end loans that received automated collection (non-customer service) re-ages in past three months.

  • Check compliance with FFIEC and bank policies.

Sample size – 30 Open-end loans that received manual collection (non-customer service) re-ages in the past three months.

  • Check compliance with FFIEC and bank policies.

Sample size - 30 Open-end loans that received customer service re-ages for more than one delinquency cycle (i.e., accounts greater than 30 days past due when re-aged) in the past three months.

  • Check compliance with FFIEC and bank policies.

Payment extensions and deferrals

Sample size - 30 Closed-end loans that received loan modifications in past three months that brought the loans to current status.

  • Include loans that were two payments or more past due.

  • Check compliance with FFIEC and bank policies.

Rewrites and renewals

Sample size – 30 Closed-end loans that were rewritten and renewed in the past three months.

  • Include loans that were 30 days or more past due.

  • Check compliance with FFIEC and bank policies.

Workout and forbearance programs

Sample size – 30 per program Open-end loans in 1) external workout programs (CCCS) and 2) internal permanent workout programs.

  • Include any program with payment amount, interest, or fee modification.

  • Verify how the minimum payment is calculated.

  • Select 50 percent of sample from accounts that entered program in last quarter.

  • Evaluate the reasonableness of forbearance programs, i.e. qualifying criteria, interest rate, payment amount, and repayment period.

  • Verify compliance with internal policies and procedures.

  • Determine length of time in temporary hardship program, if any.

  • Be alert to the movement of accounts from one program to another.

Sample size – 30 per program Open-end loans in temporary hardship programs as of the examination date.

  • Evaluate the reasonableness of forbearance programs, i.e. qualifying criteria, interest rate, payment amount, and repayment period.

  • Verify compliance with internal policies and procedures.

  • Verify how the minimum payment is calculated.

  • Be alert to the movement of accounts from one program to another.

Sample size – 30 Closed-end loans in 1) external workout programs (CCCS) and 2) internal workout programs.

  • Sample each product type, e.g., auto loans and home equity loans.

  • Include loans with interest rate and payment amount modifications.

  • Verify compliance with internal policies and procedures.

  • Evaluate the reasonableness of the program, i.e., qualifying criteria, terms, and collectibility.

Bankruptcy

Sample size 30 per loan type Open-end and closed-end loans coded as bankrupt as of exam date.

  • Include borrowers in chapter 7 and chapter 13.

  • Assess compliance with FFIEC and bank policies.

Settlement

Sample size – 30 Open-end loans with settlement agreement in the past three months.

  • Verify compliance with internal policies and procedures.

  • Evaluate reasonableness of the repayment period.

  • Determine appropriateness of loan allowance and charge-offs.

Was past due, now current

Sample size – 30 Open-end loans that were 90 days or more past due as of three billing cycles ago, but current as of next billing cycle.

  • Include accounts with NSF check payments, if possible.

  • Check compliance with FFIEC and bank policies.

  • Determine how the loan returned to current status and its appropriateness.

  • Assess the accuracy of the loan accounting system and delinquency reporting.

  • Consider the impact of any irregularities on roll rates and loan loss method.

Sample size – 30 Closed-end loans that were 60 days or more past due as of three months ago, but current in the next month.

  • Check compliance with FFIEC and bank policies.

  • Determine how the loan returned to current status and its appropriateness.

  • Assess the accuracy of the loan accounting system and delinquency reporting.

  • Consider the impact of any irregularities on roll rates and loan loss method.

Exceptions to charge-off policy

Sample size – 30 Open-end loans more than 180 days past due as of exam date.

  • Include loans from each product type.

  • Verify compliance with FFIEC and bank policies.

  • Evaluate whether exceptions to FFIEC policy are appropriate.

Sample size – 30 Closed-end loans more than 120 days past due as of exam date.

  • Include loans from each product type.

  • Verify compliance with FFIEC and bank policies.

  • Evaluate whether exceptions to FFIEC policy are appropriate.

Charge-off post mortem

Sample size – 30 Recently charged-off loans.

  • Include loans from each product type.

  • Verify compliance with FFIEC and bank policies.

  • Review borrower, payment, and collection histories to determine whether actions taken pre-charge-off were reasonable or if the practices deferred loss recognition.

  • Evaluate whether exceptions to FFIEC policy are appropriate.

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