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Don’t rely on a “business-friendly” Washington

Banks must still prove the anti-regulation case

Republican-led Congress and White House mark a potentially good beginning, not a successful conclusion. Republican-led Congress and White House mark a potentially good beginning, not a successful conclusion.

It has happened before. Both houses of Congress will have a Republican majority. And because Republicans are presumed to be industry friendly, this should be good for banks, shouldn’t it?

Don’t get excited yet.

Even when a Congress is “industry-friendly” bankers must remember that there are many industries—and some of those industries compete with banks.

In the last century, there was a similar situation—an all-Republican Congress.   Banks sighed with relief that finally the years of new consumer protection laws were over.

And they sat back and relaxed.

Mistake. Big mistake.

Other industries did not sit back and relax, trusting Congress to be aware of and responsive to their concerns. They lobbied—hard. When legislation was passed, it favored the competition and not banks.

Don’t sit back. Change takes work

Sitting back is not a smart strategy, even if you think that surely this time Congress will see the challenges that banks face.

Instead, think of this as your chance. Take advantage of the situation and do something.

But remember that simply complaining about a problem is not effective. Complaining gets us nowhere. In fact, it sounds too much like asking Congress to get rid of consumer protections.

And that is never going to sell.

The secret is the solution

You have to offer solutions. And this is where the challenge lies—thinking up solutions and explaining why they would be an improvement.

There are several factors that should be a part of any solution.

1. Any proposed solution should be good for consumers.

Consumer protection is what it is all about. Taking away protections from consumers will never be approved. Recommending such action merely makes banks look bad. So when any change is considered, first work through the impact on consumers.

2. Suggestions should be supported by facts.

The most important fact is cost. What does it cost to make a disclosure or provide a service?

These numbers should be specific. There is nothing worse than simply claiming that something is expensive to do. This merely sounds like fluff. But real numbers— attached to tasks, equipment, and software—can be persuasive.

3. Stressing the practical can be useful.

How, exactly, is something done?

• Help Congress see the situation in the branch when a teller tries to explain why a hold is being placed on a large check deposit. Or a lender is asking the applicant about their race and ethnicity.

• Describe what happens when a loan officer must explain to a customer that the loan they want cannot go to closing until the mandatory waiting period has expired.

Such regulatory requirements are meant to protect consumers—but they also cause problems.

4. Compare benefits and costs.

Costs saved should not take away consumer benefits. Consumer protections should not impose unreasonable costs. And consumer protections should not be enforced unevenly.

Other financial entities, such as finance companies, should be subject to the same level of enforcement as banks. We had hoped that CFPB would level the playing field but instead, the new bureau has targeted banks.

Make sure that Congress understands that consumer protections come at a cost and that this cost must be passed on to consumers. There is no place else for it to go.

More compliance means higher prices.

Avoid whining and produce numbers, giving Congress a choice: “If you impose this protection, this is what it will cost.”

Where to begin

So here are some ideas for getting started:

• Talk about new ideas for compliance with staff all around the bank.

• Invite your Senators and Representatives to spend a day in the bank, shadowing a teller or a lender so they can see for themselves what compliance requires.

• It might also be fun to have them sit in on some compliance training.

• Look around your market at non-bank competition and compare your compliance and consumer protections to theirs.

After all, it wasn’t the banks that started the predatory lending swirl.

Lucy Griffin

"Lucy and Nancy's Common Sense Compliance" is blogged by both Lucy Griffin and Nancy Derr-Castiglione. Both are Banking Exchange contributing editors.
    Lucy, a Certified Regulatory Compliance Manager, has over 30 years experience in compliance. She began as a regulator, including stints with the Federal Reserve Board, the Federal Trade Commission, and the Federal Home Loan Bank Board. For many years she managed the ABA Compliance Division. Since 1993 she has served as a compliance consultant as president of Compliance Resources, Inc., Reston, Va. She is also editor of Compliance Action newsletter and senior advisor with Paragon Compliance Group, a compliance training firm.     
    In addition to serving as a Contributing Editor of Banking Exchange, Lucy serves on the faculty of ABA's National Compliance Schools board. For more than a decade she developed and administered the case study at ABA's National Graduate School of Compliance Management. She can be reached at [email protected]

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