In addition to
promoting the safety and soundness of FDIC-insured institutions, the FDIC plays a
strong consumer protection role. The agency enforces compliance with consumer protection
laws, including fair lending and community reinvestment. It also educates banks and
consumers in areas such as fair lending, community reinvestment and deposit insurance. The
FDICs consumer protection activities are carried out primarily through its Division
of Compliance and Consumer Affairs (DCA), with support from other divisions and offices.
The FDIC continued working with the other federal bank and thrift regulatory agencies to
complete implementing 1995 revisions to rules that implement the Community Reinvestment
Act (CRA), a law that encourages federally insured lenders to help meet the credit needs
of their communities. The 1995 rules significantly changed the way financial institutions
are evaluated for CRA compliance. The new rules emphasize evaluating an institution based
on actual lending, investment and service, and they establish different tests for
different sizes and types of institutions. The revised CRA rules were phased in over a
two-year period that ended on July 1, 1997, when new examination procedures for large
financial institutions took effect.
Among the 1997 initiatives by the FDIC and the other regulatory
agencies to implement the new CRA rules were: issuing revised CRA examination procedures
and sample performance evaluation guidelines for large institutions; updating the
interagency CRA Question and Answer Guide for financial institutions; and training more
than 300 examiners across the country in the new CRA examination procedures for large
banks. The agencies have agreed to continue working in 1998 on a project to further
promote consistency among the agencies in implementing CRA examination procedures for
Fair Lending Efforts
The FDIC is strongly committed to ensuring that lenders give equal and fair treatment to
all loan applicants. In 1997, the FDICs continued efforts in fair lending included
discussions with the U.S. Department of Justice and the U.S. Department of Housing and
Urban Development (HUD) to refine procedures for exchanging information about potential
violations of the Fair Housing Act and the Equal Credit Opportunity Act. In June, the
federal bank regulatory agencies and the Federal Trade Commission entered into a
Memorandum of Understanding with HUD establishing procedures for exchanging fair lending
information with the Federal National Mortgage Association (Fannie Mae) and the Federal
Home Loan Mortgage Corporation (Freddie Mac), two major housing-related
DCA examines FDIC-supervised banks for compliance with consumer protection, fair lending,
and community reinvestment laws and regulations. During 1997, the FDIC initiated 1,990
such examinations, representing 32 percent of the financial institutions supervised by the
FDIC at year-end.
The percentage of institutions that were rated satisfactory or
outstanding for compliance with consumer protection laws remained constant over the past
two years. At year-end, 95 percent of FDIC-supervised banks were rated satisfactory or
outstanding for compliance with consumer protection and fair lending laws, while 99
percent were rated satisfactory or outstanding for compliance with the CRA. These
percentages are essentially unchanged from a year earlier.
During 1997, a total of 139 FDIC-supervised banks were required
to reimburse nearly $1.6 million to 49,100 consumers for violations of the Truth in
Lending Act, which requires accurate disclosures of interest rates and finance charges.
The reimbursements ordered in 1997 stem from compliance examinations conducted in 1997 and
in previous years.
The FDIC took a number of steps during the year to streamline and
refine the compliance examination process. The FDIC instituted a new case manager approach to bank supervision (click here),
significantly enhancing the examination and enforcement processes. The new approach allows
the FDIC to focus on the activities and management of all affiliated institutions in a
holding company or affiliate organization, rather than just on one institution. The case
manager system will strengthen the FDICs enforcement of institution compliance with
fair lending, community reinvestment and other consumer protection laws.
FDIC and Federl Reserve employees join in an "on-line conference"
on electronic banking and Year 2000 challenges.
The FDIC also refined its consumer lending training program for
compliance examiners, with increased emphasis on examination techniques and methodology.
The core training requirements for compliance examiners now incorporate a new focus on the
revised CRA rules and examination policies.
