Federal Deposit
Insurance Corporation

Subject: EGRPA

The Regulation that needs the most work is Regulation Z. This (now) extremely lengthy confusing regulation started out as a way to allow consumers to comparison shop prices of financing. In my opoinion, few customers are interested (or even look at or understand) the APR when signing documents. They seem to be more interested in the monthly payment, and if they can afford the total intitial costs of the loan.

A better and less confusing system (in my opinion) would be to state the contract rate and payment and include a listing and total of ALL intitial loan charges in a dollar amount. Advertising for loans would show an example of say, a $100,000 Real Estate loan showing the contract rate, monthly payment and ALL fees that the borrower will be charged...no exclusions. For other loans, such as an auto loan, a $10,000 example would be used and so one.

An example of why ALL fees should be shown in a dollar amount follows:

The regualtion requires the application fee to be a "finance charge" and included in the APR calculation ONLY if the bank does not charge ALL borrowers an application fee. If ALL borrowers are charged an application fee at any particulaar bank, the fee is NOT considered a "finance charge" and is NOT included in the APR calculation.

In my opinion, this is ludicrous and confusing to both bankers and (even more so) for consumers. The comparison shopper would not know why the APR is lower at one bank than at another because of confusing rules like this. Some borrowers will be paying the fee and some will not. Why not take the worst case scenario, and show the application fee as a listed fee for all banks that charge one, regardless of whether it might be waived or not?

In the examples cited in the second and third paragraphs above, a consumer could actually compare the costs of different banks in a language that he/she would understand...rate, payment, and total fees in dollars.

The regulation should NOT be written by a lawyer, as that is where all (or at least most) of the confusing language originates...it should be written by regulators, persons with banking experience, and reviewed by community groups to make sure it will be understood by the average customer.

Some things can definetely be fixed in a very simple way...why not try?

Jerry Gosse
Retired Regulator (28 years)
Current Compliance Officer at a Community Bank