OCC Proposes Separating ‘Substantive’ and ‘Technical’ Bank Violations
The Office of the Comptroller of the Currency wants to draw a sharper line between bank violations serious enough for a formal supervisory finding and less significant problems that can be corrected without one.
On August 27, 2026, the OCC issued Bulletin 2026-42 and released a proposed rule creating two categories of violations: “substantive” and “technical.” The proposal would apply to all OCC-supervised national banks, federal savings associations, and federal branches and agencies.
This is a proposed supervisory rule, not a change to the consumer-protection laws themselves. Banks would still have to comply with existing requirements involving fees, disclosures, loan servicing, complaint handling and other banking obligations.
How the two categories would work
Under the proposal, an OCC examiner could issue a Matter Requiring Attention, commonly called an MRA, for a violation of a banking or banking-related law or regulation only when the violation’s nature, duration, frequency or severity could meaningfully affect the bank or its customers.
The OCC lists five potential indicators for a substantive violation. The conduct could be systemic or part of a pattern; have a direct, clear, predictable and more-than-minimal effect on the bank’s financial condition; have a more-than-minimal effect on the accuracy of the bank’s books and records; require more-than-minimal restitution or be expected to cause more-than-minimal adverse customer impact; or involve insider misconduct or self-dealing.
The proposal would create a separate category for technical violations. Examiners could identify those problems and direct the bank to correct them, but the OCC would not issue an MRA or take an enforcement action for the violation under the proposed framework. Examiners also could not prescribe how the bank must correct the issue or require remediation unrelated to that specific violation.
That does not mean a technical violation would be lawful, harmless or optional. It would mean the OCC would use a less formal supervisory response while still directing correction.
Why consumers may care
The distinction could matter when a compliance failure affects customers but does not initially appear broad, repeated or severe enough to meet the proposed substantive threshold. Consumer-facing examples could include problems involving account fees, required disclosures, loan-servicing systems or complaint-handling processes.
The proposal does not say that any particular fee, disclosure or servicing failure would automatically be classified as technical or substantive. The classification would depend on the facts, including how many customers were affected, how long the problem lasted, whether it reflected a pattern, the amount of harm or restitution, and the seriousness of the failure.
A recurring systemwide problem, a violation producing more-than-minimal customer harm, or a failure requiring meaningful restitution would be more likely to meet the proposed substantive standard. A smaller isolated error could still require correction without producing a formal MRA.
Consumers should not assume that a technical classification means conduct is acceptable. The proposal concerns how the OCC escalates and documents violations during supervision; it would not erase the underlying legal duty or prevent other regulators, courts or consumers from using available remedies.
Part of a broader supervisory shift
The proposal came alongside a separate joint final rule from the OCC and Federal Deposit Insurance Corporation concerning “unsafe or unsound” practices and the agencies’ framework for MRAs and other supervisory communications. The OCC also released revised policies and procedures manuals for enforcement actions and MRAs.
The OCC said the broader changes are intended to make supervision clearer, more consistent and more focused on material financial risks. The agency said enforcement tools should be used proportionately, with corrective actions tailored to the specific deficiency.
Reuters reported that the agencies’ broader approach reflects an effort to move examiners away from emphasizing minor issues and toward risks central to a bank’s safety, soundness and compliance. Banking Dive reported that bank-industry representatives welcomed the added clarity, while critics warned that narrowing the circumstances for formal supervisory action could make it harder to raise concerns before they grow into larger problems.
Those criticisms concern the broader supervisory direction and the related final rule as well as the proposed OCC framework. They do not establish that consumer oversight will weaken or that banks will change fees or servicing practices. The practical effect will depend on the final rule and how OCC examiners apply the definitions.
What happens next
Comments on the OCC proposal are due 30 days after the proposal is published in the Federal Register. The Federal Register publication date starts the comment clock and will determine the exact deadline.
For consumers, the immediate effect is procedural rather than a change in bank pricing, account terms or legal protections. The underlying laws remain in place, and banks remain responsible for complying with them. The key question is how the OCC ultimately defines and documents the line between a violation requiring formal escalation and one directed for correction through a less formal process.
The proposal is also separate from CFPB supervision policies. The CFPB says its supervisory work focuses on compliance with federal consumer financial law, actual consumer harm, fraud, fees, disclosures and issues reflected in complaints within the Bureau’s statutory authority. That comparison helps show why the OCC proposal should not be read as a government-wide change to consumer-finance supervision.
Sources
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