Complying with Islam and bankinglaw.

Q. A customer has requested a creative lending plan. They've informed us that their religion, Islam, prohibits them from paying interest on a loan or from receiving interest payments. What options do we have?

A. The OCC has several issuances on Muslim Lending. The agency has permitted

national banks to own various types of personal property in order to engage in lease-financing activities. (See 12 CFR 23.20.) Apparently, this involves permitting national banks to own real estate as principal and then to Lease that property to the [Muslim] customer to eliminate the interest issue, notwithstanding the general prohibition in 12 USC 2g against banks owning real property. In this religious context, the prohibitions otherwise applicable to ownership of these assets by a national bank as principal are not applicable because owning the asset is deemed necessary for the bank to engage in a permissible banking activity or transaction.

You may want to review OCC Corporate Decision No. 99-07 (March 26, 1999); OCC Conditional Approval Order No. 295 and OCC Corporate Decision No. 98-17 (March 23, 1998) (same); OCC Interpretive Letter No. 806 (October 17, 1997), reprinted in [1997-1998 Transfer Binder] and Fed. Banking L. Rep. (CCH) [paragraph] 81,253 ; 12 CFR 1.100(b) (municipal leases).

(ABA Members can go to http://www.aba.com/Members+ Only/Regulatory/specilLending.htm to access these.)

Leslie Callaway, CRCM, contributing editor, works with ABA experts to answer member questions.

Submit questions to lcallawa@aba.com