WISCONSIN
BANKERS ASSOCIATION
April 20, 2004
Ms. Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Ave., NW
Washington, DC 20551
regs.comments@federalreserve.gov
Docket No. R-1180
Public Information
Room
Office of the Comptroller of Currency
250 E Street, SW
Mail Stop 1-5
Washington, DC 20219
regs.comments@occ.treas.gov
Attention: Docket No. 04-05
Mr. Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
regs.comments@fdic.gov/
Chief Counsel’s
Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
regs.comments@ots.treas.gov
Attention: No. 2003-67
Via Email
RE: Economic Growth and Regulatory Paperwork Reduction Act of 1996
Dear Ladies and Gentlemen:
The Wisconsin Bankers Association (WBA) is the largest financial institution
trade association in Wisconsin, representing 320 state and nationally chartered
banks, savings and loan associations, and savings banks located in communities
throughout the state.
WBA appreciates the opportunity to comment on the federal banking regulatory
agencies (Agencies) regulatory review pursuant to the Economic Growth and Regulatory
Paperwork Reduction Act of 1996 (EGRPRA).
EGRPRA requires
the Agencies to review their regulations at least once every 10
years in an effort to find more streamlined and less burdensome
ways to regulate. The comments WBA submits today focus on the second
round of regulatory review under the requirements of EGRPRA. Specifically,
this review seeks comment on a number of consumer protection regulations
including Regulation B, Regulation C, and Regulation Z.
Many WBA members
are bewildered by the sheer volume and frequency of regulatory
requirements with which they are constantly bombarded. As one member
succinctly stated, “we are astonished and somewhat overwhelmed
by the pace and burden of the numerous regulatory changes that
institutions have had to deal with in recent days. Aside from the
obvious recent additions such as the Patriot Act, HMDA changes
(our people had to work on New Year’s Eve to ensure our systems
performed correctly) and now FCRA (FACT Act), we are also facing
huge compliance issues from the states in the predatory lending
arena and the securities regulators on corporate governance issues
among others.” Although, the member identifies a litany of
areas in which recent regulatory changes have occurred, it only
begins to scratch the surface. Therefore, the WBA welcomes this
opportunity to address numerous regulatory burdens, including some,
which have not been specifically identified in the Agencies’ request.
Disclosures Under
Various Consumer Regulations.
In January of
this year, the WBA submitted comments in opposition to a proposal
that purports to “clarify” the meaning of “clear
and conspicuous” consumer disclosures, noting that it would
invite litigation, and impose type-size requirements that would
create unnecessary financial and operational burdens. In addition,
just weeks ago, the WBA submitted comments in opposition to an
advance notice of proposed rulemaking that suggested a mandatory
short-form model privacy notice.
In both cases,
the WBA is not aware of any problems consumers have had that would
warrant devotion of financial institutions’ time and money
to rework the existing required disclosures or notices. Financial
institutions should not shoulder the burden of non-substantive
issues, especially given the current number of truly substantive
issues and regulatory requirements with which they are required
to comply.
Regulation B
and Signature Rules.
The WBA is very
concerned about the burden created by requiring separate evidence
of a person’s intent to apply for joint credit. The Agencies
seem to believe that separate evidence, such as a separately signed
document or set of initials on an application regarding an applicant’s
intent, will remedy the misunderstanding some institutions have
of the signature rules contained in 12 CFR 202.7. The WBA disagrees
that a separately signed document or set of initials on an application
will remedy this misunderstanding. Instead, the Agencies should
continue to focus their efforts on guidance documents that supplement
training and educational efforts to remedy any misapplication of
the signature rules.
Regulation C,
CRA and Double Reporting.
The WBA has been
made aware of a problem regarding the requirements of Regulation
C (which implements the Home Mortgage Disclosure Act) and the Community
Reinvestment Act (CRA), which has ultimately created a huge regulatory
burden on its members in that certain small business loans and
small farm loans must be reported under both Regulation C and CRA.
This “double reporting” is caused by a recent change
in Regulation C, as described below.
The new definition
for “refinancing” under the Home Mortgage Disclosure
Act (HMDA) states that if a new loan satisfies and replaces an
existing loan; and both existing loan and new loan are secured
by a lien on a dwelling, it is HMDA reportable. The purpose test
no longer exists.
With this new
definition, institutions are required to report business and agricultural
purpose loans that are secured by a 1-4 dwelling that were not
previously HMDA reportable. Because these loans are for business
or agricultural purpose, they have been previously been reported
under CRA. Nowhere in the new amended Regulation C is there any
reference to double reporting of loans under HMDA or CRA. And the
WBA recognizes the huge regulatory burden double reporting imposes
on its members that make such loans.
The WBA and its
members are concerned that double reporting will also result in
information which is inaccurate, skewed or out right false, such
as:
1. Under CRA
the census tract is where the business is located;
2. Under HMDA the census tract is where the dwelling is located;
3. If an institution reports according to the new HMDA “refinance” definition,
these types of loans will now have two different census tracts (a processing
nightmare) and HMDA total dollars will now have commercial loan dollars, in
residential census tract numbers.
In addition,
the WBA is worried that this double reporting burden/problem will
negatively impact CRA evaluations of those institutions that make
such loans. And, at this time, the WBA is neither aware of any
steps the Agencies have taken to notify institutions about this
reporting issue nor any steps to remedy this problem.
The WBA believes
that “double reporting” does nothing to achieve the
purpose of HMDA— to help determine whether financial institutions
are serving the “housing” needs of their communities,
and conversely does a great deal to undermine the accuracy of the
data collected for both HMDA and CRA. Thus, given the regulatory
burden of double reporting on these loans and the inaccurate data
it produces, the WBA strongly urges the Agencies to clarify the
definition of “refinance” as it applies to business
purpose loans in Regulation C.
Conclusion.
The compliance
burdens financial institutions shoulder are voluminous and far
reaching; therefore, the Agencies must carefully consider the impact
regulations have on the various aspects of these institutions’ business
and systems. Institutions invest tremendous amounts of time and
effort in their compliance programs and they diligently work to
keep up with new laws and regulatory changes. And while there arguably
are compelling reasons for certain regulatory requirements, there
are equally as many compelling arguments against other regulatory
requirements, as is evidenced above. Simply put, the regulatory
burden on financial institutions is overwhelming and there does
not seem to be enough recognition on the part of those creating
more regulations of the burdens and costs institutions must face
to comply. In the end, the added costs created by these burdens
are passed on to consumers, so, as one member put it “regulators
should be careful to only impose regulations that, in the end,
provide real value to the banking public.”
The WBA, again,
appreciates the opportunity to comment on these very important
matters.
Sincerely,
Kurt R. Bauer
Executive Vice President/CEO
|
