MERAMEC VALLEY BANK
May 3, 2004
Jennifer J. Johnson by e-mail to: regs.comments@federalreserve.gov
Secretary
Re: Docket #R-1181
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Robert E. Feldman by e-mail to: comments@fdic.gov
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: Community Reinvestment Act regulations
As a community bank, Meramec Valley Bank welcomes the federal regulators’ work
in the area of regulatory burden. Most community banks work hard to protect
the hard-won trust and confidence of their customers, but consumer protection
rules can present a significant interference in our efforts to serve those
very customers. This is especially true for consumer lending rules, which increase
costs for consumers and detract from the level of service community banks could
otherwise offer them. For example:
Flood Disaster Protection
? Assessing whether a specific property is actually in a flood hazard zone
can be extremely difficult. It requires a variety of information, some of which
is often either difficult for an individual community bank to access, and much
of which is quickly outdated.
? Determining the appropriate amount of flood insurance coverage on a particular
property can be involved. In addition, tracking such coverage and ensuring
that the coverage remains in force is a time-consuming process.
? Most community banks are forced to out-source one or both of these areas.
The cost of such services is sufficient that the banks have to pass that cost
on to all customers, not merely those with property in a flood hazard zone.
Equal Credit
Opportunity Act – Federal Reserve Regulation B
? Definitions in the regulation are often incomplete and imprecise, so that
it is difficult to determine what requirements apply to a given situation.
For example, when has a customer provided sufficient information to create
an “application”?
? The preparation of adverse actions notice is another time-consuming. It is
also frequently difficult to tell whether an application has been withdrawn,
is incomplete, or the application been denied.
? Banks now must balance the requirements not to maintain information on race,
ethnicity, or gender under this regulation, with the customer identification
dictates of the USA PATRIOT Act.
Home Mortgage
Disclosure Act (HMDA) – Federal Reserve Regulation C
? HMDA is one regulation that appears to provide no specific benefits for consumers.
While we applaud the original aim of generating detail about where a bank’s
lending efforts are concentrated, geographically, we are concerned that some
community activists are abusing the data.
? With the changes in HMDA for 2004, it has become clear that HMDA would lend
itself to tiered regulation. We urge the regulators to raise the level of exemption
from HMDA reporting from the present $33 million in total assets to a more
realistic level, such as $250 million. For smaller banks, compliance with this
regulation represents a huge administrative burden with a strong likelihood
of inadvertent error.
Truth in Lending – Federal
Reserve Regulation Z
? Reg Z, while well intentioned, weights reasonable errors and disputes in
favor of the consumer, whether or not the bank is at fault.
? One of the most frequent customer services issues a community banker faces
is to explain to a customer the need for a rescission period that neither the
bank nor the customer wants. We need greater flexibility to allow consumers
to waive that right when they choose.
? Providing all necessary information in advertising and knowing when certain
disclosures have been triggered, represent an ongoing battle for community
banks.
? It is also difficult to know exactly which charges should be included in
the bank’s finance charge calculation, especially when the cost is charged
by a third party.
In summary, we
believe that increasing the asset size of banks eligible for less
intensive compliance is an important first step in reducing regulatory
burden. Since the survival of many community banks is closely intertwined
with the success and viability of their communities, the increase
will merely eliminate some of the more burdensome requirements.
While community banks still must comply with the general requirements of these
regulations, such a change will eliminate some of the most problematic elements
of compliance from community banks that are drowning in red tape.
Very truly yours,
MERAMEC VALLEY BANK
Donna L. Byrnes
Assistant Vice President, Compliance Officer
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