Ka-ching!
The Sound of Your Comment Letter Striking Pay Dirt
Andy Zavoina CRCM, BOL Guru
The Department of Defense is offering the banking industry a possible escape hatch that would allow it to entirely avoid a new set of compliance requirements that would apply, in some respects, to every application for consumer credit. The catch? You have to open the escape hatch by composing and sending a short and simple comment letter. Is it guaranteed to work? No, but it stands the best chance we've seen in a long time for true relief of a new regulatory burden.
Background
Servicemembers who incur large amounts of debt proportionate to their income can lose their security clearance. This means they cannot do their jobs and the military wants abusive lending practices, a leading contributor to the problem, to cease.
Enter a new law, the Talent Amendment. It will protect the servicemembers and their dependants by requiring additional warning disclosures, restricting the interest rate on many types of consumer loans, impacting collateral securing these loans and possibly inhibiting problem loan workouts.
This regulation is derived largely from abusive payday lending practices, excessive interest rates/fees and the flipping of loans to increase the return for the lender and the obligation of the servicemember. Does your bank do this? No. That is why you should be excluded.
One Question You Must Answer
There are several questions asked in the proposal but we will focus on just one. Comments are requested on applicability of the regulation in general.
"...we seek comment on whether the final regulation should exclude regulated banks, credit unions and savings associations and their subsidiaries from coverage by the regulation generally, or in limited circumstances..."
With sufficient comments and sound reasoning, regulated institutions such as yours could be omitted from the definition of "creditor" and if that's done none of these new Talent amendment-related rules will have an impact on your business.
Comment
By commenting in whole or on just this one question, you can reduce or eliminate new costs for compliance.
The Federal Register publication contains specific information on where and how to file your comments. In short, you may submit them electronically to:
- regulations.gov
- reference the Department of Defense as the Agency requesting comment and the
- RIN 0790-AI20 or DOD–2006–OS–0216 as the document you want to comment on.
Your comments and others will be available on regulations.gov, a website used to make all comments on proposals available to the public. This also allows you to view the comment letters already submitted, which may provide you with some ideas and new perceptions on how these rules will affect you.
And the time is now.
Executive Actions
- Comment on the applicability of the regulation to financial institutions such as yours. Reasons you should be excluded, may include:
- You are already reviewed on a periodic basis by a federal/state banking regulatory agency;
- These reviews already include fair lending and abusive practices, in addition to safe and sound lending practices;
- Regulated federal/state banks, credit unions and savings associations are not the abusers causing the origination of this law. Directing attention here may draw it away from those who have abused servicemembers.
- Your relationship with the servicemember is financially "holistic" in that you want them as a customer for the long term and for many products and services. To abuse your customer means losing them.
- Watch BOL for further requests for information and the final rules so you may initiate an implementation procedure.
Tick, Tick, Tick
The deadline is June 11, 2007.
Resources
- New Proposed Rules on Military Lending (BOL Briefing)
- The proposed regulation, as published in the April 11, 2007, Federal Register: TXT; PDF
- New Usury Law Coming to You (BOL article)
- Your Comments May Save You Money (BOL article)
- Comment Letter guidance from BankersOnline
- Comments submitted prior to proposal:
- Comments of ICBA, ABA, ACB, ICBA, Consumer Bankers Association, Association of Military Banks
- Comments of the National Consumer Law Center, Consumer Federation of America, Center for Responsible Lending, Consumers Union, National Association of Consumer Advocates (submitted 2/5/07)
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Don't miss a single issue of Executive Briefing. Below you will find a link
to the archives page.
--Executive Briefing Archive--
First published on BankersOnline.com 5/17/07
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