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FDIC Federal Register Citations
Iowa
State Bank & Trust
From: Marcia McKeag
[mailto:MMckeag@isbt.com]
Sent: Monday, October 18, 2004 6:59 PM
To: Comments; regs.comments@federalreserve.gov; regs.comments@occ.treas.gov;
regs.comments@ots.treas.gov
Subject: EGRPRA
Re: EGRPRA – Request for Burden reduction Recommendations
Ladies and Gentlemen:
We appreciate the opportunity to comment on reducing regulatory burden from
consumer protection rules. Iowa State Bank & Trust Co. is a $526-million
community bank with six locations in three cities in eastern Iowa. The FDIC
is our primary regulator.
Consumer Protection in Sales of Insurance
The requirement to disclose that insurance is not a deposit and is not FDIC-insured
nor insured by any federal government agency should exclude insurance products
that do not build cash values or have investment features, such as credit life
and debt cancellation contracts. We do not think that these types of insurance
products cause consumer confusion with deposit or savings products.
Regulation Z, Section 32
The Section 32 disclosure must be given to the customer(s) at least three business
days prior to loan closing. This three-day requirement is burdensome to the
bank and confusing and unfavorable to the consumer. For example, if a consumer,
at application, declines credit life insurance, then changes their mind and
informs the bank at closing, the bank is required to provide the Section 32
disclosure, the customer needs to wait three days before closing, then wait
another three days before receiving the loan proceeds if rescission applies.
Privacy of Consumer Financial Information
The privacy notice annual mailing requirement is costly and burdensome. The
annual mailing requirement should be eliminated and instead, the requirement
should be for a new notice to be delivered to consumers only when there is
a substantive change in the bank’s policy. Make the disclosure requirement
consistent with other account regulation disclosure requirements: provide the
privacy notice at account opening and upon request, make it available in lobbies
and on the bank’s website, and send a new notice to existing customers
at least 30-days in advance of any policy change. This change would reduce
the burden on the bank and be less confusing to consumers.
Electronic Fund Transfers
Consumer liability from unauthorized transactions involving customer negligence
should be increased from the current $50. Banks are required to assume too
much responsibility for unauthorized electronic transactions. Consideration
should also be given to shifting some responsibility to merchants who accept
signature-based transactions requiring the merchant to verify the customer’s
signature; if they fail to verify, they should be held accountable.
Bank Secrecy Act/Customer Identification Program
We would like further guidance from regulators including specific examples
of what is expected. We understand that a bank’s policies and procedures
need to be based on their risks and that no one program will fit all banks,
but what is enough? BSA and CIP rules seem overwhelming at times, and the burden
to staff and resources is more likely to increase without any compensating
relief.
Regulator Guidance
Regulations are not always clear and concise leaving much to be interpreted,
by both banks and regulators. Furthermore, regulatory agencies have interpreted
regulations differently. If the Agencies cannot clearly and consistently decipher
a regulation, how can banks be expected to? We would like to see clearly and
concisely written regulations as well as additional guidance on how to sufficiently
comply.
One example is the Regulation B, Equal Credit Opportunity, intent to apply
for joint credit. Our local FDIC office informed us that the Fannie Mae/Freddie
Mac residential loan application (Form 1003) was not sufficient to document
intent and that we would need to have customers separately sign their intent
to apply for joint credit. The American Bankers Association (ABA) announced
in a news alert that they had consulted with the Federal Reserve for clarification
and reported that the Form 1003 was sufficient for showing intent to apply
jointly if properly completed and signed by both applicants.
In another example, we contacted the FDIC on two different occasions for guidance
on the BSA CTR exemption process and were given two different answers; neither
answer was in writing (which seems almost impossible to get).
Summary
As the number of regulations facing the banking industry increases, so does
the overall cost of compliance. There is not any one regulation that community
banks are unable to comply with – it is the cumulative effect of all
regulations that is so onerous. Even though each new requirement may be designed
to address a particular problem, over time it all adds up to an unwieldy burden.
With the complexity and volume of new regulations coupled with the lack of
consistent guidance from regulators, financial institutions can never be certain
of whether they are adequately complying with ever-changing and increasing
requirements.
We appreciate this opportunity to provide comments on, as well as the Agencies’ concern
with, reducing the regulatory burden.
Respectfully,
Marcia McKeag
Compliance Officer
Iowa State Bank & Trust Co.
Iowa City, Iowa
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