State
Bank of Chandler
From: lonnie [mailto:lecsbcmn@frontiernet.net]
Sent: Monday, April 19, 2004 6:44 PM
To: regs.comments@federalreserve.gov; Comments; regs.comments@occ.treas.gov;
regs.comments@ots.treas.gov
Subject: EGRPRA
From: Lonnie
E. Clark
State Bank of Chandler
342 Main Avenue
Chandler, MN 56122
RE: EGRPRA Review
of Consumer Protection Lending Related Rules
Dear Sir/Madam:
Small Bank awash
in Regulations
Yes, it was a very good idea to ask bankers about outdated and excessive regulations.
Thank you very much for this opportunity. We are a small community bank of
under $30 million. With less than 10 employees, it is almost impossible to
stay up to date on all the existing laws and regulations, all the continuous
changes to those laws and regulations, plus all the new ones coming out. Sometimes,
it appears as if there is an effort to drive the smaller banks out of business,
awash in all this regulation.
Less Frequency
in Changes to Regulations and Forms
There are some onerous laws and regulations that tend to cause me the most
concern. Even so, I almost didn’t write this letter, out of concern that
it could prompt changes to something even worse than what we have now. Every
time a change is made, we have to rewrite our Policies and Procedures, Conduct
Employee Training, and buy all new Forms. The fact that the laws and regulations
are changing as frequently as they do, in itself is burdensome. Please consider
the frequency of changes to the regulations, and then do not demand instant
change. Give the banks time to adapt to all the changes. The government is
actually doing a better job of that. I have noticed that and I appreciate it.
What I would really like to see is a 5 year cycle, 4 years in which new laws
and regulations could be proposed but not passed, and then 1 year to prioritize
and implement only those laws and regulations with the most merit. Drop the
rest. If you change a regulation for the purpose of making it easier for the
banks, don’t criticize the banks for not immediately converting to the
simplified version. Give us more time to adopt new forms and procedures, and
please don’t change them as often.
Continue the
Regulator – Banker cooperation
I am impressed when bank examiners point out regulatory issues and apparent
violations, and actually assist bankers with helpful ways to comply. There
seems to be an improvement in the attitude of regulators toward banks over
the past years. This opportunity to comment is an example of that. Thank you.
Please keep the partnership going.
I would like
to address a few specific laws and regulations:
Call Report Disclosure
of Cash on Hand in Banks
Years ago, when I completed the call report for our bank, the regulators were
sensitive to the issue of not disclosing the actual amount of cash on hand
at a bank. It was included in a total of “Cash and Due from Banks”.
Let’s just say that the government didn’t want to give a would-be
bank robber a shopping list. Since that time the government has decided the
need for public disclosure is more important than the safety of the smaller
banks with only one location. Perhaps the number crunching people don’t
realize that some banks do not have multiple branches. I strongly object to
this public disclosure. I would not object to the number being put in a non-public
area of the Call Report.
Two Year Exam
Cycle
I agree with those proposing a 2 year exam cycle.
Balloon Real
Estate Loans under RESPA
Many small banks make 3 or 5 year fixed rate balloon loans to finance real
estate. We lack dependable longer term fixed rate liabilities to match up against
these assets. In many cases, we refinance the balloon balance of the loan for
the customer at a new fixed interest rate at maturity. We pass on the $20 filing
fee to the customer, to extend the mortgage. Truth in Lending applies to these
loans. There is just no need for any additional disclosure on that type of
loan. RESPA should not apply. It is extra wasted effort. Banks are filling
a very important need in the market with these loans. They should not be burdened
with RESPA on them.
Credit Life and
Disability Insurance and HOEPA
Truth In Lending does not include Credit Life and Disability premiums in the
Finance Charge, when they are properly disclosed. HOEPA should not either.
Small banks want to avoid becoming a HOEPA Lender because the disclosures are
too difficult. Another reason is that it throws a red flag to regulators for
possible predatory lending. There are times that Credit Life would be appropriate
on these loans, but banks will not offer it, because of HOEPA. A customer that
may qualify for Credit Life or Disability insurance because of the Group Policy
may not qualify individually for that type of insurance. They may have lost
their only opportunity for that coverage because of HOEPA. Predatory lending
is wrong. Including Credit Life and Disability Insurance premiums in finance
charge, to determine if HOEPA applies, is also wrong.
Information for
Government Monitoring Purposes on Real Estate Loans for Dwellings
Sometimes we have to get it by law and sometimes we are prohibited from getting
it by law. Make up your mind, and either require it on all Real Estate Loans
for Dwellings, or don’t require it on any.
Sincerely,
Lonnie E. Clark
President
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