I'm posting blind today because I'm venting and need some opinions.

We're being examined and we have a few technical Reg CC violations - we're doing the holds correctly, but have some disclosure issues.

Our policy is case by case with immediate availablility, unfortunately our disclosure says case by case with next day. I'm willing to take the hit on that and get it fixed. However, the examiner is stating that because when we do hold under case by case we use the statutory limits under the permanent schedule that we must tell the customer in the disclosure how to determine if the check is local or non-local. He's citing 229.16(b)(2), I think he needs to read on to 229.16(c)(1) - but he doesn't know how to listen.

We use the model disclosure with a couple of modifications - not material, but he says that we aren't using the model so that I have to disclose how to determine if something is local.

Problem is that he's written up other institutions for this same thing and they've caved and let it go in a report and changed their disclosures.

Am I off base, before I go up the chain, and I'll go to the Fed if I have to , I want to know if this is happening elsewhere - are examiners making law and getting away with it.

He additionally doesn't like Reg DD, and is trying to make law there also.

Thanks for letting me vent, and I'd appreciate any assistance or opinions that may be out there.

I will defer to wiser heads to answer the particulars of your situation, but I want to respond to the general problem you're facing. I had the same thing happen - examiner cited, I responded with contradicting cites, examiner wouldn't give in. With the help of BOL posters, especially Andy "Root Canal" Zavoina, we assembled a case and submitted it to the ombudsman. Nine months later, the examiners notified us that we could delete the violation from their report. So, make certain of your position, then stick with it.

I'm replying anonymously too. We do case-by-case holds with next day availability but if someone comes in with their receipt the day of deposit and wants to withdraw we let them. However our teller machines are not online so for most depositors it is next day availability. We don't tell the customer how to tell if the check is local or nonlocal; the hold disclosure tells them how many days the hold will be so what does it matter?? Sounds like you are disclosing just like we do and we have gone through numerous exams with flying colors. The only thing we have been told to do is disclose on our hold forms if the hold is for a new account since our hold times are different than with over-the-counter deposits so the examiners can tell the difference. Model disclosure are just a model. Ours are not exaclty like the case-by-case model either and we have never had a problem.


I don't see how this examiner is getting away with this since their work has to be reviewed and approved before issuing their report.

The Commentary to Reg CC is a wealth of information - and it appears that your examiner has not bothered to read it.

In the Commentary to 229.16(b) it states in part:
B. 229.16(b) Content of Specific Policy Disclosure

1. This paragraph sets forth the items that must be included, as applicable, in a bank's specific availability policy disclosure. The information that must be disclosed by a particular bank will vary considerably depending upon the bank's availability policy. For example, a bank that makes deposited funds available for withdrawal on the business day following the day of deposit need simply disclose that deposited funds will be available for withdrawal on the first business day after the day of deposit, the bank's business days, and when deposits are considered received.
2. On the other hand, a bank that has a policy of routinely delaying on a blanket basis the time when deposited funds are available for withdrawal would have a more detailed disclosure. Such blanket hold policies might be for the maximum time allowed under the federal law or might be for shorter periods. These banks must disclose the types of deposits that will be subject to delays, how the customer can determine the type of deposit being made, and the day that funds from each type of deposit will be available for withdrawal.


So basically, you do not need to tell your customer's how to tell the difference between local and non-local checks because you do NOT hold all checks based on the availability schedules of 229.12. You employ a case-by-case hold in which you inform the customer that you will be placing a hold, and the amount and date that funds will become available. The banks that must inform customers about how to tell the difference between local/non-local are those banks that place a hold on all checks (with the exception of Next Day items) because those banks do not need to give a hold notice to their customer each time. That's why the disclosure is so bleeping complicated, and that's why most banks have chosen to go the "Next Day but Case-by Case & Exception" routine.

Incidently, the Commentary for 229.16(a) states in part:
2. The disclosure must reflect the policy and practice of the bank regarding availability as to most accounts and most deposits into those accounts. In disclosing the availability policy that it follows in most cases, a bank may provide a single disclosure that reflects one policy to all its transaction account customers, even though some of its customers may receive faster availability than that reflected in the policy disclosure. Thus, a bank need not disclose to some customers that they receive faster availability than indicated in the disclosure. If, however, a bank has a policy of imposing delays in availability on any customers longer than those specified in its disclosure, those customers must receive disclosures that reflect the longer applicable availability periods.

