Academic journal article ABA Banking Journal

Beyond "Enough!"

Academic journal article ABA Banking Journal

Beyond "Enough!"

Article excerpt

WE DEFY ANYONE TO READ THIS month's Compliance Clinic and not hit themselves on the head and say, "What's going on here?"

That's not meant as a criticism of the column or its author, nor of the other talented people of the compliance community who do their best to guide their institutions through the regulatory morass. It is a reaction to decades of stultifying rules. We could easily fill each issue cover to cover with compliance articles and still not scratch the surface.

This month's Clinic is an expanded discussion of Regulation B (equal credit opportunity). Not the reg in its entirety--that would take a book-but a single sentence from an earlier issue that set the compliance fraternity abuzz. It had to do with when a lender has to provide an applicant with an adverse action report, differentiating between loan "type" and "terms." Reg B requires a lender to give specific reasons why an applicant was turned down.

The column requires a page and a half to discuss the point. Stuff like this occupies the time of thousands of people in the industry. The cost includes salaries, consulting and legal lees, frequent changes required in forms and/or systems, etc. Perhaps the biggest cost, not easily definable, but very real nevertheless, is the opportunity cost of having so many intelligent people spending their energy on minutia. Some of them no doubt enjoy the work and feel it is important. The underlying principles are important.

The problem is that to implement these principles--Reg B in this case-in the complex and competitive business of lending, requires a group of people, few of whom have likely ever made a consumer loan, to anticipate every possible situation and write rules for them. That is why we end up with references to "12 CFR 202. …

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