SUTTON
BANK
April 19, 2004
Mr. Robert E.
Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: EGRPRA
Burden Reduction Comments
Dear Mr. Feldman,
I would like
to take this opportunity to say thank you to you and others charged
with the task of reviewing our regulatory burden. As I review our
customer surveys, one thing is clear, people do business with banks
because they trust us. If we lose that trust, we lose a relationship.
Regulations should not be needed to maintain trust. Community banking
is overwhelmed with supervision and regulation! Our industry has
allowed a few to sour the milk for all, including the consumer.
Common sense must again prevail. Why burden the consumer with outdated
regulations? Likewise, Congress cannot legislate away greed. Nor
can regulators such as the Securities and Exchange Commission or
the Federal Deposit Insurance Corporation prevent collusion in
the process of masking fraud as in the case of Enron and instances
of failed banks. How many other laws or regulations were broken
in route to a failed business?
The key to protecting
the customer is not creating mountains of regulation, but in education.
Sutton Bank has ordered the Money Smart and a faith based financial
counseling program in an effort to design a program to better educate
our customers. Maybe there should be more emphasis placed on educating
the consumer. With all of this said, there are several regulations
upon which I would like to comment.
Home Mortgage
Disclosure Act
We have recently
made application to a MSA area and have crossed the mystical threshold
of $250 million in total assets; so I admittedly have a stake in
this additional regulation. I question the value and need of collecting
all this data when you can simply look at the results of the housing
GSE initiatives. Home ownership is at an all-time high! As I review
the reports of the housing GSE’s I cannot help to think that
they are doing something right. Their automated systems approve
loans on the basis of the information. Their system does not discriminate.
As Joe Friday used to say “Just the facts Ma’am, just
the facts.” The facts are we like thousands of other lenders
utilize the GSE underwriting systems and look at the results. If
the data is used to track penetration within markets, is that not
the purpose of CRA? It is quite easy to determine whether a community
bank is serving its’ market. HMDA is an outdated regulation
built to only report data and should therefore be discontinued.
Or at a minimum, the size of the institution required to report
should be commensurate with the recent regulatory recommended reporting
requirements of CRA. ($500 million, a number still too low)
Truth in Lending
(Regulation Z)
I recently refinanced
my home and attempted to waive my right of rescission. It was a
simple refinance without any cash taken out of the transaction.
In an effort to be uniform, I still was required by the title agency
to wait the three days. It would imagine the number of instances
whereby by a customer would rescind a transaction is few and far
between. After all, buying or refinancing a home is not something
that occurs overnight. Again, education could help to avoid any
problem. Repeal this portion of the regulation, it is unnecessary.
When I review
the results of our compliance audit in the area of Truth in Lending,
I understand the frustration of lenders. Why bring non-finance
charge items into the computation of the APR? Keep it simple and
just be sure all fees are disclosed on the HUD statements. Overall
consumers are savvy. If fees seem to be unusually high, with all
else being equal, would this not draw attention and cause the consumer
to ask why or check with another provider? Please simplify the
APR computation.
Equal Credit
Opportunity Act (Regulation B)
Regulation B
creates a number of compliance problems and burdens for banks.
Knowing when an application has taken place is often difficult
because the line between an inquiry and an application is not clearly
defined.
Spousal Signature.
Another problem is the issue of spousal signatures. The requirements
make it difficult and almost require all parties – and their
spouses – to come into the bank to personally complete the
documents. This makes little sense as the world moves toward new
technologies that do not require a physical presence to apply for
a loan.
Adverse Action
Notices. Another problem is the adverse action notice. It would
be preferable if banks could work with customers and offer them
alternative loan products if they do not qualify for the type of
loan for which they originally applied. However, that may then
trigger requirements to supply adverse action notices. A straightforward
rule on when an adverse action notice must be sent 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.
If it is the
goal of Congress and/or the Regulators to reduce the number of
community banks and thrifts through burdensome regulations, just
say so. However, I truly doubt that to be the case. Please eliminate
the nonsense regulations and allow us to more easily serve our
customers, communities, and shareholders. Thank you for your time
and the opportunity to comment.
Sincerely,
Eric A. Gillett
President and Chief Executive Officer
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