The banking industry in the U.S. is a highly regulated industry with very detailed and focused regulators. The United States employs a dual system of bank regulation. The Federal Reserve is one of several banking regulatory agencies that operate on the federal level. At the state level, state chartered banks are regulated by their appropriate state banking regulator. State chartered banks can be supervised and regulated at both the state and federal levels. At the federal level, state-chartered banks are regulated by either the FDIC or, if they choose to be members of the Federal Reserve System, by the Federal Reserve. All banks with FDIC insured deposits have the FDIC as a regulator; however, for examinations, the Federal Reserve is the primary federal regulator for Federal reseve member state banks. The Office of the Comptroller of the Currency, or OCC, is the primary federal regulator for national banks. The Office of Thrift Supervision, or OTS, is the primary federal regulator for thrifts. State non-member banks are examined by the state agencies as well as the FDIC.
Depending on a banking organization’s charter-type and organizational structure, it may be subject to numerous federal and state banking regulators. The overlap in tasks among federal regulators and between federal and state regulators creates a confusing system that can be hard to follow. Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere. The system seems to function well and has served both the industry and the industry’s customers well. Though there have been regulatory difficulties, the U.S. banking system is one of the safest, sound and open financial systems in the world.
The plethora of regulatory bodies starts with the primary federal regulators in the U.S. banking system which may be the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. Within the Federal Reserve Board there are 12 districts centered around 12 regional Federal Reserve Banks, each of which carries out the Federal Reserve Board’s bank regulatory responsibilities in its respective district.
The OTS is the federal bank regulator and supervisor of a dynamic and diverse industry of savings associations and their subsidiaries across the nation. The OTS also oversees domestic and international activities of the holding companies and affiliates that own these thrift institutions. The OTS is an office within the Department of the Treasury.
In 1989, Congress passed a law that dramatically restructured the banking business, moved deposit insurance for savings associations to the Federal Deposit Insurance Corporation and established the OTS to supervise, charter and regulate the thrift industry.
The OCC, the Office of the Comptroller of the Currency, is the primary regulator of national banks. A national bank is a financial institution chartered, regulated and supervised by the OCC. National banks have “National” or “N.A.” in their name. National banks represent about 23 percent of all insured commercial banks in the United States, holding 68 percent of the total assets of the banking system. The Office of the Comptroller of the Currency is a bureau of the United States Department of the Treasury. The OCC charters, regulates, and supervises about 1,700 national banks and about 50 federal branches of foreign banks in the U.S. (as of March 31, 2008) and their operating subsidiaries to ensure a safe, sound and competitive national banking system that supports the citizens, communities and economy of the United States. The OCC also supervises federally licensed branches and agencies of foreign banks.
State banks are chartered, regulated and supervised by their state’s banking division. State chartered banks regulation and supervision by the appropriate state regulatory agency of the state in which they were chartered applies in addition to federal regulation. State regulation of state chartered banks by the Federal Deposit Insurance Corp., is the federal regulator of state chartered banks that don’t belong to the Federal Reserve System. A state bank that is not a member of the Federal Reserve System would be regulated by both the state department that handles and regulations and the FDIC. A state bank that is a member of the Federal Reserve System would be jointly regulated by the state regulator and the Federal Reserve.
For members of the Federal Reserve System who are not national banks, and for offices, branches, and agencies of foreign banks located in the United States (who are not federal branches and agencies of foreign banks), the provisions are enforced by the Board of Governors of the Federal Reserve.
Credit Unions in the United States are subject to certain similar bank-like regulations and are supervised by the National Credit Union Administration. A federal credit union is a nonprofit, cooperative financial institution owned and run by its members and is not supervised or regulated by The Federal Reserve. The National Credit Union Administration regulates federally chartered credit unions, while state-chartered credit unions are regulated at the state level. The National Credit Union Administration (NCUA) is a federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions across the country through the National Credit Union Share Insurance Fund (NCUSIF), a federal fund backed by the full faith and credit of the United States government.
