FDIC: Most Banks Break Consumer Laws, and Mostly by Mistake
Anason, Dean, American Banker
Consumer compliance regulations continue to frustrate banks despite recent government efforts to simplify the rules.
Seventy-five percent of banks examined by the Federal Deposit Insurance Corp. last year violated the Truth-in-Lending and Real Estate Settlement Procedures acts.
Close behind on the FDIC's list of the 10 most commonly violated consumer and fair-lending laws were equal credit opportunity, fair housing, and Truth-in-Savings. In addition, 65% of institutions erred in reporting Home Mortgage Disclosure Act data.
The ranking of violations was included in a Sept. 2 letter to the chief executives and compliance officers of institutions overseen by the FDIC. The agency culled the data from examinations of 2,031 institutions and reviews of HMDA data from 1,021 institutions in 1996.
Most of these violations are minor and "inadvertent errors," said Steven D. Fritts, associate director of compliance and consumer affairs. "In almost all our institutions, the violations are exceptions, not the rule."
Some violators pay the price. The FDIC forced 148 banks to repay $1.4 million to 6,272 customers for Truth-in-Lending violations in 1996. In addition, three institutions and 10 people were penalized $123,500 last year for compliance errors.
The list of the 10 most violated regulations has remained consistent during the past three years, although the number of Truth-in-Savings and HMDA violators rose about 10 percentage points each from 1994 to 1996.
But agency officials said the number of egregious violations has dropped, primarily because of increased enforcement and more education programs.
Fewer than 1% of FDIC-supervised institutions in 1996 received failing Community Reinvestment Act or low overall compliance ratings-down from 5. …