You can access the commentary on-line from the FDIC's website at http://www.fdic.gov/regulations/laws/rules/6500-3225.html

Thanks Bonnie, I've tried that. His take is that because our disclosure does not match what we do - we disclose next day and give immediate that we fail this section 229.16(a)

2. The disclosure must reflect the policy and practice of the bank regarding availability as to most accounts and most deposits into those accounts. In disclosing the availability policy that it follows in most cases, a bank may provide a single disclosure that reflects one policy to all its transaction account customers, even though some of its customers may receive faster availability than that reflected in the policy disclosure. Thus, a bank need not disclose to some customers that they receive faster availability than indicated in the disclosure. If, however, a bank has a policy of imposing delays in availability on any customers longer than those specified in its disclosure, those customers must receive disclosures that reflect the longer applicable availability periods.


Therefore we must give specific disclosure to inform the customer on how to determine if their check will be placed on holde - even though we don't hold.
He doesn't listen and wants only to hear his opinion.

I am running into problems with examiners that are a little too big for their britches as well. Seems like we don't get finished with one bunch of them before here comes another. What seems fine with one batch is a real no no with the next ones. They all have their own opinion. You fix something one batch says you are doing wrong and here comes the next ones who says it has to be done the way you did it in the first place. Hey, just try talking with some of the "higher-up" ones.....they can be rude and will not follow up with their promisses. If we are constantly being examined, and spend so much time trying to defend interpretations with examiners when are we suppose to take care of our customers? Good Question huh?

Technically, your examiner is correct - 229.16 requires you to diclose your actual policy. But if this is anything other than a footnote in the exam exit, I would have a discussion with the guy's supervisor - there is no harm suffered by the consumer by your providing faster availability than you disclose.

His interpretation that you have to provide information regarding local and non-local checks is not correct, however, for the reasons Bonnie already noted. I would fight that one tooth and nail. Presuming you have a relativley clean report otherwise, if this item is included in the examination report, I would recommend to management that you disagree with the finding in the exit, and in the response to the exam report.

The regulators are not always correct. When we disagree with their findings, we should not be afraid to question them.

Just curious, who is your regulator, OCC, FDIC?

OTS

This thread is an excellent case study in the problems that result when banks roll over and play dead the moment an examiner criticizes something. Not only do you get yourself whipsawed every exam, but fellow bankers find it harder to fight off the dark side of the Force. When you don't agree with an examiner:
1. review the source of the problem (form, procedure, calculation, etc.)
2. ask for a cite so you can study the applicable reg,
3. read the rule cited,
4. read all the definitions of the terms used in the rule,
5. read any commentary on the above,
6. search BOL for any discussions on that topic,
7. reconsider your position,
8. politely present your views to the examiner & request reconsideration,
9. contact the person who heads up your regulator's compliance exams at the regional office & request a review of your case by a review examiner,
10. contact the subject matter specialist at your regulator's national office to request a review,
11. appeal to the ombudsman.

Somewhere at about step 7 or 8, you may want to seek your lawyer's opinion. Consultants can also help you determine who's right and, if necessary, make your case.

Richard's info is excellent. As a consultant I often hear "the examiners told us ..." and it is incorrect or the banker disagrees but did nothing about it. As an "recovering examiner" I can tell you first hand that disagreeing with an examiner is not wrong, it is expected. If you feel that you don't agree, politely state so and as Richard said in #2 of this list, ask them where that it is located in the reg so you can research it. On many occasions, this will be the end of it as the examiner can't find the info in the reg to support what they were saying (no more here-say!).

If you play dead, you are not doing your job. Learn when to pick your battles (some things are not worth arguing about) and learn how to tactfully argue your point. Good luck.

Part of the problem when examiners try to "make law" is that it may start at a bank that has several violations, and some may be more severe than the one that the examiner has "invented." The bank in question picks and choses its battles and may give in on the "smaller" violation so as not to aggravate the situation on the "larger" violation.

The examiner, having now found a new "gotcha" then proceeds to other banks, and each "successful" citing adds momentum.

We have always been taught not to go head-to-head with examiners but I am finding it harder and harder to follow this old line of thought. I actually had one tell me one time that if she could'd get me on that one that she would find something else. That was after she could't show me any requirement for it. If the examiner cannot point out law or requirements can they still show an exception in a written report?

BWest

1) Exception to what? No cite, no violation. Someone has to say something is wrong first.
2) I know this can be difficult at times, but it is important to step back in the relationship between the bank and the regulator and look at this as a partnership, an advisor.

Examiners can be a good resource. You should work on developing a working relationship, not an adversarial one. That takes time and trust, but it can be beneficial.

With this in place, going head to head means to play "show me" and to work out interpretations that differ.

