FRB's Loan Officer Compensation "Guidance"


On January 26, 2011, the Federal Reserve Board issued a "Guide" - a "small entity compliance guide" required under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. I have placed "Guide" in quotes because I haven't seen such a perfunctory and virtually useless issuance from the FRB in quite a long time in a matter of such consequence!

It seems to me that the "Guide" is more of a reaction to the January 13, 2011 letter from the SBA's Office of Advocacy, which expressed concern, among other things, that the "the Federal Reserve has not analyzed properly the full economic impact of the proposal on small entities as required by the Regulatory Flexibility Act (RFA)."

If this is meant to be a response to that letter, it falls far short of the mark; and, in any event, it surely doesn't seem to fulfill the statutory requirements carefully reasoned in the SBA's letter. Much of the FRB "Guide" is no more than a regurgitation of the "already known" aspects of the Regulation Z amendments affecting loan officer compensation.

The SBA's letter recommended that the Board publish a compliance guide in the immediate future and extend the time for small entities to comply - now scheduled for April 1, 2011 - to reflect the delay in the availability of the guide. To quote directly from the SBA letter:

"Small entities have indicated that the requirements of some of these changes are unclear and confusing. They are concerned that the lack of clarity may lead to problems in compliance.

Advocacy reviewed the Board’s website. Advocacy commends the Board for having a SBREFA compliance guide page on its website. However, although there are compliance guides for Regulations C, D, E, F, H, I, J, L, M, O, P, R, V, X, AA, BB, CC, DD, and GG, Advocacy was unable to find a compliance guide for Regulation Z."

Nevertheless, at this time it does not appear that a delay is being seriously considered.

The article provides an outline of the "Guide" and offers links to a compendium of relevant documents.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jonathan Foxx, Lenders Compliance Group | Attorney Advertising

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