If you are a small community bank, you probably have taken note of and made use of the various Small Entity Compliance Guides that the Consumer Financial Protection Bureau and the Federal Reserve Board have developed and published on their websites. These compliance guides have been created for some of the major new regulatory changes flowing out of Washington this year. The most recent one was published on August 14 and covers the Ability-to-Repay and Qualified Mortgage rule changes that take effect next January.
If you are not using these guides, you’re missing out on a helpful tool. Or are you?
How they came about
The small entity compliance guides are intended to provide basic information about a regulation that is geared to small businesses in order to help them comply with the requirements.
They aren’t an invention of the CFPB and FRB. Small entity compliance guides are a product of the Small Business Regulatory Enforcement Fairness Act of 1996, which also requires agencies to determine whether a proposed or final rule has a significant economic impact on small businesses. Federal agencies are required to create a compliance guide for small entities if a final regulatory flexibility analysis for the rule concludes that the rule would have a significant economic effect on a substantial number of small entities.
The CFPB has developed and published a number of the guides since the transfer of regulations from the Board in July 2011. The guides that are related to the mortgage-related regulations are found on the CFPB site on the Mortgage Rules at a Glance page.
Assessing the guides
But we all know about good intentions.
How useful are these small entity compliance guides? Are they worthwhile? Too basic? Helpful? Too complex?
According to a recent report by the Office of Inspector General for the Board of Governors of the Federal Reserve Board, the small entity compliance guides of the FRB may not be that useful.
The report, published on July 1, 2013, concluded that the Board was not consistent in developing or updating small entity compliance guides in accordance with the requirements of the Small Business Regulatory Enforcement Act.
In many cases, the guides just restated and summarized the regulation, without providing clear guidance to small entities on how to comply with the rules or when the requirements of the rule would be satisfied.
The Office of Inspector General conducted an evaluation of the Board’s compliance with the SBREA and came to the conclusion that the agency did not implement a consistent approach for developing small entity compliance guides and that the Board can considerably improve its approach to ensuring consistent compliance guides.
Inconsistency was found in how the Board determined when to create a compliance guide, when to update an existing guide, and in the process for distributing the compliance guides. There was no centralized oversight for small entity compliance guides, which leads to multiple and varying approaches at varying levels of quality.
In addition to a concern about inconsistency, the report also made the point that the Board “did not address questions that may have assisted small entities in comprehending applicable requirements” in the compliance guides sampled for the evaluation.
While this evaluation only applied to the Federal Reserve Board small entity compliance guides, you be the judge. How helpful are the compliance guides? Do they provide enough of the right kind of guidance? Do they answer the questions you have?
If not, speak up. This particular evaluation was the result of one complaint that the Office of Inspector General received.