Baileyville State Bank
April 17, 2004
Robert E. Feldman, Executive Secretary
Federal Deposit Insurance
Corporation
550 17th Street NW
Washington, DC 20429
Re: EGRPRA Review of Consumer Protection Lending Related Rules
Dear Mr. Feldman:
As a community banker, I appreciate the opportunity to comment on
the regulators' effort to relieve the problem of regulatory burden.
This bank was established in 1894 and since then the bank has worked
hard to establish the trust and confidence of our customers and to
provide excellent customer service, but regulations designed to help,
protect or assist our customers often interfere with our ability
to provide good customer service. When a customer has to sign their
name ten to twenty times to obtain a residential real estate loan
it would seem to be a bit much and in reality not overly consumer
friendly. This bank is a vital part of this community's economic
well being, but we are slowly and surely being put out of business
due to the excessive time, talent and money it takes to comply with
the over whelming weight of banking regulation. It is truly a burden.
It is time that this growing problem is addressed by the regulatory
agencies and Congress. This is especially true for consumer protection
lending rules, which though well intentioned, unnecessarily increase
costs for consumers and prevent banks from serving customers. While
each individual consumer regulatory requirement may not be burdensome
itself, the total weight has the camel on its knees and is breaking
its back. It's not only time to acknowledge that consumer protection
regulations are a burden to banks, are in reality quite ineffective
but also that the majority of consumers don't care, don't want and
don't understand the reams of regulatory legalese they have to endure.
Truth in Lending (Federal Reserve Regulation Z)
Right of Rescission.
This is one regulatory requirement that when presented to a consumer
they roll their eyes, look at you in disbelief
and say "What do you mean I can't have my money?" Is this
regulation burdensome, probably, but its more of a non-essential
irritating nuisance. Rarely, if ever, does a consumer exercise the
right. Consumers resent having to wait three additional days to receive
loan proceeds after the loan is closed. Inflexibility in the regulation
making it difficult to waive the right of rescission aggravates the
problem. If not outright repealed, depository institutions should
at least be given much greater latitude to allow customers to waive
the right.
Finance Charges. Bankers have difficulty understanding and consumers
don't have clue what the appropriate components are when determining
finance charges and the APR. This process desperately needs simplification
so that all consumers can understand the APR and bankers can. easily
calculate it.
Equal Credit Opportunity Act (Federal Reserve Regulation B) .
Regulation B creates a number of compliance problems and is a true
burden. It is not well written and is difficult to understand. For
instance, it is often difficult to determine when an inquiry becomes
an application because neither is clearly defined.
Spousal
Signature. Spousal signatures are a quagmire and in reality are
probably as much of a burden on the consumer as they are on
the banks. The requirements are difficult and almost require all
parties -and their spouses -to 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. And the additional requirements that were effective
4-15-2003 with mandatory compliance on 4-15-2004 did not simplify
matters and actually fly in the face of regulatory relief
Adverse Action Notices. Adverse action notices are probably the
coldest rudest thing we give to any of our customers for any reason.
A straightforward rule on when an adverse action notice must be sent-
that can easily be understood and is maybe not so adverse - 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.
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.
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 yours,
Paul R. Boeding
President
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