Ombudsman Report to the Industry
Message from Cottrell L. Webster, FDIC Ombudsman
I am pleased to present the latest in our series of online reports to
the financial services industry about issues and concerns raised to
the FDIC Office of the Ombudsman (OO). This report covers the period
1, 2009, through December 31, 2009.
During the second half of the year, 362 industry representatives contacted
the OO requesting assistance. In addition, OO staff spoke about banking
47 financial industry representatives through outreach visits, telephone
calls and industry-sponsored conferences. Bankers generally expressed
overall satisfaction with the FDIC. Their major area of concern
continued to be the struggling
economy and its impact on the Deposit Insurance Fund (DIF); however,
the Ombudsman saw an increase in inquiries concerning changes in
The OO also spoke to 1,526 members
of the public about the FDIC and banking matters.
We welcome suggestions and concerns about the FDIC in
its supervisory role. The OO summarizes these comments for FDIC senior
management review – without attribution – to
eliminate the possibility of reprisal. In addition to regional
specialists in Washington, D.C., provide assistance, regardless
of your location. Please visit our Web site (www.fdic.gov/regulations/resources/ombudsman)
for more information.
||Cottrell L. Webster
Office of the Ombudsman
The economy continued to be the greatest individual concern
of bankers who spoke to the OO during the second half of 2009; however,
many bankers also shared their concerns and sought help with
changing regulations. Of particular interest to bankers was an
alternative to special assessments for
liquidity of the Deposit Insurance Fund (DIF). The FDIC Board ultimately
asked for prepayment of three years of deposit insurance premiums.
in Banking Laws and Regulations
While numerous regulations changed during the reporting period, bankers
called the Ombudsman with issues regarding a specific few.
Changes to FRB Regulation Z (Truth-in-Lending) prompted the most
questions among bankers contacting the OO. Many had concerns
regarding the delivery of periodic statements at least 21 days before
due date for certain open-end credit, such as home equity lines
and overdraft protection lines. This concern was eliminated
after November 6, 2009, when President Obama signed the
Technical Corrections Act of 2009, which narrows the scope of application
to credit card accounts. The following URL links to Financial Institution
Letter FIL-74-2009 which provides more information www.fdic.gov/news/news/financial/2009.fil09074.html
Bankers were concerned with the effect of new regulations prohibiting
acts and practices associated with higher-priced mortgage loans --
specifically, that the regulation effectively prohibited
loans with a
due in less than 7 years. To dispel this concern, the Board of Governors
of the Federal Reserve System issued a letter on November 9, 2009,
addressing short-term balloon loans and FRB Regulation Z repayment-ability
higher-priced mortgage loans on November 9, 2009. Here is a link to
the letter on the Federal Reserve website http://www.federalreserve.gov/boarddocs/caletters/2009/0912/caltr0912.htm.
The OO also received questions about changes in the Federal Reserve
check processing regions and whether these changes triggered new
disclosure requirements. The Federal Reserve consolidated all check
processing to the Federal
Reserve Bank of Cleveland as of February 27, 2010, eliminating non-local
checks for purposes of Regulation CC. As a result, some banks had to amend
availability schedules and related disclosures, and provide their
customers with notice of these changes. Vendors may have added to
bankers' confusion about what was required for the notice of
changes; and the
Ombudsman, with input from FDIC specialists, assisted with clarification.
Here is a link to a press release from the Federal Reserve explaining
the consolidation and its consequences:
Bankers sought clarification on Part 360 of the FDIC's Rules
and Regulations concerning processing of deposit accounts in the event
of an insured
depository institution failure. Most of these questions were
technical clarifications concerning sweep accounts, which the
OO referred to the appropriate subject matter experts. The following
is a link
to Financial Institution Letter FIL-9-2009 concerning the final rule: http://fdic.gov/news/news/financial/2009/fil09009.html
On May 29, 2009, the FDIC Board of Directors approved a final rule making
certain revisions to the interest rate restrictions applicable to less than
well-capitalized institutions under Part 337.6 of the FDIC Rules and
Regulations. The final rule redefined the "national rate" as a
simple average of rates paid by U.S. depository institutions as calculated
by the FDIC. The national rates and rate caps for various deposit
maturities and sizes are provided on the FDIC's website at the following
which includes a link to the Financial Institution Letter FIL-25-2009
discussing the changes. These "Weekly National Rates and Rate Caps"
were also the subject of inquiry. Bankers sought clarification from
the OO regarding deposit accounts that did not appear to fit the categories
available on the FDIC website,
particularly sweep accounts.
Some community bankers expressed concern about the termination of the
Transaction Account Guarantee program (TAG) on June 30, 2010,
and sought clarification on the coverage of the program.
The OO also received questions from consumers about the program
and whether their bank participated. For
some community banks, the
the end of TAG. As the CEO of a small bank described
the situation, almost all of the valuable public
funds have migrated to
NOW accounts, currently protected by TAG. When TAG ends, the banker
fears those accounts may leave the bank. This is also a concern
for business deposits in noninterest bearing transaction
The TAG program is one of two parts to the FDIC's Temporary Liquidity
Guaranty Program (TLGP), which is an initiative to counter the current
system-wide crisis in the nation's financial sector. The TAG guarantees
certain noninterest-bearing transaction accounts at insured depository
institutions. For more information on the TLG program, including
TAG, visit www.fdic.gov/tlgp
Bank customers contacted the OO for various reasons, two of which follow.
Some borrowers were frustrated in obtaining loan modifications from their
servicer and note holder. Although the FDIC has
no authority to force a modification, even at FDIC-supervised institutions,
the FDIC encourages efforts to prevent avoidable mortgage
were frustrated when institutions assuming deposits from the receivership
failed institutions drastically lowered rates, typically on time
deposits such as a certificate of deposit.
While the OO
resolve these complaints, we gently remind
customers that they received their
deposits to FDIC insurance limits (and in whole deposit
transactions, their entire deposits) in the failed institution,
as well as the benefit from having accounts
automatically transferred to another financial institution.
Generally, bankers contacting our office were satisfied with prepaying
three years of FDIC insurance premiums rather than potentially
paying special assessments. Some bankers
expressed a preference that the FDIC use its lending lines
with the Treasury, but understood the FDIC's rationale
to continue funding the FDIC with premiums from the industry.
Bank customers continue to contact our office complaining
about institutions charging depositors for deposit insurance assessments.
asked about these charges, the OO reiterates that
the FDIC does not
directly on depositors;
for paying the assessments. The FDIC has no formal position on
the practice of institutions passing the cost of these
assessments to their customers through special fees; however, these
institutions should not suggest that the FDIC is imposing
the fee on
NOTE: If you have comments or suggestions about this semiannual report, please contact
FDIC Ombudsman Cottrell Webster at (703) 562-6040, or by e-mail at email@example.com.
To receive e-mail notifications of future OO semiannual reports as soon as
they are posted to the FDIC's Web site, follow the instructions at E-Mail updates.