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PrintGet Involved! Write a Comment Letter
Understanding the Regulatory Process
Why Should You Write a Comment Letter?
What Should Be Included in a Comment Letter?
Where Can I Get Information?
Sample Organization of a Comment Letter
Almost everyone is familiar with some aspects of the legislative process. You are urged by newspaper, TV, and radio advertisements to "Call your Congressperson" to support or oppose pending legislation. But equally important is what occurs after a bill becomes law. A law that you either supported or opposed could become much more onerous during the regulatory process if your opinions and thoughts are not conveyed to the regulatory agencies that supervise your institution.
As compliance officers, you can get directly involved in the regulatory process by writing effective comment letters. Doing so will not only help ease the burden on the banking industry, it will also enable the regulators to craft a rule that is more manageable for you to implement.
This article will explain the regulatory process, provide an outline for your letter, and furnish some informational resources. And, it is hoped, once you discover how easy it is to do, you will incorporate comment letter writing into your job responsibilities.
Understanding the Regulatory Process
A bill becomes a law, then a law becomes a regulation, right? Well, sometimes. The comment letter process begins where the law leaves off. But because there are four primary financial institution regulators - the Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC) - it gets a little complicated.
A regulation is written by the agency that has been granted responsibility, or "rulemaking authority," as indicated in the statute. Congress can either designate rulemaking authority to one agency, give one agency authority but require consultation with one or more other agencies, or dictate that each agency write its own regulations.
For instance, the FRB has rulemaking authority for Regulation O for reserve member banks (national and state member banks), but the FDIC has authority to make minor changes for nonmember banks. All the other banking regulatory agencies have adopted the FRB's Regulation O in its entirety. But with other rules - for example, the new Know Your Customer rules - each agency may write its own proposal.
To add another element of possible confusion, take the case of having two agencies independently in charge of complementary rules, as is the case with Department of Housing and Urban Development's (HUD) regulation under RESPA, the Real Estate Settlement Procedures Act (Regulation X); and the FRB's regulation under TILA, the Truth in Lending Act (Regulation Z). A recent push has been initiated to get the rulemaking authority for RESPA moved to the Fed to ensure consistency with the other consumer regulations. For banks that have multiple regulators, compliance with numerous rules can be very complex to manage.
Sometimes a law is enacted but a regulation is never written. In these instances, the agencies sometimes choose to not issue a regulation or issue something more informal, such as guidelines or letters.
Once a proposal is written by a regulatory agency, under the Administrative Procedures Act (12 USC 501), it is published in the Federal Register for public comment, usually for a 30-, 60-, or 90-day period. The proposal may be for a new regulation or for a regulatory amendment issued because of a change in the law or as part of an agency review. In the case of the Community Reinvestment Act (CRA), for example, the FRB rewrote the regulation both to ward off the threat of congressional action and to ease banker and public dissatisfaction with the regulation.
Why Should You Write a Comment Letter?
We know that writing effective comment letters makes a difference. As a compliance officer, you may be in the best position to write a meaningful comment letter because you are ultimately the one who will have to live with the regulation. The regulatory staffs that write the regulations are not bankers. Many have never even worked in a bank. Although your bank may require that the letter be signed by your president or CEO, it will most likely be your inclusion of the specific details of how the rule will affect your bank that will make the most difference.
Writing comment letters can also aid in your own professional development. The "Professional Development Track for Compliance Professionals" (presented in the September/October 1998 issue of ABA Bank Compliance) specifies participating in the comment letter process as one of the suggested activities for compliance officers at the advanced level of their career.
Clearly, the compliance officer position has evolved into a strategic position within the bank, and managing the risks in the bank has become an integral part of your job. Helping to shape the way your bank is regulated falls within your job description and could also benefit your institution by saving time and money.
Do Comment Letters Actually Make a Difference?
Good comment letters make a difference. Writing comment letters is a very important function of ABA's Government Relations department, proving that it does make a difference when it is done well. If participating in the comment process were not worthwhile, an entire division would not be dedicated to the regulatory function. Through October, ABA's Regulatory and Trust Affairs group alone had reviewed or written more than 125 comment letters during 1998. ABA incorporates the banking industry's views based on membership and executive committee feedback; therefore, if you cannot write a letter yourself, comments to ABA staff are welcome.
Although a massive response to a proposal definitely gets the attention of the agencies, keep in mind that, to them, a meaningful letter holds much more weight than a huge number of postcards or form letters saying the same thing. An example of a situation in which comment letters made an impression was the rewriting of the CRA regulation. In December 1993, the first CRA proposal - which included burdensome reporting requirements, a controversial market share test, and significant enforcement actions - was published for public comment. The industry responded with an overwhelming 6,500 letters! On the basis of the massive response, the regulation was rewritten and published for a second comment period. The industry responded again with 7,000 letters. The final CRA rule omitted some of the most burdensome requirements, thus saving the industry millions of dollars in compliance costs.
