Office of Advocacy - U.S. Small Business Administration
April 6, 2004
Via Electronic Mail
Communications Division
Public Information Room
Mailstop 1-5
Office of the Comptroller of the Currency
250 E Street, SW
Washington, DC 20219
Docket No. 04-06
Jennifer J. Johnson, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 200551
Re: Docket No. R-1181
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
Attention: No. 2004-04
Re: Community Reinvestment Act Regulations (69 Fed. Reg. 5729; February
6, 2004)
Dear Sir/Madam:
The Office of Advocacy of the U.S. Small Business Administration
submits this comment letter in response to the above-referenced
proposed rule. We commend the promulgating agencies for issuing
a proposed rule that is well received by the affected small entities
for providing burden reduction, and we urge the agencies to improve
their implementation of the Regulatory Flexibility Act by providing
a fact-based analysis on why the rule would not significantly impact
a substantial number of small entities. These comments reflect
opinions that small entities have voiced to the Office of Advocacy.
Advocacy Background
Congress established the Office of Advocacy (Advocacy) under Pub.
L. 94-305 to represent the views of small business before Federal
agencies and Congress. Advocacy is an independent office within the
Small Business Administration (SBA), so the views expressed by Advocacy
do not necessarily reflect the views of the SBA or of the Administration.
Section 612 of the Regulatory Flexibility Act (RFA) requires Advocacy
to monitor agency compliance with the RFA, as amended by the Small
Business Regulatory Enforcement Fairness
Act.1 On August 13, 2002,
President George W. Bush enhanced Advocacy’s RFA mandate when
he signed Executive Order 13272, which directs Federal agencies to
implement policies protecting small entities when writing new rules
and regulations. Executive Order 13272 also requires agencies to
give every appropriate consideration to any comments provided by
Advocacy.2 Under the Executive Order,
the agency must include, in any explanation or discussion accompanying
the final rule’s
publication in the Federal Register, the agency’s response
to any written comments submitted by Advocacy on the proposed rule,
unless the agency certifies that the public interest is not served
by doing so.3
The Proposed Rule
On February 6, 2004, the Office of the Comptroller of the Currency,
the Federal Reserve System, the Federal Deposit Insurance Corporation,
and the Office of Thrift Supervision (collectively, the agencies)
published a joint proposed rule to amend the Community Reinvestment
Act (CRA) regulations. Prior to publishing the proposed rule, the
agencies published an advanced notice of proposed rulemaking to seek
public input on changes to the CRA regulations. The proposed rule
is based on the comments that the agencies received.
The proposed rule amends the definition of “small institution” to
mean an institution with total assets of less than $500 million,
without regard to any holding company assets; increases the number
of institutions that are eligible for evaluation under the small
institution performance standards, while slightly reducing the portion
of the nation’s bank and thrift assets subject to evaluation
under the large retail institution performance standards; and addresses
abusive lending practices by providing that evidence that an institution
or any of an institution’s affiliates has engaged in specified
discriminatory, illegal, or abusive credit practices in connection
with certain loans will adversely affect the institution’s
CRA performance. The purpose of the proposal is to reduce unwarranted
regulatory burdens and to better address abusive lending practices.
RFA Compliance in the Proposal
Pursuant to section 605 of the RFA, an agency may certify that
a rule will not have a significant economic impact on a substantial
number of small entities in lieu of preparing an IRFA. The agency,
however, must provide a factual basis for the certification.4 Advocacy
recommends that agencies perform a preliminary economic analysis
to determine whether certification is appropriate or if an IRFA
should
be performed.5
The information gathered through the preliminary
economic analysis will provide the factual basis for the
certification statement.
Advocacy regularly advises agencies that a factual basis should
at a minimum identify the small entities affected by the
rule, describe
the impact on those entities, and explain the agency’s reasoning
in support of the certification. Advocacy encourages the agencies
to review comments from small entities to determine whether the
final rule can be certified or if analysis of the rule’s
impact is required. Advocacy is available to assist the agencies
in their analysis
of the rule’s impacts on small entities.
Other Issues
In the preamble, the agencies state that the small banks have stated
that it is too difficult to get an outstanding rating from a CRA
examiner.6 This issue was not addressed in the proposed rule.
It is Advocacy’s understanding that the agencies are considering
changing the procedures for the examination process. Advocacy encourages
the agencies to consider appropriate changes to improve the procedures
so that the CRA examination process is not so daunting. Advocacy
further encourages the agencies to publish the proposed changes
to the examination process for public comments.
Conclusion
The RFA requires agencies to consider the economic impact on small
entities prior to proposing a rule and to provide the information
on those impacts to the public for comment. We recommend that the
agencies revise their respective certifications to include a meaningful
factual basis that provides an analysis to support the conclusion
of no significant economic impact
Please note that Section 3(c) of E.O. 13272 requires agencies to
respond to Advocacy’s written comments in an explanation
or discussion of the final rule that is published in the Federal
Register.
The Office of Advocacy is available to work with the agencies to
ensure compliance with the RFA. Thank you for the opportunity to
comment on this important proposal. If you have any questions,
please feel free to contact the Office of Advocacy at (202) 205-6533.
Sincerely, Thomas M. Sullivan
Chief Counsel for Advocacy
Jennifer A. Smith
Assistant Chief Counsel
for Economic Regulation
& Banking
____________________________________
1 Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified at 5 U.S.C. §§ 601-612)
amended by Subtitle II of the Contract with America Advancement Act, Pub. L No.
104-121, 110 Stat. 857 (1996). 5 U.S.C. § 612(a).
2 Id.
3 Id.
4 See, 5 USC § 605.
5 The Regulatory Flexibility Act: An Implementation Guide for Federal Agencies,
Chapter 1, available on Advocacy’s website.
6 Fed. Reg. at 5737.
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