Participating In The Process: Commenting To Your Regulator

Why bother?
Banks as an industry have been passive in the process of regulatory development. They tend to rely on their trade associations to lobby for them. The reliance on the trade association assumes that the association staff has the requisite knowledge and information to lobby effectively. The staff does have knowledge, but does not necessarily have information specific to each bank.

This passive approach to commenting also relies on the regulators to develop a regulation that works. The problem is that this assumes that the regulators have all the knowledge and information about banking practices that they need to get the job done.

Regulators are regulators, not banks. They don't have detailed, hands-on information about how banks do business. They do have a good handle on the law and what it requires. But to the extent that the law provides the agency with room to design a variety of regulatory solutions, some more workable than others, it is important to provide the agency with practical information that helps the agency design a workable regulation.

The largest risk to the passive approach is the fact that where regulations dealing with consumer protections are involved, consumer advocacy groups will comment powerfully. Without bank involvement, the consumer comments may prevail.

If banks want a better regulatory environment in which to do business, they should become involved in the process of developing regulations. In fact, commenting on regulatory proposals should be part of the compliance manager's job description.

Federal Agency "Compliance"
Congress has provided the public with the tools for participating in the development of regulations. Each federal agency must comply with the Administrative Procedures Act. This means that as a regulation is being developed, the agency must publish draft regulations for public comment. The proposal is published in the federal register (which you can check each day on the internet) and the agency must provide a reasonable period of time for public comment, usually between 30 and 90 days. When the agency is operating under a tight statutory schedule, such as six months to have final regulations, the comment period will be short. The Administrative Procedures Act also requires the agency to read and analyze each comment letter. This means that the agency must give attention to your comment letter as well as to opposing comments such as those likely to be made by an advocacy group.

This comment process is your chance to minimize the burden in the requirements and to help shape the regulation to a livable set of rules. Information that you have about how certain tasks are performed, what automation you use, what customers tell you they want, and what problems you encounter, is very useful to the regulatory agency.

The comment period is an opportunity for the drafters of the regulation to compile information about the business practices the rule would affect and what the impact the rule would be. If banks don't comment on regulatory proposals, it becomes more difficult for the regulation's drafters to learn about the practice they regulate and the impact of the proposed rule.

Too many bankers believe that they can save time by waiting until a rule is final to read it. These bankers forfeit any opportunity to influence regulations. These bankers are then left to deal with compliance burden that could have been prevented or minimized.

How to comment
Writing a comment letter is easy. There is no formal, required format for the letter. You simply have to address it correctly and identify what proposal you are commenting on. Agencies provide a docket number for this purpose. The address and docket number are provided at the beginning of the document in the Federal Register.

Some information is easy to write about. For example, it is helpful to provide the agency with information about your bank, including your bank's size, location, the type of community or communities in which it does business, the number and skill level of staff, and the resources and tools such as available automation. If the proposal would require extensive training, it can be helpful to provide budget figures for training and staff development. Using round numbers is fine. You don't need to reveal any trade secrets. Also, remember that a comment letter goes on the public record and anyone, including reporters and consumer advocacy groups, can get copies of it.

The hardest part of a comment letter lies in deciding what to say about the proposal. To do this, you have to study the proposal and work through how the proposal would be implemented in your bank. To the extent that it is feasible, provide the regulator with specific information about how implementation would occur. It is helpful for them to know some details, including cost, about reprogramming software, redesigning and replacing forms, training or retraining staff, and designing and implementing controls.

Provide support where support is called for. State what part or parts of the proposal you like. Even a statement that seems obvious, such as the fact that something can be easily done, can be important. Remember, if you like a proposal, someone else won't. Your statement of support may be important to preserve what you like in a proposal.

You do not need to comment on everything that is in the proposal. Commenting on one or two of the most important issues to your bank is fine.

Finally, send it in on time. Although an agency will not usually refuse to read late comments, they may be serious about their deadlines. The comment dates are set to enable them to stay on schedule. This is particularly important when they have statutory deadlines to implement a rule. When this is the case, they may not be able to take late submissions into account.

ACTION STEPS

• Review your job description. Make sure that writing comment letters on proposals to issue or revise compliance regulations is a part of your responsibility. If it is not there, get it added to your job description.
• Mark your 1997 calendar for drafting comment letters in December. There is always a proposal (or several) from the Federal Reserve Board to update commentary.
• Review the proposed revisions to the Regulation Z Commentary. Consider how they would affect your bank. Meet with staff or departments that would be affected by the proposal.
• Then draft a comment letter. Use the model provided in this issue or design your own. And get it in by the deadline.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 18 & 19, 12/96