9:00     Welcome – John Carter, FDIC San Francisco Regional Director
                            Michael Finn, OTS Western Region Director

           Introductory Remarks -  John Reich, Director Office of Thrift Supervision

          Overview of EGRPRA

            Claude Rollin, Project Manager (EGRPRA)

·        Goals of EGRPRA

·        Process to Date

9:30     Overview of Focus Group Process

            Lori McMaster, Facilitator

·        Introductions of Attendees

·        Description of Today’s Focus Group Process and Desired Outcomes

9:45     Breakout Focus Group Sessions to Discuss Reactions to the Draft Regulatory Proposals

11:00   Break

11:15   Focus Groups Report Results of Their Discussions and Solicitation of Ideas for Next Steps                 

12:00   Lunch

1:00     Focus Groups Re-Convene for Report Out of Results and Solicitation of Ideas for Next Steps
           (continued)   

3:00     Closing Remarks -  John Reich, Director, Office of Thrift Supervision 

Attendance:

The meeting was attended by representatives from consumer organizations (California Reinvestment Coalition, Los Angeles NHS, California Capital Small Business Development Corporation, Valley Economic Development Center, Consumers Union, San Diego Reinvestment Task Force); banks (Bank of the West, Center Bank, Hanmi Bank, Indymac Bank, Broadway Federal Bank F.S.B, Silicon Valley Bank, Charles Schwab Bank, Imperial Capital Bank, Wilshire State Bank); and the banking regulatory agencies (Federal Deposit Insurance Corporation, Office of Thrift Supervision, Office of the Comptroller of the Currency, and the Federal Reserve Board).

Summary of Discussions:

John Carter, FDIC San Francisco Regional Director, and Michael Finn, OTS Western District Director, provided welcoming remarks and encouraged the participants to provide their input and feedback. The input is valued and this is an opportunity to learn more about what issues are on the minds of both consumer organizations and bankers.  

John Reich, OTS Director, welcomed the attendees. He also acknowledged the attendance of Thomas Curry, one of FDIC’s Directors and the new Chair of Neighborworks America.  Director Reich provided some background for the EGRPRA project and noted there had been several other outreach events since the project’s inception.  He also noted that in light of hurricane Katrina, the work today might have seemed trivial in comparison, however, it was important. The EGRPRA project must succeed or we will see a continued consolidation in the community banking industry. He noted that 20 years ago, there were over 13,000 small community banks. Now there are 4,000. In the next few years, that number could decline to 1,000.  As a former CEO of a community bank, he mentioned how communities can be negatively impacted when they lose their community banks.  He also noted that the banking industry is enjoying record profits, however, small institutions represent only 1% of those profits. That lack of profitability may be due regulatory burden.

Claude Rollin, Project Manager (EGRPRA), welcomed the participants and provided a brief overview of the EGRPRA project history and purpose.

The attendees then formed two focus groups – one for the consumer organization representatives (facilitated by Lori McMaster, FDIC) and one for the financial institution representatives (facilitated by Barbara Pfaffenberger, FDIC) – and discussed each of the proposals. Regulatory representatives were available to both groups to answer questions, as needed.  Each focus group shared their respective views on each proposal and later reconvened together to compare views and ideas for possible proposal changes and edits which might help bring differing views closer together, if applicable.

The proposals discussed and the views of the bankers and consumer representatives are summarized in the table below:

B - Bankers
CR - Consumer Representatives
S – Group supported the proposal
C – Group expressed concerns about the proposal
#* These consumer-protection proposals are from a larger matrix of regulatory proposals covering a wide range of topics. The numbers correspond to their number on the larger matrix.

Group comments on each proposal, as well as suggested alternatives for the regulatory community to consider (if applicable), were as follows:

# 7 Repeal CRA Sunshine:

Bankers were supportive of the proposal, noting that they were already providing the information that the written agreements require. Thus, there was no financial effect.  Consumer representatives had strong concerns about the proposal, noting that the current regulation did not really work, as there still was not adequate transparency.  They offered the suggestions of repealing the current proposal and replacing it with requirements to add dollar amounts of agreements to already reported information. Banks should also include the dollar amounts of their agreements in their CRA public evaluations.  They also suggested that requirements should be created which standardize agreements between banks and consumer organizations.  Such standardization would help reduce ambiguity and add some safety and soundness standard for local and regional implementation.     

#s 55, 96 Update HOLA – Investments by Thrifts

Both consumer representatives and bankers were supportive of the proposal as written. There is a desire for consistency in the investment criteria across all financial institutions – to include credit unions.

#62 Eliminate Prior Written Consent to Establish Branches

Both consumer representatives and bankers expressed concerns about this proposal noting that it sends the wrong message to consumers.  The consumer representatives noted that under the proposed approach they will get even less notice, as information will no longer be posted on the FDIC’s web site.  The local notice in newspapers may not be sufficient.  Bankers believed the proposal would eliminate the comment opportunities for consumer groups and that the proposal addressed only one federal regulatory agency.  The group suggested considering such waivers for branches opening in low to moderate income areas.

