Abstract: Appropriately, the correct gift for first anniversaries is ... paper. Question is, does anyone want it? Are we having a celebration? the compliance officer asked ABA Banking Journal when told she had been called for an interview for a story about the banking industry's first anniversary of mandatory compliance under Regulation DD, which implements the Truth in Savings Act. No, indeed, Reg DD is hardly cause for celebration. Yet another of the unpleasant offspring of the FDIC Improvement Act, the rule has been the cause of more than its share of hair pulling and ulceration in its brief life. The law was founded on a simple premise--to make it easy for consumers to shop around for the best rate, much as the Truth in Lending Act was intended to make it easier to shop around for the best loan deal. Another key goal of the legislation was to put an end to some institutions' practice of paying interest solely on investable balances. say that compliance with Truth in Savings has been frustrating is to speak with significant understatement. The law affects virtually every aspect of the deposit-gathering process, from product design to advertising and promotion to processing to the rendering of banks' periodic statements to customers. No big penalties, so far It has been an expensive, bothersome first year--not to mention the warm-up time banks had to put in beforehand, when regulations were finalized but not yet in effect. Perhaps the only good news to come out of Year One is this: No bank appears to have fallen so afoul of Reg DD that significant regulatory penalties--or even private, class-action lawsuits--has hit. Not yet, anyway. To some extent the fact that there hasn't been a big crisis is an indication that maybe the Fed didn't do such a bad job in the implementation, says Robert Chamness, an attorney, and executive vice-president at CFI ProServices, Portland, Ore. The Fed's Leonard Chanin, managing counsel and one of the regulation's drafters, concludes that the dearth of truth-in-savings litigation results from one of two factors: Either it means banks are doing wonderfully well in compliance or people aren't in a mood for suing--which is a seldom-seen occurrence. For his part, Chamness notes that similar lawsuits weren't seen under the Truth in Lending Act until about three years after passage--then thousands followed. In any event, bankers appear to have grudgingly settled in, resigned to a new burden many consider to be of dubious value. ABA's staff expert on truth in savings, Nessa Eileen Feddis, senior federal counsel, says the initial flood of questions about Reg DD has slowed significantly in recent months. Has the customer been served? Banks large and small have spent a significant amount of money getting ready for, and continuing to comply with, truth in savings. This regulation has had an intense impact on the need for employee says Stuart Lehr, vice-president and senior compliance officer at $21 billion-assets, five-state U.S. Bancorp, Seattle, Wash. At $160 million-assets South Umpqua State Bank, Roseburg, Ore., truth in savings cost $54,000 to implement, according to Jeri Jardine, vice-president and auditor/compliance officer. Most of that sum went to labor for implementation and training, she says. The Federal Reserve staff has been working on a long-overdue study of the compliance costs of Reg DD, based on a survey of bankers. A Fed economist says early conclusions will probably be available in late June. wish the Fed would come out with this study, which I think will be appalling, compared to the good consumers get out of it, says Kate Barr, senior vice-president, $130 million-assets Riverside Bank, Minneapolis. Barr's skepticism is widespread. Bankers frequently report that customers--supposed beneficiaries of all the training, reprogramming, and other expenses--either could care less about truth in savings disclosures or are annoyed by the results of the law. …
Publication Year: 1994
Publication Date: 1994-06-01
Language: en
Type: article
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