FOR IMMEDIATE RELEASE
January 3, 2002
Contact: Kevin Mukri
OCC Orders Eagle to Cease Payday Lending Program
WASHINGTON — The Office of the Comptroller of the Currency announced today that Eagle National Bank has signed a Consent Order directing it to cease all payday lending activities. Eagle has been engaged in payday lending through arrangements with Dollar Financial Group. The OCC acted after finding that Eagle was in material noncompliance with an earlier Memorandum of Understanding entered into with the OCC and was engaged in numerous unsafe and unsound activities.
The action follows a recent examination of Eagle in which the OCC determined that:
"Eagle had effectively turned over the management of the bank's main business to a third party, and then virtually ignored how that business was being conducted," said Comptroller of the Currency John D. Hawke, Jr. "The bank essentially rented out its national bank charter to a payday lender in order to facilitate that nonbank entity's evasion of the requirements of state law that would otherwise be applicable to it."
OCC examiners conducted an extensive review of the bank's payday lending activities, including on-site reviews of Dollar Financial Group loan stores in several states. The examiners found that bank management was not adequately monitoring or controlling its third party loan origination activities, compliance responsibilities, quality assurance, or internal audit programs. In addition, the examiners found that Dollar had opened stores in some states and begun originating payday loans without the bank's knowledge or approval.
Other practices criticized by the OCC included Eagle's lack of knowledge that Dollar had actively promoted rollovers of payday loans booked by the bank by providing an incentive to Dollar's employees, which resulted in a higher volume of rollovers than new loan originations and misuse of the loan product for long-term credit.
In addition, Eagle had also failed to comply with eight of ten requirements of a Memorandum of Understanding issued in 2000 that was intended to address safety and soundness problems at the bank.
Under the Consent Order, the bank must:
"This case demonstrates the dangers inherent in arrangements under which national banks rent out their charters to nonbank providers of financial services," said Mr. Hawke. "Not only did Eagle allow itself to become a mere appendage to Dollar, but it effectively collaborated in Dollar's scheme to evade state law requirements that would otherwise be applicable to it."
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