The FDIC insures most all US banks and savings and loans for $100,000.00 per customer and $250,000.00 on retirement accounts. The FDIC insurance will cover all standard bank products such as:
Checking accounts
• NOW accounts
• Savings accounts
• Certificates of deposit
• Money market deposit accounts
FDIC insurance does not cover all bank products offered by an FDIC insured institution. Some products banks offered that are not covered by FDIC insurance will include:
Mutual funds and stocks
• Bonds, including Treasury bonds and savings bonds
• Insurance products including annuities, life, home, auto and related products
• Losses in a safety deposit box
• Errors made on accounts
• Fraud
Consumer Protection
The U.S has one of the most highly regulated banking environments in the world. Oddly, many of the regulations are not necessarily safety and soundness related. Most U.S. bank regulations are focused on rules and thegovernance of disclosures, privacy issues, fraud prevention, anti-money laundering, anti-usury lending, and promoting lending to lower-income segments. The Federal Reserve Board issues regulations that have varying levels of impact across the banking sysytem.
Some of the Federal Reserve Board regulations apply to the entire banking industry, whereas others apply only to its member banks, that is, state banks that have chosen to join the Federal Reserve System and national banks, which by law must be members of the System. The Federal Reserve makes consumer protection rules, including rules that implement the Truth in Lending, Home Mortgage Disclosure, and, Equal Credit Opportunity Acts, that all lenders, including credit unions, must follow. The Federal Reserve Board also issues regulations to carry out major federal laws governing consumer credit protection, such as the Fair credit Reporting, Equal Credit Opportunity, Truth in Lending, and Right to Financial Privacy. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.
Right to Financial Privacy Act
This act establishes procedures for the release of financial records of consumers to government authorities. This act provides customers of financial institutions the right to expect that their financial activities will have a reasonable amount of privacy from federal government scrutiny. The act establishes specific procedures and exceptions concerning the release of customer financial records to the federal government.
Regulation E – Electronic Fund Transfers
Regulation E provides consumer protection, liabilities, and responsibilities of parties in electronic fund transfers (EFT) and protects consumers using EFT systems, such as ATMs and debit cards.
Regulation E establishes the rules for solicitation and issuance of EFT cards; governs consumers’ liability for unauthorized electronic fund transfers (resulting, for example, from lost or stolen cards); requires institutions to disclose certain terms and conditions of EFT services; provides for documentation of electronic transfers; sets up resolution procedures for errors; and covers notice of crediting and stoppage of pre-authorized payments from a customer’s account.
Stored-value cards or smart cards and home banking by personal computer is also subject to Regulation E because the act governs electronic fund transfers.
Fair Credit Reporting Act
The Fair Credit Reporting Act regulates the collection, sharing, and use of customer credit information. This act defines a credit reporting agency and implements procedures for maintaining fair and objective use of consumer credit information. The act allows consumers to obtain a copy of their credit report records from credit bureaus that hold information on them, provides for consumers to dispute negative information held, and sets time limits after which negative information is suppressed. The act establishes procedures for correcting mistakes on a consumer’s credit report and requires that a consumer’s record only be provided for legitimate business purposes. It also requires that the record be kept confidential. It requires that consumers be informed when negative information is added to their credit records, when adverse action is taken based on a credit report and if a consumer is denied credit, a free credit report may be requested within 30 days of denial.
Regulation D – Reserve Requirements
Regulation D imposes uniform reserve requirements on all depository institutions with transaction accounts or non-personal time deposits. The reserve requirements are based on various deposit account classifications and are important to consumers because they define transaction, savings and time deposit account categories. The regulation defines the deposit types and requires reports of deposits to the Federal Reserve.
Regulation BB – Community Reinvestment
Regulation BB implements the Community Reinvestment Act (CRA) and is designed to encourage banks to help meet the credit needs of their communities. Regulation BB requires each bank office to make available for public inspection a statement of the types of credit the bank is prepared to extend within the communities served by that office and provide a map of its communities. Each bank must maintain a file of public comments relating to its CRA statement. The Federal Reserve, in examining a state member bank, must assess its record in meeting the credit needs of the entire community, particularly low- and moderate-income neighborhoods, and must take into account the bank’s record in considering certain bank applications. A provision in the act requires public disclosure of a bank’s CRA rating and CRA performance evaluations.
Regulation B – Equal Credit Opportunity Act
The Equal Credit Opportunity Act states that creditors which regularly extend credit to customers, which include banks, retailers, finance companies, and bankcard companies, should evaluate candidates on credit worthiness alone, rather than other factors such as race, color, religion, national origin or sex. Regulation B prohibits creditors from discriminating against credit applicants, establishes guidelines for gathering and evaluating credit information, and requires written notification when credit is denied. Discrimination on marital status, welfare recipience, and age is generally prohibited with exceptions, as is discrimination based on a consumer’s good faith exercise of their credit protection rights. The regulation establishes a special residential mortgage credit monitoring system for regulatory agencies by requiring that lenders ask for and note the race, national origin, sex, marital status, and age of residential mortgage applicants. The regulation covers all credit transactions (unlike other regulations that may cover only consumer credit), with some modifications applicable to certain classes of transactions. The regulation also requires creditors to give applicants a written notification of rejection of an application, a statement of the applicant’s rights under the Equal Credit Opportunity Act, and a statement either of the reasons for the rejection or of the applicant’s right to request the reasons.
