German
American State Bank
From:
Jim Sacia [mailto:tracy.gasb@ffgbank.net]
Sent: Tuesday, April 20, 2004 10:47 AM
To: Comments
Subject: EGRPRA Review of Consumer Protection Lending Related Rules
Jim Sacia
100 Church Street
German Valley, IL 61039
April 20, 2004
Dear FDIC:
Dear Sir or Madam:
Thank you for allowing a forum for community bankers to express our
concerns regarding the problem of regulatory burden within our industry.
Although we are well aware of the need for consumer protection rules,
often times the regulations in place make the process of providing a bank
product to a customer very cumbersome. It is our hope that by commenting
on a few components of the consumer regulations that we find to be most
burdensome, the regulators will realize what a serious issue this is to
community bankers and support us by providing better guidance and
eliminate some of the unnecessary requirements.
Equal Credit
Opportunity Act (Federal Reserve Regulation B)
Spousal Signature. In the rural community that we serve our loan
portfolio consists of a large portion of agriculture loans. The newly
implemented revision to REG B that requires an application verifying the
borrowers intend to apply jointly for credit is a significant change for
our loan officers and customer base. This provision will practically
require a husband and wife to always come to the bank personally to
complete the documents. As a community bank we strive to provide service
that our customers could not receive at a large bank. This revision slows
down the processing time it takes to do a loan and makes additional
paperwork for our customers.
Home Mortgage
Disclosure Act (HMDA) (Federal Reserve Regulation C)
Volume of Data. The volume of data that must be collected and reported
is clearly burdensome. The changes implemented in 2004 make this
statement even truer. More loans from our commercial and agriculture
departments are considered HMDA reportable under the new definition of a
refinance. These loans will skew the HMDA data and more than likely be
removed from the Reg for 2006 once the data is reviewed in 2005.
Also the requirements to assess loans against HOEPA, reporting rate
spreads, and documenting the date the interest rate on the loan was locked
provide little information with regards to what HMDA was originally
established to monitor.
Truth in Lending (Federal Reserve Regulation Z)
Finance Charges. The definition of the finance charge is not clearly
stated which makes determining what should be included in the APR
calculation difficult. The regulation needs to clearly state what
qualifies as a finance charge and what doesn’t so banks can be sure they
are disclosing the information correctly. The fear of under disclosing
and being penalized by examiners often forces banks to overstate the APR
to avoid regulator scrutiny, which could result in the loss of the loan.
Advertising. The regulation defines what must be disclosed in an
advertisement subject to Reg Z requirements. This section of the
regulation is not clear and it is often very time consuming to determine
what needs to be included in an advertisement, what can be left out, and
what additional disclosures must be included when trigger words are used.
Additional guidance or support via a website where bankers could plug in
what they are doing and get samples of what an advertisement should
include would be helpful.
Conclusion
Community bankers often wear many hats on a daily basis. It is the goal
of our company to provide exceptional customer service and meet the needs
of the communities we serve. The regulation burden the banking industry
faces is a serious concern to a community bank. Unlike the large banks
that have staff and monetary resources to insure they are in compliance
with all the regulations, we are forced to comply with the same standards
while trying to serve our customers first. Unless the burden of
regulation is lifted from the community banks at some level, we will not
be able to continue to provide our customers with the quality service and
products that brought them to our bank. Thank you for the opportunity to
comment on this critical issue.
Sincerely,
Jim Sacia, Board of Directors German American State Bank, German Valley,
IL
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