From: Tobey Wilkins [mailto:tobeyw@vikingbank.com]
Sent: Friday, April 16, 2004 12:17 PM
To: Comments
Subject: EGRPRA Review of Consumer Protection Lending Related Rules
Tobey Wilkins
PO Box 70546
Seattle, Wa 98107
April 16, 2004
Dear FDIC:
I am a Consumer Loan Officer at a fast-growing successful Community
Bank
headquartered in Seattle, Washington. We are slowly being crushed
under the cumulative weight of regulatory burden, something that
must be
addressed by Congress and the regulatory agencies before it is too
late.
This is especially true for consumer protection lending rules, which
though well intentioned, unnecessarily increase costs for consumers
and
prevent us from serving our customers. Unduly burdening service-oriented
Community Banks is a disservice to Consumers.
An example is "Reg. Z" Finance
Charges which I believe was intended to
"
level the playing field" for Consumers making financing choices
an easy
decision. Unfortunately, the calculation of "APR" is a
murky process,
handled in a variety of ways by various Lenders and only serves to
confuse
the Consumer. Simplification and Clarification are desperately needed
in
"
APR" disclosure.
Equal Credit Opportunity Act (Federal Reserve Regulation B)
Regulation B creates a number of compliance problems and burdens
for
banks. Knowing when an application has taken place, for instance,
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 - 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.
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. For example, it may
be
difficult to decide whether an application is truly incomplete or
whether
it can be considered "withdrawn." A straightforward rule
on when an
adverse action notice must be sent - that can easily be understood
-
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.
Home Mortgage Disclosure Act (HMDA) (Federal Reserve Regulation
C)
Exemptions. The HMDA requirements are the one area subject to the
current
comment period that does not provide specific protections for individual
consumers. HMDA 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.
Volume of Data. The volume of the 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. Consumer activists are constantly
clamoring for additional data and the recent changes to the requirements
acceded to their demands without a clear cost-benefit analysis. All
consumers ultimately pay for the data collection and reporting in
higher
costs, and regulators should recognize that.
Certain data collection requirements are difficult to apply in practice.
Additional Comments
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.
Conclusion
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,
Tobey R. Wilkins
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