Pub. 12 2017-2018 Issue 3

NEBRASKA BANKERS ASSOCIATION 7 CFPB MEETING DEMONSTRATES NEED FOR REAL-WORLD EDUCATION President’s Message — continued on page 11 Richard J. Baier, President & CEO, Nebraska Bankers Association I N LATE JULY, I WAS PART OF A SMALL GROUP OF STATE BANKERS association representatives asked to participate in a meet- ing at the Consumer Financial Protection Bureau (CFPB) related to the Dodd-Frank Act’s pending Section 1071 Small Business Data Collection requirements. Meeting participants in- cluded association representatives fromGeorgia, Massachusetts, Missouri, Nebraska, New Hampshire, and Oklahoma as well as from the ABA. We were joined at the CFPB’s headquarters by 16 CFPB representatives who are responsible for implementing these regulations. You will find the NBA’s formal comments to the CFPB’s Re- quest for Information Regarding the Small Business Lending Market (Docket No. CFPB-2017-0011) at http://bit.ly/S1071Ltr. Below are a few personal observations about our meeting and subsequent discussions. √ The meeting included an active give-and-take dialogue, with many CFPB staff asking good questions and trying to understand how their proposed rules might impact both banks and borrowers. I witnessed several key staff diligently taking notes during the discussions. They seemed eager to learn about our perspective. √ Like many federal agency and congressional offices in Washington, D.C., the CFPB is largely staffed by young people who are extremely bright but lack a certain level of real-world business experience and understanding. Although Grady Hedgespeth, the individual leading the project to implement Section 1071, has banking and government (SBA) experience, only a small number of meeting participants had any true banking knowledge, or had ever made a loan. One staffmember told me after the meeting that his primary banking knowledge was the result of obtaining a car loan at a credit union and using his debit card. Clearly, he doesn’t understand the difference between credit unions and banks. √ It is challenging for agency representatives to develop simple regulations and programs that meet both con- gressional intent and statutory language. Several of the CFPB staff expressed their concerns about and commit- ment to complying with the federal statutes as handed down by Congress. √ Certain CFPB staff members lacked a thorough under- standing of the complexities of our banking system, especially as it relates to commercial lending. Several staff, for example, suggested that every bank in the country has a standardized, one-page application for small business lending. Similarly, many were surprised that discretion in the small business lending space is driven by an enormous amount of business factors, not just a cookie-cutter template. I mentioned the impact, for example, that products like USDA or SBA guarantees can have on the terms of a commercial note. √ Because of their personal experiences (or lack thereof), many of the young CFPB staff had a difficult time grasping the challenges of rural areas and small banks. I shared with them that Nebraska has 80 banks with less than $100 million in assets. In addition, some of our smallest NBA-member institutions have less than five employees. Therefore, the statutory requirement that loan underwriting be completed by someone other than the participating loan officer will be especially troublesome for smaller institutions. Likewise, the shear geographic area of a state like Nebraska was difficult to comprehend for individuals who may easily drive through two or three states daily on their way to work. √ A recurring, yet highly inaccurate perception of the CFPB staffwas that banks can easily and efficiently adjust their operating plans and software systems to account for PRESIDENT’S MESSAGE