The Office of the Comptroller of the Currency (OCC) recently updated its guidance on procedures for internal appeals of supervisory decisions at various levels. The subject matter deals solely with internal appeal procedures and not with judicial review of final agency action.

The update, released as Bulletin 2013-15 on June 7, 2013, replaced a 2011 bulletin issued in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. The 2011 bulletin consolidated and updated prior OCC and Office of Thrift Supervision bulletins on the same subject from 2002 and 2008, respectively. The overall policy—referred to as OCC’s “core philosophy”— is the expeditious and fair resolution of disputes arising from supervisory action. Bulletin 2013-15 is very similar to its 2011 predecessor but contains some significant changes.

• The Ombudsman. Previously, a bank that questioned whether it should enter the appeal process could contact the OCC Ombudsman, who would act as a liaison between any “affected person” and OCC regarding “any problem such a person may have in dealing with the OCC.” The new guidance explains that the Ombudsman may be contacted with “any questions regarding the appeals process” and will act as liaison between OCC and “any person or bank” to “resolve disputes resulting from the OCC’s regulatory activities.”
• Appealable Matters. These are now explicitly listed and include:
• Examination ratings
• Adequacy of the allowance for loan and lease loss (ALLR) methodology
• Individual loan ratings
• Violations of law
• Shared National Credit (SNC) decisions
• Fair lending-related decisions
• Licensing decisions
• Material supervisory determinations such as matters requiring attention, compliance with enforcement actions, or other conclusions in the report of examination (ROE)

Note that in the last category, Bulletin 2013-15 explicates that appeals are limited, in the case of ROE conclusions, to whether the examiners “appropriately applied agency policies and standards,” and, in the case of compliance with an extant enforcement order, “conclusions regarding the bank’s level of compliance” therewith, and do not extend to a decision to take enforcement action based on ROE conclusions or further enforcement action based on non-compliance or inadequate compliance with an extant enforcement action.

This limitation, as worded, may overstate matters a bit, however. For example, if examiners appropriately applied agency policies and standards but cited as a violation of law or regulation something that arguably is not a violation, that presumably may still be appealed internally. In contrast, remarks in an ROE or other communications about potential enforcement action are preliminary and not appealable if made before a supervision review committee determination on whether to take such action.

•  Non-appealable Matters. This list is largely the same as before, except that decisions to take enforcement action should be included. The latter have been clarified as follows: “A formal enforcement-related action or decision takes effect when a supervision review committee recommends or determines that the OCC will pursue a formal action under applicable statutes, regulations, or published enforcement-related policies of the OCC and at that point is no longer subject to appeal.”
• Continuum of Internal Appeals Procedures. The 2013 update contains definitions of terms that collectively establish a continuum of procedures:
  • Inquiry: Verbal information gathering, typically during the examination cycle, about a specific topic and related standards or the appeals process.
  • Formal discussion: Communication after the supervisory office receives written communication from a bank concerning its disagreement with preliminary supervisory conclusions based on a draft ROE, matters requiring attention, loan classifications, etc. Any communication between a Deputy Comptroller or the Ombudsman and the bank at any time before filing a formal appeal is considered a formal discussion.
  • Informal appeal: Written communication by a bank after receipt of an ROE or other written decision to the bank’s supervisory office or signatory in which the bank expresses disagreement with final, written conclusions.
  • Formal appeal: Written communication to a Deputy Comptroller or the Ombudsman expressing disagreement with the final supervisory conclusions. A formal appeal must have board approval. A bank may appeal to the Ombudsman after filing an appeal with a Deputy Comptroller or the SNC appeals panel if applicable; this appeal is referred to as a second-tier appeal.
• Informal Procedures. Inquiries or formal discussions are intended to produce, where possible, an agreeable resolution before the issue in dispute escalates to an informal or formal appeal. If banks and their supervisors cannot resolve their differences during the formal discussion stage, the next step would be for the bank to file an informal appeal with the supervisory office’s Assistant Deputy Comptroller, the Director for Special Supervision, or the Large Bank Examiner-In-Charge within 10 days of receiving the agency’s final written decision.
  
  The supervisory office must then respond in writing within 10 days of receipt. If still dissatisfied with the outcome, the bank may file a formal appeal with the appropriate Deputy Comptroller or the Ombudsman (at the bank’s discretion). If a bank files an appeal with its appropriate Deputy Comptroller and disagrees with the outcome, the bank may file for an additional review of the disputed matter directly with the Ombudsman.
• Formal Procedures other than for appeals of SNCs, fair lending issues, or matters arising under Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) §914. An appeal to the appropriate Deputy Comptroller must be filed within 60 days of receipt of the final written agency decision in dispute. The appeal must be in writing, fully describe the matter in dispute and the basis for the bank’s disagreement, include evidence of board approval of the appeal, and include the supervisory standards (legal citations, a supervisory issuances, etc.) that the bank contends were inappropriately applied by OCC officials. (As before, a Deputy Comptroller who participated in the disputed decision or reports to an official who did must transfer the appeal to the Ombudsman; the bank may, of course, choose to appeal to the Ombudsman in the first instance).
  
  If the matter is appealable and accepted for appeal, the bank is notified within 7 days and written submissions from OCC officials who participated in the decision are solicited. Barring extenuating circumstances, a decision will be issued within 45 days. Within 15 days of receipt, the bank may, if dissatisfied, pursue a second-tier appeal with the Ombudsman. Any appeal to the Ombudsman (whether first-tier or second-tier) will follow the same procedures and deadlines as set forth earlier in this section.
• SNC Appeals. These are appealable within 14 days to the Deputy Comptroller for Large Bank Supervision and are typically (but not exclusively) filed by the Agent Bank. The procedures are largely unchanged from the 2011 Bulletin, other than to clarify that a second-tier appeal by a national bank from the interagency SNC appeals panel goes to the Ombudsman.
• Fair Lending. This applies to an OCC determination that there is reason to believe an instance or pattern or practice of discrimination exists that will result in either a referral to the U.S. Department of Justice or notification to the U.S. Department of Housing and Urban Development (HUD). In such circumstances, the bank will receive notice from either the Senior Deputy Comptroller for Midsize and Community Bank Supervision or the Senior Deputy Comptroller for Large Bank Supervision (whichever oversees the bank). The bank then has 15 days from the notice date to file an appeal to the Ombudsman for reconsideration of this determination.
• FIRREA §914. This applies to decisions to disapprove directors or officers. These are not appealable to a Deputy Comptroller or the Ombudsman. OCC will have issued a disapproval letter explaining why the candidate was not accepted. Within 15 days of receiving this letter, the bank or the unsuccessful candidate may file an appeal with the bank’s supervisory office, which will then forward the appeal directly to the Comptroller for decision. The appeal must state why the reasons for disapproval are contrary to fact or insufficient to justify disapproval and attach any supporting documentation. Within 45 days, the Comptroller, or an authorized designee not previously involved in the disapproval, will evaluate and make a final determination on the appeal.