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FDIC Federal Register Citations

Farmers & Commercial Bank



April 16, 2004

Mr. Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Attention: EGRPRA Burden Reduction Comments

Dear Sir:

We appreciate the opportunity to comment on the issue of consumer regulatory burden. As community bankers, we are proud of our ability to meet the credit needs of our community, however, the burden of consumer protection rules frequently interferes with our ability to serve our customers. While each individual regulation may not seem too overly burdensome, the cumulative affect of these regulations is onerous. We urge Congress and the regulatory agencies to recognize that the community banking industry is slowly being crushed under this cumulative weight. While we can understand the theory behind the consumer protection rules, they continually impede our ability to serve our customers and work to ultimately drive up the costs to the consumer.

The following regulations are just a few examples of how consumer regulations have become not only a burden to banks, but the consumers they were enacted to protect:

1) Right of rescission: One of the most burdensome requirements is the three-day right of rescission under Regulation Z. 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, and they often blame the bank for “withholding” their funds.

2) 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.

3) Regulation B’s requirements complicate other instances of customer relations. For example, 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.

4) HMDA is an extremely cumbersome act that does nothing for consumer protection. It 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. The volume of 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. In addition, with the changes in definition of a “refinance,” several agricultural and commercial loan refinances must now be included, in effect, “watering down” the relevance of the data collected.

5) Flood insurance – The current flood insurance regulations create difficulties with customers who do not understand why flood insurance is required and that the federal government, not the bank, imposes the requirement. 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.


Respectfully,

Robert E. Mickey
President
124 W. 2nd St.
Holden, MO 64040


Last Updated 05/06/2004 regs@fdic.gov

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