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ICBA Urges Bank Regulators to Reduce Regulatory Burden

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Washington, D.C. (April 21, 2004) - The Independent Community Bankers of America has filed a letter urging the four federal banking agencies to take steps to reduce the regulatory burden imposed by consumer lending regulations and expressed strong support for the agencies' current comprehensive review of bank regulations under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA).

"Community bankers work diligently to serve their customers, but find that regulations — especially consumer lending regulations — consume valuable resources and can interfere with good customer service," wrote Dale L. Leighty, ICBA chairman and chairman and president of First National Bank of Las Animas, Colorado. "Regulatory and paperwork requirements impose a disproportionate burden on community banks with their limited human, financial and other resources."

The ICBA highlighted many areas where regulatory burden creates problems, such as the right of rescission, a three-day period when borrowers can cancel the loan before receiving the funds. This requirement is especially vexing to customers who seldom exercise the right but resent having to wait three days to receive loan proceeds.

Other examples cited in the ICBA's comments include restrictions on advertising that interferes with providing loan information, Home Mortgage Disclosure Act (HMDA) data collection requirements that drive up mortgage costs, and new restrictions that complicate lending to spouses. Said Leighty, "It's time to acknowledge that consumer protection regulations are not only a burden to banks but are also a problem for consumers."

ICBA further urged the agencies to constantly assess regulatory burden, incorporating careful and accurate cost-benefit analysis into all facets of the regulatory process, in addition to the current review. "The community banking industry is slowly being crushed under the cumulative weight of regulatory burden," Leighty wrote, "causing many community bankers to seriously consider selling or merging with larger institutions, taking the community bank out of the community."

Several hundred community bank members of ICBA have sent their own comments, both to regulators and to their congressional representatives, urging them to address these problems.