Yesterday I notified you about the so-called "small entity compliance guide" issued on January 26, 2011 by the Federal Reserve Board.
The "Guide" is inadequate, incomplete, and regurgitates most features of the "already known" aspects of the Regulation Z final rule amendments affecting loan officer compensation.
That rule is scheduled to go into effect on April 1, 2011.
As you may know, I am writing an article on this subject - which will be published in March 2011 in the National Mortgage Professional Magazine - so I am watching this issue pretty closely and have had numerous discussions with industry members, such as compliance counsel, corporate officers, mortgage loan originators, and even a few lobbyists and politicians.
It is now clear to me that FRB's "Guide" is probably meant to be a response 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)." That is, the "Guide" is a transparent attempt to satisfy a regulatory requirement, though the dubious result adds little to an overall resolution.
Let's read the basis for the authority of the SBA's Office of Advocacy (Advocacy), as stated in its January 13, 2011 letter that: (My emphasis)
"Congress established the Office of Advocacy under Pub. L. 94-305 to represent the views of small business before Federal agencies and Congress. Because Advocacy is an independent office within the Small Business Administration (SBA), the views expressed by Advocacy do not necessarily reflect the views of the SBA or of the Administration. Section 612 of the Regulatory Flexibility Act (RFA) requires Advocacy to monitor agency compliance with the Act, as amended by the SBREFA. In 1980, Congress enacted the RFA after determining that uniform federal regulations produced a disproportionate adverse economic hardship on small entities. In order to minimize the burden of regulations on small entities, the RFA mandates that federal agencies consider the potential economic impact of federal regulations on small entities.
In 1996, Congress amended the RFA with SBREFA. Among other things, SBREFA requires agencies to provide plain English compliance guides to clearly explain each final rule that has a significant economic impact on a substantial number of small entities. The intent of section 212 of SBREFA is to ensure that small businesses have a way to understand complex and technical federal regulations."
Advocacy's January 13, 2011 letter recommended that the Board publish a "compliance guide in the immediate future and extend the time for small entities to comply to reflect the delay in the availability of the guide."
Obviously, Advocacy must have believed that the FRB would provide a robust and comprehensive compliance guide. But that has not been forthcoming, while the effective date of April 1, 2011 draws ever closer.
Today, February 1, 2011, Advocacy issued yet another letter to the FRB, again asking for a postponement and this time specifically enumerating the expectations of what constitutes satisfaction of compliance with Section 212(a)(4) of SBREFA, the section that sets up the requirements of a compliance guide.
The following outline provides my brief synopsis of Advocacy's letter to the FRB.