ABA Banking Journal - November 2007 - (Page 60)
Compliance Clinic What’s wrong with the way we regulate? Too much angst, too little delivered. Is there a better way? e all use the term “regulatory burden.” It means many things, from too much work to supremely difficult calculations. We use the term to refer to consumer protection regulations and to safety and soundness regulations. The real meaning is murky at best, but we know it’s out there and that something should be done about it. In the past several years, both the industry and regulatory agencies have worked to identify components of regulatory burden and find ways to minimize it. Statutes and regulations were scoured and some laws were changed, resulting in a little less burden. But there is plenty more burden on the horizon. Congress is looking actively at the negative results of predatory and nontraditional mortgage lending. Once more, we face a legislative solution that carries a heavy burden. Both consumer protection and safety and soundness may be affected. And banks will have to do more. It’s a recurring pattern. Does it always have to be this way? Or is there a better way to regulate? W By Lucy Griffin, president, Compliance Resources, Inc., and senior associate, Paragon Compliance Group. She can be reached at griffin@ bankersonline.com 60 NOVEMBER 2007/ABA BANKING JOURNAL One law, a few formulas, a thousand disclosures The first step in finding a better way to regulate is to take a hard look at the current process, to find the weak points. It’s a process of many steps, beginning with consumer complaints and congressional action through the issuance of regulations all the way to compliance efforts and examinations. Generally, regulation writing and disclosure design begins with a law. The mission of those writing the regulation and designing the disclosures is to carry out the mandate of the statute. In the case of Regulation Z, implementing the Truth in Lending Act, this process involved defining the elements of “finance charge,” developing formulas for calculation of APRs, and designing the format and content of disclosures. The result is the thousands of disclosures presented to consumers each year. When a draft regulation is put out for comment, the industry and other interested parties have the opportunity to opine. Far too few bankers take the time and trouble to review the proposal and develop thoughtful comments. Those who do comment tend to focus on the details. Industry members consider how to do what the regulation would require and the feasibility and cost of doing that. Consumer advocates consider whether it ILLUSTRATION BY STEPHEN F. HAYES Compliance without pain?
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