Skip to main content
U.S. flag
An official website of the United States government
Dot gov
The .gov means it’s official. 
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.
Https
The site is secure. 
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.
Federal Register Publications

FDIC Federal Register Citations



Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations




FDIC Federal Register Citations





Baileyville State Bank


April 17, 2004

Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429

Re: EGRPRA Review of Consumer Protection Lending Related Rules

Dear Mr. Feldman:

As a community banker, I appreciate the opportunity to comment on the regulators' effort to relieve the problem of regulatory burden. This bank was established in 1894 and since then the bank has worked hard to establish the trust and confidence of our customers and to provide excellent customer service, but regulations designed to help, protect or assist our customers often interfere with our ability to provide good customer service. When a customer has to sign their name ten to twenty times to obtain a residential real estate loan it would seem to be a bit much and in reality not overly consumer friendly. This bank is a vital part of this community's economic well being, but we are slowly and surely being put out of business due to the excessive time, talent and money it takes to comply with the over whelming weight of banking regulation. It is truly a burden. It is time that this growing problem is addressed by the regulatory agencies and Congress. This is especially true for consumer protection lending rules, which though well intentioned, unnecessarily increase costs for consumers and prevent banks from serving customers. While each individual consumer regulatory requirement may not be burdensome itself, the total weight has the camel on its knees and is breaking its back. It's not only time to acknowledge that consumer protection regulations are a burden to banks, are in reality quite ineffective but also that the majority of consumers don't care, don't want and don't understand the reams of regulatory legalese they have to endure.

Truth in Lending (Federal Reserve Regulation Z)

Right of Rescission. This is one regulatory requirement that when presented to a consumer they roll their eyes, look at you in disbelief and say "What do you mean I can't have my money?" Is this regulation burdensome, probably, but its more of a non-essential irritating nuisance. Rarely, if ever, does a consumer exercise the right. Consumers resent having to wait three additional days to receive loan proceeds after the loan is closed. Inflexibility in the regulation making it difficult to waive the right of rescission aggravates the problem. If not outright repealed, depository institutions should at least be given much greater latitude to allow customers to waive the right.

Finance Charges. Bankers have difficulty understanding and consumers don't have clue what the appropriate components are when determining finance charges and the APR. This process desperately needs simplification so that all consumers can understand the APR and bankers can. easily calculate it.

Equal Credit Opportunity Act (Federal Reserve Regulation B) .

Regulation B creates a number of compliance problems and is a true burden. It is not well written and is difficult to understand. For instance, it is often difficult to determine when an inquiry becomes an application because neither is clearly defined.

Spousal Signature. Spousal signatures are a quagmire and in reality are probably as much of a burden on the consumer as they are on the banks. The requirements are difficult and almost require all parties -and their spouses -to come into the bank personally to complete documents. This makes little sense as the world moves toward new technologies that do not require physical presence to apply for a loan. And the additional requirements that were effective 4-15-2003 with mandatory compliance on 4-15-2004 did not simplify matters and actually fly in the face of regulatory relief

Adverse Action Notices. Adverse action notices are probably the coldest rudest thing we give to any of our customers for any reason. A straightforward rule on when an adverse action notice must be sent- that can easily be understood and is maybe not so adverse - should be developed.

Other Issues. Regulation B's requirements also complicate other instances of customer relations. For example, to offer special accounts for seniors, a bank is limited by restrictions in the regulation. And, most important, reconciling the regulation's requirements not to maintain information on the gender or race of a borrower and the need to maintain sufficient information to identify a customer under section 326 of the USA PATRIOT Act is difficult and needs better regulatory guidance.

Flood Insurance

The current flood insurance regulations create difficulties with customers, who often do not understand why flood insurance is required and that the federal government -not the bank - imposes the requirement. The government needs to do a better job of educating consumers to the reasons and requirements of flood hazard insurance. Flood insurance requirements should be streamlined and simplified to be understandable.

Additional Comments

It would be much easier for banks, especially community banks that have limited resources, to comply with regulatory requirements if requirements were based on products and all rules that apply to a specific product were consolidated in one place. Second, regulators require banks to provide customers with understandable disclosures and yet do not hold themselves to the same standard in drafting regulations that can be easily understood by bankers. Finally, examiner training needs to be improved to ensure that regulatory requirements are properly -and uniformly -applied.

Conclusion

The volume of regulatory requirements facing the banking industry today presents a daunting task for any institution, but severely saps the resources of community banks. We need help immediately with this burden before it is too late. Community bankers are in close proximity to their customers, understand the special circumstances of the local community and provide a more responsive level of service than megabanks. However, community banks cannot continue to compete effectively and serve their customers and communities without some relief from the crushing burden of regulation. Thank you for the opportunity to comment on this critical issue.

Sincerely yours,

Paul R. Boeding
President

Last Updated 05/11/2004 regs@fdic.gov

Last Updated: August 4, 2024