From: Randal Morley [mailto:dpriore@sbcglobal.net]
Sent: Thursday, April 15, 2004 5:46 PM
To: Comments
Subject: EGRPRA Review of Consumer Protection Lending Related Rules
Randal Morley
1141 East 37th Street
Tulsa, Oklahoma 74105
April 15, 2004
Dear FDIC:
With regard to the Regulatory Burden of federal laws and regulations
on
our Banks, we would respectfully submit the following comments based
on
our knowledge and experience.
The Home Mortgage Disclosure Act and the accompanying Federal Reserve
Regulation C are among the most burdensome and costly regulations
to
community banks. Its usefulness to the general public and to the
government is highly questionable.
The new revisions to Regulation C have made compliance with this
regulation even more time-consuming and burdensome to community banks.
Instead of requiring banks to report the APR on each loan which would
be a
simple task, banks must now report the APR rate spread only if the
rate
exceeds the comparable term Treasury rate by 3% or more on first
lien
loans, or 5% or more on junior lien loans. This requires bank employees
to have to go and find the official table of “Treasury Securities
of
Comparable Maturity” under Regulation C and then use the FFIEC
Rate Spread
calculator. There remain unanswered questions of date issues for
the
calculation of the rate spread. Hours of bank employee time, which
translates to hundreds of dollars in costs to the bank, could have
been
saved by simply requiring the bank to report the APR on each loan.
This
is among the most burdensome regulation ever dreamed up by a federal
bureaucrat.
At a minimum, the size of the current HMDA exemption should be
increased
from banks with $33 million in assets to a more meaningful level;
for
example, banks with $300 million or more. This would at least allow
banks
with more assets and the ability to hire additional employees to
comply
with this onerous and unnecessary regulatory burden.
An example of the regulatory burden can be seen in that, due to
federal
regulations, a husband and wife may have to sign their names seven
times
just to obtain an unsecured consumer $5,000 loan. First, at time
of
application, the customers must be given oral “Miranda rights” insurance
disclosures stating that they do not have to buy credit insurance
offered
by the bank and then subsequently sign the consumer credit disclosure
which states that they do not have to buy credit insurance offered
by the
bank. Next, the customers have to sign the loan application, and
because
they are applying for joint credit due to the revisions in Regulation
B,
must sign again their intention to seek joint credit. If the customers
want credit insurance, then the customers (again) must be orally
advised
of their insurance “Miranda rights” and have to sign
the federal sale of
insurance disclosure. Since the customers wanted credit insurance,
they
have to sign again verifying that they want credit insurance. The
customers also must initial the three pages of the loan contract,
which is
so lengthy because it must contain all the federally mandated disclosures.
Finally, the customers sign the note. The customers are also given two
privacy notices at the time of the transaction; the bank’s privacy notice,
and the insurance company’s privacy notice.
The Gramm-Leach
Bliley Act’s so-called “consumer protection
for sales
and offers of sales of insurance products” is also one of the
most onerous
bank regulations. The four banking agencies have adopted substantially
identical regulations. A customer must be given an oral and written
disclosure stating that at the time of application they do not have
to buy
insurance products offered by the bank, and the customers signature
must
be obtained verifying that they have received the disclosures.
If the customer wants to buy credit insurance he again must be
advised
orally and in writing that the insurance is not a deposit or guaranteed
by
the bank, is not insured by the FDIC, and there may be investment
risk
before the completion of the sale of the insurance product. Again,
the
customer must sign verifying that he has been given these disclosures.
It is interesting to note that the famous Miranda warnings given
to
persons in police custody are only required to be given orally and
are not
required to be given in writing or signed by the person in custody.
But
Congress has required banks to do more than is required of the Miranda
warning in that customers must be given two sets of warnings, orally
and
in writing, and that the customer acknowledge the same in writing.
Space does not permit me to comment on all the vexatious and burdensome
federal regulations that govern the banking industry. There are too
many
regulations and most serve no useful purpose. A bank’s trash
can is often
full of the privacy notices and other mandated written disclosures
that
customers throw away before they even leave the bank.
Sincerely,
Randal D. Morley
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