In another initiative, the FDIC began developing
automated programs that will allow examiners to examine supervised institutions for
compliance more comprehensively and effectively. The programs will help examiners target
potential risk areas for a more detailed review in a way that is less burdensome to
financial institutions. Examples of programs recently developed or under development
CRA Mapping and Analysis System, which integrates
demographic, loan and economic information from a variety of sources;
Automated Compliance Examination Structure, a joint
initiative by the FDIC and the Federal Reserve that will improve examination
efficiency and consistency, while minimizing the burden on financial institutions by
reducing the time that examiners must spend at the bank; and
Community Contacts Database, a centralized interagency list of
community organizations or other entities involved in community reinvestment
activities of banks and thrifts.
For information on other automated examination programs,
Financial institutions increasingly are using technology to provide financial products and
services. Many recent enhancements involve automated teller machines, smart
cards, video-kiosks, and home banking by phone, computer or interactive television
(Web TV). At year-end 1997, a total of 602 FDIC-supervised banks operated home pages on
the Internet. Thirty-four were transactional sites that provided customers the
ability to pay bills, transfer funds and open accounts. The others were information
only sites that described the banks products and services. While institutions
on the Internet represent a small segment of all financial institutions, acceptance of the
new technology by consumers and financial institutions is increasing rapidly.
The advent of electronic banking technology raises significant
questions and unique challenges for enforcing consumer protection, fair lending and
community reinvestment laws. The regulations implementing these laws generally do not
contemplate the electronic delivery of financial products and services. The FDIC has
recognized the need to ensure that its examination staff is aware of current developments
in electronic banking, and that examination and enforcement policies take into account the
increased use of new technology by institutions and consumers. DCA took steps in 1997 to
address the impact of electronic banking on enforcement of the consumer protection
Expanding examiner training to incorporate a segment on the impact
of electronic banking on the legal and regulatory environment.
Participating in a Federal Financial Institutions Examination
Council working group that focused on electronic banking issues and
interagency examination policies on consumer protection and fair lending
laws, and advised examiners in these areas.
Coordinating participation by the regulatory agencies
in an Internet conference for financial institutions that responded to 15 major
industry questions on electronic banking.
The FDIC offers a wide range of educational information and assistance to tens of thousands of
consumers and financial institutions each year. DCAs main vehicle for providing
deposit insurance and consumer protection information is its toll-free Call Center
(1-800-934-3342 or 1-800-925-4618 for the deaf). During 1997, more than 70,000 consumers
and bankers contacted the DCA Call Center with questions about FDIC deposit insurance or
consumer protection matters. DCA regional offices received another 15,000 calls.
responded to 1,522 written inquiries from consumers and 320 written inquiries from
financial institutions. Another 555 inquiries were received through the Internet (click here). Use of the electronic mail to contact the FDIC
increased in 1997, with the agency receiving an average of 45 inquiries per month,
compared to 10 per month in 1996.
Most consumer inquiries in 1997 concerned deposit insurance
coverage, determining if a financial institution is FDIC-insured, requests for FDIC
publications, consumers rights under the consumer protection regulations, and how to
file a consumer complaint. Most financial institution inquiries concerned the deposit
insurance rules, requests for FDIC publications and consumer brochures, and questions
about general banking or regulatory matters, including fair lending, community
reinvestment and consumer protection laws.
The FDIC develops and distributes informational brochures on
deposit insurance and other topics of interest to consumers. The FDICs most popular
brochure is Your Insured Deposits, which explains the rules for insurance coverage of
deposit accounts. During 1997, the FDIC issued a new consumer brochure, Your Investments,
about financial institution investment products, such as mutual funds and annuities, that
are not deposits and are not insured by the FDIC.
The FDIC frequently conducts training and outreach activities to
promote an understanding of deposit insurance and consumer protection laws. The FDIC
conducted several major outreach initiatives locally and nationally in October 1997 in
observance of National Consumers Week, such as training sessions for bankers on consumer
protection issues, joint outreach efforts with local consumer organizations, and consumer
Because the staff of an insured institution generally is a
customers first source of information about deposit insurance, the FDIC conducted 12
insurance seminars for employees of institutions in eight states during 1997.
