Farmers & Commercial
Bank
April 16, 2004
Mr. Robert E.
Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: EGRPRA
Burden Reduction Comments
Dear Sir:
We appreciate
the opportunity to comment on the issue of consumer regulatory
burden. As community bankers, we are proud of our ability to meet
the credit needs of our community, however, the burden of consumer
protection rules frequently interferes with our ability to serve
our customers. While each individual regulation may not seem too
overly burdensome, the cumulative affect of these regulations is
onerous. We urge Congress and the regulatory agencies to recognize
that the community banking industry is slowly being crushed under
this cumulative weight. While we can understand the theory behind
the consumer protection rules, they continually impede our ability
to serve our customers and work to ultimately drive up the costs
to the consumer.
The following
regulations are just a few examples of how consumer regulations
have become not only a burden to banks, but the consumers they
were enacted to protect:
1) Right of rescission:
One of the most burdensome requirements is the three-day right
of rescission under Regulation Z. 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, and they
often blame the bank for “withholding” their funds.
2) Spousal signatures – The
requirements make it difficult and almost require all parties – and
their spouses – 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.
3) Regulation
B’s requirements complicate other instances of customer relations.
For example, 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.
4) HMDA is an
extremely cumbersome act that does nothing for consumer protection.
It is primarily a data-collection and reporting requirement and
therefore lends itself much more to a tiered regulatory requirement.
The current exemption for banks with less than $33 million in assets
is far too low and should be increased to at least $250 million.
The volume of data that must be collected and reported is clearly
burdensome. Ironically, at a time when regulators are reviewing
burden, the burden associated with HMDA data collection was only
recently increased substantially. In addition, with the changes
in definition of a “refinance,” several agricultural
and commercial loan refinances must now be included, in effect, “watering
down” the relevance of the data collected.
5) Flood insurance – The
current flood insurance regulations create difficulties with customers
who do not understand why flood insurance is required and that
the federal government, not the bank, imposes the requirement.
Flood insurance requirements should be streamlined and simplified
to be understandable.
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.
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,
Carrie L. Hutcherson
Sr. Vice President/Lending Manager
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