I whole heartedly agree with the Z man, a working relationship is what you are striving for. We all have different ways of looking at a regulation. Some regs are more clear cut than others.

When there is a difference of opinion, let the examiner know. I was known to make a mistake or two while a bank examiner. While some may hold a grudge, I believe they are few and far between. The truly good ones will think more of you if you stand your ground.

Andy, wish me luck because they are to call me and I am going to attempt to keep them from showing an exception when there is nothing to base the exception on. I did not have any dealings with the examiner during the examination, however, I am told she sees things only in "black-and-white". That's what I am going to bank on......either there is a regulation/requirement or there isn't on which to base the exception. I have a feeling it is going to become a safety and soundness issue with the examiner, however, I have many things to backup my theory that the so called exception in no way has any effect on the safety and soundness of the bank. Wish me luck!

PS: I know better than to be disrespectfull of the examiners and to argue with them over every little thing. They are just doing their jobs.(maybe enjoying it a little too much! but) That's not really what I meant when I used the term "head-to-head".

BWest

Also a recovered examiner (and review examiner/manager), I made my share of mistakes while in the agency, too. As a review examiner, I got really peeved when my field staff dragged in some half-baked "findings" that didn't make sense, weren't supported by the workpapers, or were just plain wrong. If we can help examiners avoid embarassing mistakes that will cost them at performance evaluation time, they should be thankful. I don't share Andy's view that the relationship is a partnership, but examiners usually have a well-informed point of view worth considering. Don't hesitate to engage in a professional debate, and don't let them try to trump a losing debate by saying that it's a "safety & soundness" issue. It's been a few years longer since I was one of that type of examiner, but we were expected to substantiate those findings, as well. If something is unsafe or unsound, then it's fair to inquire why it's unsafe so you don't attempt to improve the process by doing something different but equally unsafe.

Thanks Richard, I feel that I do have a good case to present if they try and use the safety and soundness point of view on me. As I said to Andy, wish me luck!

Anon: You might want to point out to the examiner that the language of 229.10 on next-day availability says that you give next-day availability if the funds are available "not later than" the business day after the day of deposit. If you are giving immediate availability the funds ARE available "not later than" the next day.

Excuse me for jumping in here, but, did you say that you did not have any dealings with the examiners while they were there? If I understand correctly, you did not participate in the examination and now it is your responsibility to make sure that the written report is accurate. If this is the case, you really do need to get some dialog going with your examiners. The one really good aspect of my job is that I do deal with the examiners when they are here (oh my gosh, did I really say that?), we discuss alot of issues, and I do learn from my mistakes and from the mistakes of my bank (and I bet they learn a little too). We also discuss the issues in detail and exactly how they want it based on a complete and accurate understanding of the issue. I can not imagine how difficult it would be to have to come in after the fact and change their minds about something after they had left the bank and were trying to complete the written report. Surely, somebody had some idea that this was going to be an issue while they were still on the premises. If at all possible, you need to be on the team while they are there so that any misconceptions can be cleared up before they leave. Believe me, the advantages far outweigh the burdens.

Out of which regional office?

There are several Anon's out here, but I have been involved in this exam, I meet with the examiners everyday to discuss issues, but I'd rather not say what OTS region, except that we are west of the Mississippi.

We have an outcome, I spoke with the field manager and explained by position and he agreed with me and the issue has been dropped. The examiner is NOT happy, but I am.

I'be been through many exams and this has by far been the toughest, and we're a pretty clean shop. The majority of the findings are nits and they go after them with the same gusto that they do significant issues. The examiner complained yesterday at the final findings meeting that it'd taken too long on Reg CC - I wonder why!

I think this was handled in a professional way, at the end, we agreed to disagree about Reg CC.

This is a good example why it is important for compliance officers to stick to their guns when they know they are right, because now only have a small Reg CC comment for a few mistakes on extended hold notices.

And we thought you had problems . . .

An article appearing in the Las Vegas Review Journal today (April 23, 2002) titled, “NO BUM’S RUSH: Museum has straight scoop on toilet paper,” reminded me that, like this pain-in-the-wherever examiner, it’s the little things in life that cause the most pain. Truly, all things come to pass in a full measure of time.

Within the article, Green Bay’s Northern Paper Mill is credited with creating modern toilet paper in 1902, however, notes the article, “the stuff felt like sandpaper.”

“In fact,” still according to the article, “it wasn’t until 1935 that toilet paper was advertised as ‘splinter free’.”

And there it is . . .

This posting in not intended as legal advice nor should it be construed as such for any purpose.

Rob Robinson
CAMELS' Eye Limited
Community Banking Specialists
http://www.camelseye.com