Approximately 430 financial institution employees attended these sessions, which provided
an in-depth review of the deposit insurance regulations and interagency guidelines for the
sale of nondeposit investment products.
In 1997, DCA continued to expand its use of the Internet to
provide information about deposit insurance and consumer protections. DCA began developing
an interactive Internet application that will allow consumers to enter information about
their accounts and determine whether their funds are fully insured under the FDIC deposit
insurance rules. The application is expected to be on the Internet in the third quarter of
Responses to Consumer Complaints
The FDIC investigates complaints it receives from consumers about
FDIC-supervised financial institutions. It also tracks the volume and nature of these
complaints to monitor trends and identify emerging issues that may raise consumer
In 1997, DCA received more than 3,600 written consumer complaints
against FDIC-supervised banks, most concerning consumer credit card accounts, as has been
the trend over the past few years. About half of all complaints involved a small number of
specialized credit-card banks that manage large credit-card loan portfolios. The most
common complaints typically involved the adverse action notice that financial institutions
must provide consumers under the Equal Credit Opportunity Act when denying a credit
application; credit card billing errors and disputes with merchants; the advertising of
loan products, particularly credit cards; and creditors requirements for a co-signor
as a condition of loan approval.
The FDICs Office of Legislative Affairs, with the
assistance of other divisions and offices, sent 1,385 letters to members of Congress in
1997. Many were in response to constituent complaints about financial institutions
compliance with fair lending and consumer protection laws.
The FDICs Office of the Ombudsman handled more than 55,000
inquiries and requests for information in 1997. The office provides guidance to consumers
on where to get information throughout the agency and acts as an impartial third party to
assist consumers and bankers who have had problems working with the agency. The
Ombudsmans office conducted a number of outreach efforts in 1997 and participated in
programs such as National Consumers Week, sponsored by the U.S. Office of Consumer Affairs
as well as other consumer-related groups and associations.
The FDIC frequently meets with community and consumer groups, bankers and government
officials to exchange views about community reinvestment and fair lending issues. In 1997,
the FDIC participated in 187 such events across the country. More than half were events to
educate bankers and others about CRA and fair lending topics. Other events focused on
fostering partnerships between financial institutions and community-based organizations.
The FDIC reached more than 6,000 bankers through these events.
Other outreach efforts in 1997 included forming a focus group in Georgia to enhance
communication between bankers and community representatives after claims of lending
discrimination, and organizing roundtable discussions with bankers and a community
organization to spur economic development in low- and moderate-income areas of Reno, NV.
For more information
on outreach efforts (click here).
Communicating Through Technology
The FDIC broadened its use of Internet technology to communicate both inside and outside
the agency. published on the FDIC's home page on the World Wide Web include FDIC "financial
institution letters" (notices to the industry about proposed or new rules and
procedures), press releases, speeches by the FDIC Chairman, congressional testimony,
manuals, descriptions of banking laws, lists of asset information and banking statistics.
Users of FDIC Internet offerings include bankers, regulators, financial analysts,
journalists, stockbrokers, academics, consumers and others who want quick and easy access
to the FDICs public information.
FDIC employees from Washington (top) and Dallas
participate in National Consumers Week outreach and education efforts.
Several new features were added to the FDICs home page in 1997, including an electronic reading room
where the public may peruse FDIC publications; an online form to request information from
corporate databases; and custom-ized reports with FDIC and banking industry information.
Another new feature provides state banking agencies and other regulators secure access to
confidential financial, supervisory and policy data. For students in kinder-garten through
grade 12, the FDICs home page now offers interesting and useful information about
the FDIC and the banking system. (For a general description of FDIC Internet offerings (click here).