You do not have to write a long letter every time. If only one aspect of the proposal affects your institution, just comment on that part of the proposal. However, it is not very effective to send the regulators a "hate" letter (in other words, "we hate the proposal") because it does not provide the regulatory staffs with any constructive feedback. Citing specific concerns or problems in your letter will give more weight to your letter.
It is worth expressing your point of view because community activists and competitors (including credit unions) may also write comment letters. The community groups follow the regulatory process, just as your industry does. Many community groups have a vested interest in defending consumers' rights, so they may not take into consideration the compliance challenges that implementation of the rule.The reason most people do not write a comment letter is that they don't know where to begin. Exhibit 1 will give you some suggestions to help you get started. Some associations and groups write form letters for each proposal in which the bank name and information can be "plugged in." Again, although this may get more people to write a letter, the more generic the comments, the less useful they are and the more easily they are ignored.
Also, be aware that, if a significant portion of the proposal is mandated by law, it can be changed only by revising the statute. Don't waste your time complaining about the law - save that for Congress. Keep your comments on the regulatory issues.
Nobody knows your job better than you do. A proposal might sound reasonable to the staff members who work at the agencies or even to your own CEO. But you have the unique ability to tell them exactly how or why the regulation will create problems, burdens, or unnecessary costs.
In the opening paragraph, you should briefly summarize the proposal. The regulators usually send out a summary with each proposal to help you in this regard. Describe your institution. Include your bank's asset size and structure. Is your bank part of a holding company or an independent bank? Include any other information that is relevant to the proposal. Does your bank or market have any unique characteristics that would affect your comments?
In the body of the letter, comment on aspects of the proposal that will affect your institution. Remember, you do not have to address every issue in the proposal. Some issues will not apply to your institution, so do not try to comment on them. Give specifics on how the rule will impact your institution. Use "real world" illustrations, and give an estimate of your compliance costs if the rule is changed as proposed. Will you have to hire more staff? Will you have to contract with an outside vendor? How much more of your staff time will be required to comply? Will you have to retrain employees?
In the conclusion, restate the main idea of your letter. Do you support or oppose the proposal? Don't forget to thank the regulator for the opportunity to comment, and give a contact person and phone number at your institution (preferably your own contact information).
The Federal Register is published daily. It compiles regulatory proposals and final regulations for all the government agencies. You can subscribe to the Federal Register or access it electronically. In addition, the regulatory agencies send copies of the Federal Register proposals to your bank president.
The ABA Web site is a very useful way to monitor regulatory changes. Most proposals are listed and summarized under the "Government Relations" or the "Compliance Center" section. An ABA contact person is listed for each regulatory proposal. You should also make it a habit to visit your regulator's Web site (see Exhibit 2), which lists regulatory proposals as well as other useful information.
For those who are not on the Web yet, you can look up the ABA staff expert in the "ABA on Call" directory, or call ABA Customer Service at (800) 338-0626. You can speak directly to the ABA staff person who is writing the association comment letter and either share your views or get guidance for writing your letter.
Conclusion
So you see, writing comment letters is both useful and doable. Comment letters are a practical way to help shape the regulatory process. Getting involved will advance your own professional development and will contribute to the easing of regulatory burden for your institution and your industry. It will also help you manage compliance later because, having participated in the comment process, you will have gained a better understanding of why the final regulation reads the way it does.
And remember, you might not comment, but other special interest groups will. Like voting, if you don't comment, you deserve what you get.
Exhibit 1
Sample Organization of a Comment Letter
1. Agency Name and Address
2. Docket Number
3. Opening Paragraph
4. Body
5. Conclusion
Exhibit 2
Resources for Writing Effective Comment Letters
American Bankers Association
www.aba.com
Office of the Comptroller of the Currency
www.occ.treas.gov
Federal Deposit Insurance Corporation
www.fdic.gov
Federal Reserve Board of Governors
www.federalreserve.gov/
Office of Thrift Supervision
www.ots.treas.gov
Federal Register
www.gpoaccess.gov/fr/index.html
Publications
ABA Bank Compliance Magazine/Regulatory & Legislative Advisory
ABA Banking Journal
American Banker
Other Resources
ABA Customer Service
(800) 338-0626
ABA Compliance Connection
(800) 551-2572
Questions? Please contact Mark Tenhunfeld for more information.
