From: Cary
Anderson [mailto:cjand@bektel.com]
Sent: Tuesday, April 20, 2004 4:17 PM
To: Comments
Subject: EGRPRA Review of Consumer Protection Lending Related Rules
Cary Anderson
PO Box 309
Wilton, ND 58579
April 20, 2004
Dear FDIC:
As a community
banker, I would like to comment on the critical problem of
regulatory burden. Most of the consumer protection regulations are good
in theory, but quirky interpretations frequently make them extemely time
consuming to comply with and even interfere with the intended benefit to
the consumer. The community banking industry is slowly being crushed
under the cumulative weight of regulatory burden.
There is no better
example than to look at "Finance Charges" in Reg.
Z-Truth in Lending. The definition of the finance charge, assessing what
must be included, is very confusing. To the consumer, the APR calculation
on secondary market real estate loans has become meaningless. This
process desperately needs simplification so that all consumers can
understand the APR and bankers can easily calculate it.
Another good
example is in the 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. Frequently, a customer
simply comes into the bank to obtain more information in order to make a
decision. It can be difficult to comply with present regulations and yet
offer opinions and advice to customers.
Adverse Action
Notices. 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or whether it can be considered "withdrawn."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.
Flood Insurance.
The current flood insurance regulations create
difficulties with customers, who often do not understand why flood
insurance is required and that the federal government - not the bank -
imposes the requirement. The government needs to do a better job of
educating consumers to the reasons and requirements of flood hazard
insurance. 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,
Cary J Anderson
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