#63 Eliminate Annual Privacy Notice if no Personal Information Shared

Bankers were supportive of the proposal, noting that when banks do not share information, all annual privacy notices should be eliminated except when there is a change in the privacy policy of the institution.  Consumer representatives expressed strong concerns with the proposal. The annual privacy notice should continue, as it reminds consumers of what sharing is happening, particularly with the banks’ affiliates.  The timing of this proposal is also bad due to the open rulemaking happing right now.  The group also said that having the law allow for “opt in” rather than “opt out,” would be a better solution.

#64 Waiver of Three-Day Right of Rescission

Both consumer representatives and bankers expressed strong concerns about the proposal and saw it as weakening consumer protections. Consumer representatives noted that the 3-day right of rescission is the heart of the Truth-in-Lending Act and a key safeguard. There are also predatory lending and subprime lending concerns that make this safeguard even more important in today’s market place. The ability to waive deters some loan transaction issues, particularly changes in terms.  Bankers noted that the proposal could increase burden because customers would need to be educated on how write the waiver.  

#65 Increased Flexibility for Flood Insurance

Bankers were supportive of the proposal. Consumer representatives expressed mild concerns about the proposal, noting that the licensed surveyors process could become like the appraisal industry and lose its objectivity, forced-placed insurance is the most expensive kind of insurance available, and that CMPs may actually be helpful.  The group suggested that the grace period could be adjusted to 45 days, more information be gathered about flood insurance issues in light of hurricane Katrina, and more guidance be issued on forced placed insurance and the contractual obligation of financial institutions.  The group also noted that this issue has little to do with regulatory burden.

#79 Mortgage Servicer Exemption to Fair Debt Collection Act

Bankers supported the proposal as written, but noted it may have little impact on reducing regulatory burden as it primarily involves mortgage services, not community banks.  The consumer representatives expressed strong concerns about the proposal, noting that providing the notice to the consumer is important because the prior servicer may have made a mistake. The notice also tells the consumer what to do to dispute the debt. The group suggested considering mandating third party licensed counselors for consumer advice in addition to the current notice requirement.

#91 Continuing Debt Collection Efforts

Both consumer representatives and bankers supported the proposal as written. The consumer representatives noted that FDIC’s proposal language regarding the Federal Trade Commission defining “conspicuous notice” was critical to their support.

#115  Electronic Funds Transfer Act

Consumer representatives supported the proposal as written. Bankers expressed strong concerns about the proposal, noting that it reduces the flexibility for financial institutions and does not reduce burden, and that after-the-fact notification would be acceptable.

Other Regulatory Concerns

The group also provided some additional regulatory issues for consideration, beyond the proposal discussed at the meeting. Issues raised by the bankers included:

Bank Secrecy Act – the data collection the bankers experience is not in the spirit of the intent of the law.  For example, the filing of Cash Transaction Reports (CTRs) is extremely burdensome in terms of time and resources required to do so due to the volume of those transactions. The dollar thresholds should be changed and indexed.  The exemption process is very burdensome as well.

The USA Patriot Act – the data collection efforts are burdensome and not in alignment with financial institutions’ needs, use, and application. The data collection also presents privacy and civil liberties concerns. 

The group noted that law enforcement is driving the need for this information.  It would be helpful to get the law enforcement, bankers and regulators discussing these concerns together.  These laws are significantly burdensome to bankers, much more so than the various proposals that were discussed at the meeting today.

Issues raised by the consumer representatives via a one-page handout (the Consumers Union verbally cited items 1, 10, and 14 as their top 3 concerns):

1. Update the jurisdictional limits and statutory damage amounts for TILA and the Consumer Leasing Act.  (For example, the current TILA $25,000 coverage cap on non-dwelling secured consumer credit transactions would be $132,000 in 2004 dollars).
2. Clarify application of TILA to bounce loans.
3. Apply the EFTA to pooled account stored value cards.
4. Open a docket to examine unfair and deceptive lending practices.
5. Improve the Schumer Box by re-providing it when the card is provided.
6. Improve the Schumer Box with additional content – disclosing all fees.
7. Provide effective minimum payment impact information.
8. Improve open end home secured loan disclosures.
9. Improve variable rate disclosures for closed end loans.
10. Permit telephone reports of credit card disputes and unauthorized charges to be made by phone.
11. Enforce recredit obligations under the EFTA – stop imposition of additional, non-statutory requirements
12. Acknowledge the role of state law and state law enforcement in the protection of customers of federally chartered financial institutions.
13. Decline industry requests to weaken the Community Reinvestment Act.
14. Promote ease of comparison shopping by requiring that financial institutions which choose to maintain a web site provide to the public, prior to the start of the account opening process, the full TISA section 264 detailed account schedule.

 John Reich provided closing remarks to the attendees and thanked them for their participation and insights and useful and dialogue.