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Ceos of all of the National Banks online installment loans il and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested events

Overview

Work of the Comptroller associated with the Currency (OCC) is issuing this guidance to describe security and soundness measures that nationwide banking institutions and federal cost savings associations (collectively, banks) should follow when they provide income tax products that are refund-related. This guidance replaces OCC Bulletin 2010-7 (February 18, 2010), which sent the ”OCC Policy Statement on Tax Refund-Related items, ” but doesn’t supersede or amend just about any OCC issuances.

Note for Community Banks

This guidance relates to all OCC-supervised banking institutions offering tax products that are refund-related.

Features

The guidance outlines security and soundness measures banking institutions should follow when they provide taxation refund-related services and products. Those measures consist of

• Making certain the lender’s board of directors maintains risk that is sound policies, procedures, and techniques to oversee all income tax refund-related items.
• Applying effective controls that are internal review requirements to promote and solicitations.
• Supplying appropriate disclosures that explain material components of the merchandise to customers.
• Applying appropriate research and sufficient procedures to ensure tax refund-related services and products supplied by 3rd events conform to relevant guidance.
• Making certain Bank Secrecy Act (BSA) conformity risk management systems cover taxation products that are refund-related.
• Supplying training programs (including certification processes) that target regulatory demands, interior policies and procedures, and obligations for keeping a compliance program that is effective.
• Keeping adequate money and liquidity amounts.
• Developing timely and management that is accurate systems (MIS) for taxation refund-related services and products.
• Ensuring the financial institution’s compliance along with applicable regulations, including those involving customer security.

Background

The term ”tax refund-related services and services and products” encompasses credit services and products, deposit services and products, and settlement solutions to send funds that are tax-related. Tax refund-related items present specific safety and soundness and conformity dangers, due to (1) their particular payment and value structures and (2) banking institutions’ reliance on third-party tax return preparers whom communicate with customers. With appropriate customer defenses and danger management controls that target security and soundness issues, nonetheless, the products might provide options that are reasonable clients.

Tax refund-related items can include some or every one of the after features:

• Item exists through a taxation planning solution.
• Item is predominantly provided during taxation season.
• Charges related to income tax planning along with other services or products are subtracted through the consumer’s taxation reimbursement.
• Consumer’s taxation reimbursement is employed to settle or collateralize the mortgage, or even start a deposit or prepaid account.
• Only a tiny portion of reports, exposed throughout the income tax season, stay active later on within the 12 months.

You will find three primary kinds of taxation refund-related items:

Credit items

Tax refund-related credit items presently available on the market include the annotated following:

• Reimbursement anticipation loans (RAL), that are short-term loans manufactured in expectation of a tax reimbursement being qualified and compensated because of the Internal Revenue Service (IRS) or even state taxation authority. A bank makes the loan through third-party taxation preparers that provide both income tax planning solutions and RALs.
• ”Holiday loans” and ”pre-file” or ”pay-stub” loans, that are provided through third-party taxation preparers prior to the consumer receives a W-2 type for the year that is current. These loans exhibit more credit danger than typical RALs because funds are advanced level predicated on past years’ earnings or a pay stub that is current.
• Other bank programs that anticipate (regardless if they cannot fundamentally require) loan payment from future income income tax refund proceeds.

Deposit products and prepaid access cards

Tax refund-related deposit services and products presently available on the market include the transmittal of a income tax reimbursement by the relevant income tax authority 1 to (1) a small or special-purpose deposit account that a bank establishes to issue a check to your client 2 or (2) a bank-issued prepaid access card. 3

Settlement services

Tax refund-related settlement solutions include the transmittal of the income tax reimbursement because of the relevant taxation authority up to a bank-controlled account. The lender typically releases funds towards the client after re re payment towards the taxation preparer for the taxation planning solutions.

Safe and Sound Methods regarding the Tax Refund-Related Items

This guidance addresses sound underwriting and system administration methods for banks that provide tax refund-related services and products and it is based on the premise that banking institutions should provide services and products that meet clients’ monetary requirements on a nondiscriminatory foundation and without subjecting clients to treatment that is unfair.

Banking institutions’ risk administration policies, procedures, and techniques for income tax refund-related services and products should really be (1) commensurate with all the complexity and nature of these task; (2) in keeping with safe and banking that is sound and appropriate reporting demands; and (3) undertaken having an admiration of and ability to address all relevant customer security and reputation danger factors, along with legal conformity responsibilities, associated with the task.

The danger administration principles established in this guidance are divided in to three categories: (1) danger administration for several income tax refund-related items; (2) supplementary danger administration for income tax refund-related services and products involving an expansion of credit (taxation refund-related credit services and products); and (3) supplementary danger management for taxation refund-related services or products for transmitting a reimbursement (taxation refund-related deposit items).