EC - 216
EXAMINING ISSUANCE
Comptroller of the Currency
Administrator of National Banks
Type:  Examining Circular
Subject:  Certification Procedures for Consumer Loans Charged-off Between
          Examinations

TO:	Deputy Comptrollers, District and Regional Administrators and All
Examining Personnel

PURPOSE

This issuance revises OCC procedures for examiner certification of
consumer loans charged-off between examinations.

BACKGROUND

The OCC procedures for certification of installment loans charged- off
between examinations directed the examiner to review the schedule of
voluntary charge-offs made since the preceding examination and 1) on a
test basis, review files on borrowers and determine that the charge-off
was correct and 2) prepare the certification form CC-1427-OX (attached).
If the examiner agreed that the tested loans were correctly charged-off,
he or she would certify to all the consumer loans charged-off between
examinations.

The Internal Revenue Service (IRS) asked if the OCC would enforce a
minimum charge-off policy for voluntary charge-offs. Because the examiner
did not review each charged-off loan, the IRS was concerned that some
banks may take early losses on consumer loans solely to reduce tax
liabilities.

The OCC consumer loan charge-off policy, Banking Circular 140 (BC- 140)
specifies that loans delinquent 120 days or more are considered loss. We
also recognize that a bank may make valid charge-off entries before a loan
is 120 days past due. Because of that fact, we do not wish to require
banks to adhere to a minimum 120 day charge-off policy at all times.
Therefore, at the request of the IRS, we have altered our certification
procedures to allow some variation in charge-off and, at the same time,
incorporate IRS concerns about banks' tax liabilities.

PROCEDURE

Examiners will certify only to consumer loans the bank charged-off between
examinations in the following manner:

Loans Delinquent 120 Days or More

For consumer loans charged-off which were 120 days or more delinquent, the
bank must show proof of the past-due status. The examiner will determine
the validity of the charge-off based on the past-due information. The OCC
will not expect the bank to provide any additional information for those
loans.

Loans Delinquent 90-120 Days

For consumer loans charged-off which were 90 to 120 days delinquent the
bank must show proof of past-due status and briefly describe the reason(s)
for the charge-off. To certify to this group of loans the examiner will
determine the validity of the bank's charge-off based on the past-due
status and the bank's explanation.

Loans Delinquent from 0-90 Days

Examiners will not certify to any consumer loans the bank charged- off
which were less than 90 days delinquent. Bank management must be prepared
to justify such charge-offs to the IRS.

Documentation

A new form, WP-209-17, is attached that the banks may use in submitting
the required information for the examiner's review.

Form CC-1427-OX (attached) has been revised to include the information
requested. Examiners may wish to refer to information supplied by banks by
stating "see attached" on CC-1427-OX, rather than retyping the
information.

EFFECTIVE DATE

This procedure is effective immediately.



John F. Downey
Chief National Bank Examiner



Attachments

Date:  July 26, 1983