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FDIC Federal Register Citations

FIRST INTERNATIONAL BANK & TRUST

March 29th 2004

Robert E Feldman, Executive Secretary
Attention: comments
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429

RE: Economic Growth and Regulatory Paperwork Reduction Act.
Changes in regulations.

Dear Mr. Feldman:

First International Bank and Trust is a community bank with an asset size of 609 million. The Corporate office is located in Watford City, North Dakota, which is a rural community. The bank has a network of 16 branches. There are 13 branches located in North Dakota of which 3 are in an MSA the other 10 are located and serve rural communities. There are 3 branches in Arizona. The Arizona branches are located in an MSA.

This memo is intended to address some of the consumer regulations that I personally find burdensome for community bankers throughout the nation. What seems to be for the benefit, of our customers (consumers) ends up as a burden on the consumer as well as the community bankers and thus does not result in a positive benefit for the consumer or the community bankers. When reviewing some of the regulations it appears that there have been financial entities that are not fair with their consumers and do not implement regulations. Thus a regulation is revised and applied to all bankers. This should not occur. Resolve the issue with the entity that is causing the problem rather than placing this unfair burden on the community banks that are well run, well capitalized, have strong management, policies, procedures and adhere to rules and regulation.

Regulation Z

There is an issue with Truth In Lending Regulation Z as it relates to the three day right of rescission. Many times the 3 day right of rescission causes undue stress and problems for our customer. The reason is the 3 day hold on the disbursement of funds may be a personal financial emergency to the consumer while a regulator or a banker may not consider it a personal financial emergency. The rule is not a Consumer Credit Protection Act requirement under Title 15 Section 1635 of the United States Code; it is however imposed in Regulation Z. I, as a banker feel the three day rescission rule as it-relates to disbursement of funds should be eliminated from Reg Z. I do feel that the consumer should have the right to rescind, however funds should be able to be disbursed.

The regulation or law should cover if the consumer does act on the rescission the steps that need to occur to unwind the transaction, including unwinding the payoff of a prior lien with the proceeds of a new loan. The regulation should then also require any third party that is involved (such as in a payoff of the loan) to be subject to the rescission to unwind the transaction to put the loan back to the original state.

Bank Secrecy Act and Currency Transaction Reports:

The regulations enacted pursuant to the Bank Secrecy Act and Anti-money laundering legislations are the most burdensome regulations for the banking community. The cost of compliance is high. The documentation of the monitoring is labor intensive which results in the cost of compliance being very high. As a banker or examiner, I would want to know more if there is suspicious activity occurring. Based on this thought the following is submitted:

• The CTR filing requirements are eliminated and rely on the Suspicious Activity Report or SARS to report apparent criminal activity.

• If CTR filings are not eliminated then the base level of reporting CTR's of $10,000.00 should have a significant increase to reflect a more the realistic level given today's business environment. The recommended revised threshold could be set at $40,000.00.

• Eliminate bi-annual recertification requirements for the same customer. Changing the above items would eliminate labor hours for the community bank, and would also save many labor hours and tracking hours for examiners and other government agencies involved in processing this paper.

USA Patriot Act and "Know Your Customer" Requirements

In review of EGRPRA it would be prudent to review this regulation and determine the true effectiveness in combating terrorism. This regulation is also very time consuming, expensive to document and maintain recordkeeping.

• Review the effectiveness of the customer identification and recordkeeping requirements of the USA Patriot Act.

• The best identification is the drivers license or other pictured government ID, however if one places this evidence of customer identification in the loan file or other lending record keeping mechanism it is viewed by examiners as discrimination.

• Reconcile the requirements of anti-discrimination laws, which prohibit the collection of data, with the USA Patriot Act requirements.

• It is inefficient and very costly to send annual, repeat privacy notices. The vast majority of which go unread and discarded. Customers are confused and annoyed at receiving annual notices especially when the bank does not share information in the first place. The original notice at account opening should be sufficient. The elimination of the annual notice would save the community banks in labor hours, postage, paper, and record keeping.

Home Mortgage Disclosure Act (HMDA) and Regulation C

The changes in this regulation are mind boggling. What should be simple is quite complex. What consumer actually has ever used the data collected under HMDA? I

HUD I
As a banker I am very pleased to hear that HUD has pulled the revisions to HUD. As written, that change would be a very unrealistic approach to solve the HUD problems. In today's market our consumer received a Good Faith Estimate which is followed at closing with a final closing statement called HUD-I or HUD-IA. The Good Faith Estimate and the HUD I Settlement Statement while they do not mirror each other in costs, are very similar. The unknowns are not of a significant amount. The difference is mainly in items that the borrower selects prior to closing such as insurance coverage, final taxes etc. The known costs are the same.

To bundle the costs involved would not be fair to any community banker who in Good Faith provides the information known at application.

Appraisal Regulations

The current regulation requires a licensed or certified appraisal on loans greater than $250,000.00. This is a hard and fast rule which is restrictive to a community bank. A banker should be able to use the County Assessors value on loans that are up to $500,000.00 without requiring a formal appraisal. The County Assessors value could be supported by an in-house appraisal and photographs.

Regulation D and Limitation on Transfers and Withdrawals from Money Market Deposit accounts

This regulation is outdated and serves no purpose for our consumers. The restrictions are not fair. The same regulation and its restrictions are not imposed on non-banks or credit unions.

• Remove restrictions and allow unlimited withdrawals against money market accounts.

• Eliminate restrictions on paying interest on certain deposit accounts.

Regulation B

The most recent amendment to regulation B "Evidence of Intent" I feel is not necessary. This change puts additional documentation burden onto the community banker. When an applicant and co-applicant sign an application or financial statement for a loan, the intent is built in that it is a joint application. The application also has a section at the top that can be marked if it is being completed jointly. To have the person sign the statement of "I wish to apply for joint credit" is overly burdensome and does not provide the consumer with any additional information and therefore this process is without merit. This requirement should be eliminated.

SUMMARY

It would be fair to state that our customers, who are also consumers, are overwhelmed with papers when they apply for a loan or open a new account. What is supposed to be documentation to protect the consumer frustrates them. The person in the consumers eyes who is to blame for all this paper and requirements is their community banker. They do not care that it is required by the regulators. It is the bank that is requiring the documentation in their eyes. This same feeling of being overwhelmed applies to us, the community bankers. There is just so much paper, documentation and recording keeping required to keep up with all the changes and new regulations. It is virtually impossible for a small community bank to keep up with and/or maintain full compliance, resulting in small community banks selling to larger banks. The expense of compliance, credit review, safety and soundness is astronomical and many small community banks cannot afford the personnel expense to maintain a compliance/credit review/ audit staff.

It is important that regulations are reviewed on a regular basis to ensure the need for the regulation still exists. If the need is no longer there, eliminate the regulation.

Thank you for providing the opportunity to respond to the EGRPRA.

Sincerely,

First International Bank & Trust
Stephen L. Stenehjem,
President
First International Bank & Trust
100 N. Main
Watford City, ND  58854
 

Last Updated 04/13/2004 regs@fdic.gov

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