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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Office of the Ombudsman

Dodd-Frank legislation and Mortgage Reform

Message from Cottrell L. Webster, FDIC Ombudsman posted on 06/2012

During the first half of 2012, the FDIC Office of the Ombudsman heard from a number of community bankers about the perceived regulatory burden of the Dodd-Frank legislation. Chief among their concerns is the creation of the new Consumer Financial Protection Bureau (CFPB) and the burden of mortgage reform, including compensation restrictions for mortgage originators.

During my many years with the FDIC, I have witnessed a steady increase in federal consumer protection laws that have required banking resources to ensure compliance. Each time a consumer law creates a new challenge, bankers tend to overcome the challenge and continue to operate successfully. For most bankers, treating the customer right is common practice, and adjustments to comply with new regulations are minor. For a few bankers, more effort is required.  However, I have never known a bank to fail because of a federal consumer protection law, and nothing in the Dodd-Frank legislation raises this prospect. I say this to temper the dialogue rather than discourage important conversations among bankers, lawmakers, and regulators over how best to resolve the continuing challenges in the U.S. economy.

In fact, I encourage bankers to avail themselves of all avenues for feedback to lawmakers and regulation writers. One avenue is the FDIC Office of the Ombudsman. Bankers who contact us can rest assured that we share your concerns anonymously with Acting FDIC Chairman Martin Gruenberg. Also, the Small Business Regulatory Enforcement Fairness Act requires the CFPB to meet with small businesses, including community banks, when proposing a rule that will significantly affect these businesses. This requirement offers community bankers yet another opportunity to provide valuable feedback to regulators.

Parts of the Dodd-Frank legislation have already positively affected community banks. For example,

I would ask community bankers to acknowledge these aspects of the Dodd-Frank legislation that have already benefited their institutions, inform legislators and regulators of areas that may be of concern, and remain committed to helping creditworthy borrowers so that our economy can continue to recover.

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