Disclosure Fever

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Editor's Note: To keep bankers informed of proposed rules and other issues of concern to regulators, this column summarizes recent testimony and comment letters IBAA provides to federal banking agencies.


Issue: Proposal to require disclosure to prospective borrowers of fees to be paid to mortgage brokers and on the relationship between the mortgage broker and the borrower.

Agency: U.S. Department of Housing and Urban Development.

IBAA Position:

Strongly objected to HUD imposing a test on mortgage brokers to determine whether their compensation was too high;

Said such a compensation test would be burdensome for all brokers, but extremely difficult and burdensome for small brokers;

Urged that rather than imposing a government standard on broker compensation levels or imposing burdensome data gathering requirements on brokers or a government agency, maximum compensation should simply be disclosed to borrowers;

Questioned the need for a broker who works with only one lender to disclose that lender's name when brokers who work with multiple lenders are not required to disclose their names;

Asked HUD to change the proposed disclosure language on the mortgage broker's role as agent for the borrower, from promising "to get the most favorable mortgage loan that meets the borrower's stated objectives" to promising "to use `best efforts' to obtain the most favorable mortgage";

Agreed with the concept of a safe harbor for mortgage brokers who comply with the disclosure requirements, but questioned whether a safe harbor exists when there is an additional test to be passed regarding the level of compensation;

Told HUD that the mortgage broker disclosure "contract" it proposed placed all the disclosure burden, risk and responsibility on brokers and none on borrowersthus, the disclosure form could not be considered a contract.


Issue: Proposal to provide banks a means to exempt certain customers from filing reports on large currency transactions. The proposal would require banks to file one form with FinCEN to exempt customers, but would also require banks to estimate the annual cash needs of exempt customers and report annual cash usage.

Agency: Financial Crimes Enforcement Network, U.S. Treasury Department.

IBAA Comments:

Urged FinCEN to establish an exemption procedure that is simple to use, because most banks will elect to file currency transaction reports if filing is easier than seeking an exemption;

Recommended FinCEN allow banks to exempt customers based on their familiarity with customers;

Urged FinCEN to place greater reliance on Suspicious Activity Reports for detecting illegal activities;

Noted that an annual report of a customer's cash transactions is unduly burdensome, especially as banks prepare for Year 2000 compliance;

Advised FinCEN to establish a safe harbor for banks that exempt customers from currency transaction report filings in good faith.


Issue: Modification of ACH operating rules to permit commercial depositors to collect checks returned for nonsufficient or uncollected funds via the ACH system.

Organization: National Automated Clearing House Association.

IBAA Position:

Supported the proposed modification while urging NACHA to address specific aspects that would be problematic for community banks and their customers;

Strongly supported allowing receiving banks to return the ACH entry if a commercial depositor fails to provide proper notice to the check writer that the returned check could be collected via the ACH;

Agreed that amount of the ACH transaction should match the face amount of the check;

Strongly opposed allowing the originating bank to charge a fee to the receiving bank for requesting either the original check or a copy to which the represented check entry relates;

Recommended that the commercial depositor surrender physical checks to the originating bank for safekeeping;

Strongly encouraged NACHA to develop a formal educational program to facilitate implementation and compliance. …