November 8, 1999
Michigan Credit Union League
Comment Letter to Federal Reserve
Regarding Changes to Regulation B
November 8, 1999
Jennifer J. Johnson, Secretary,
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, D.C. 20551
RE: Docket No. R-1008, Comments on proposal to revise Regulation B.
Dear Ms. Johnson:
The Michigan Credit Union League (MCUL) welcomes the opportunity to provide comments on the Federal Reserve Board’s proposed changes to Regulation B. MCUL is a trade association representing 453 state and federally chartered credit unions in Michigan. Credit union officials reviewed the proposed changes and their comments are incorporated into this comment letter.
Removing Prohibition of Creditors Collecting Information on Applicant’s Characteristics
MCUL and Michigan credit union officials have strong reservations about removing the prohibition on creditors documenting an applicant’s race, color, religion, national origin and sex for non-mortgage credit products. The regulatory burden on credit unions to “voluntarily” collect applicant information far exceeds any benefit to the various federal enforcement agencies in compiling evidence of discrimination in credit practices. One credit union official estimated that it would add five minutes to the already lengthy lending process because the loan officer would now have to explain to the borrower why he is “voluntarily” collecting information on race, color, sex, national origin, and religion. This would add 750 hours to this credit union’s loan process or $11,625.00 per year in order to implement this “voluntary” data collection process. It is questionable whether a credit union would collect this information after it analyzed the increased time and budget expenditures involved in a voluntary program. The additional cost burden would eventually be passed on to the consumer either through higher loan rates or lower savings rates.
The dilemma of this voluntary program of data collection is that those who choose to comply are subject to a greater regulatory burden. A disparity may result in that those creditors that collect this information may be subject to closer scrutiny for discriminatory practices than those creditors that choose not to collect this information. Also, a legitimate fear exists in the credit union community that examiners may pressure credit unions to collect this data despite its voluntary nature. Another concern is that this voluntary data collection would inevitably become mandatory.
Prescreened credit solicitations
While we are encouraged that the Federal Reserve Board did not extend Regulation B provisions to cover pre-application marketing practices, the record retention requirements are burdensome in that it will require additional storage space and cost for credit unions.
While targeting discriminatory practices is an admirable goal in an effort to achieve fair lending practices, the methods proposed in this rule are clearly too burdensome in terms of cost, time, and storage space for credit unions. Credit unions currently have policies and procedures in place to track discriminatory lending practices for non-mortgage products. The data collection methods proposed in this rule would result in credit unions focusing more time on complying with voluntary regulatory requirements and less time on servicing their members.
Cc: Jeffrey Block, Credit Union National Association