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Regulation DD – Truth in Savings Act
Regulation DD requires depository institutions to disclose the terms of deposit accounts to consumers and applies to all consumer deposit accounts except those offered by credit unions, which are governed by rules of the National Credit Union Administration. The purpose of the Truth in Savings Act is to enable consumers to make informed decisions about accounts at depository institutions. This part requires depository institutions to provide disclosures so that consumers can make meaningful comparisons among depository institutions. Specific information that must included in bank and savings instutition disclosures must include; written information about important terms of an account including the annual percentage yield, any fees and other information on any periodic statement sent to consumers, use certain methods to determine the balance on which interest is calculated and comply with special requirements when advertising deposit accounts.
Regulation CC Expedited Funds Availability Act
Regulation CC implements the Expedited Funds Availability Act (EFA) and governs the availability of funds and the collection and return of checks. This regulation establishes what are referred to as the availability schedules under which depository institutions must make funds deposited into transaction accounts available for withdrawal. The Expedited Funds Availability Act requires all banks, savings and loan associations, savings banks, and credit unions to make funds deposited into checking, share draft and NOW accounts available according to specified time schedules. The regulation also provides that depository institutions must disclose their funds availability policies to their customers. The law does not require an institution to holdup the customer’s use of deposited funds but instead limits how long any waiting period may last. In addition, Regulation CC establishes rules designed to speed the collection and return of checks and imposes a responsibility on banks to return unpaid checks expeditiously. The provisions of Regulation CC govern all checks, not just those collected through the Federal Reserve System.
Truth in Lending Act
Regulation Z requires disclosure of the finance charge and the annual percentage rate and certain other costs and terms of credit so that a consumer can compare the prices of credit from different sources. The Truth in Lending Act establishes uniform methods of computing the cost of credit, disclosure of credit terms, and procedures for resolving errors on certain credit accounts. It also limits liability on lost or stolen credit cards. It also gives consumers the right to cancel certain transactions involving their principal residence. A key provision of the regulation requires lenders to provide borrowers with good faith estimations of disclosure information before consummation of certain residential mortgage transactions. Other provisions governing lender requirements include; the requirement that lenders respond to consumer complaints of billing errors on certain credit accounts within a specific period, lenders identify credit transactions on periodic statements of open-end credit accounts, specific disclosure of credit terms to consumers interested in adjustable rate mortgages (ARMS) and home equity lines of credit are provided, abide by special requirements when advertising credit, provide certain rights regarding credit cards.
Home Equity Loan Consumer Protection Act
The Home Equity Loan Consumer Protection Act requires lenders to disclose payment terms, rates, APRs, miscellaneous charges and other features for home equity lines of credit with the applications and before the first transaction under the home equity plan. If the disclosed terms change, the consumer can refuse to open the plan and is entitled to a refund of fees paid in connection with the application. The Act also limits the circumstances under which creditors may terminate or change the terms of a home equity plan after it is opened.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act is designed to eliminate abusive, deceptive and unfair debt collection practices. It applies to third party debt collectors or those who use a name other than their own in collecting consumer debts. Very few commercial banks, savings banks, savings and loan associations, or credit unions are covered by this Act, since they usually collect only their own debts. Complaints concerning debt collection practices should generally be filed with the Federal Trade Commission. This act defines which financial institutions are subject to the act and prohibits abusive debt collection practices. It applies to third-party debt collectors or to those who use a name other than their own in collecting debts.
Fair Credit and Charge Card Disclosure Act
The Fair Credit and Charge Card Disclosure Act requires new disclosures on credit and charge cards, whether issued by financial institutions, retail stores or private companies. Information such as APRs, annual fees and grace periods must be provided in tabular form along with applications and preapproved solicitations for cards. The regulations also require card issuers that impose an annual fee to provide disclosures before annual renewal. Card issuers that offer credit insurance must inform customers of any increase in rate or substantial decrease in coverage should the issuer decide to change insurance providers.
Bank Consumer Complaint Filings
The Federal Reserve can help individual consumers by answering questions about banking practices, and investigating complaints about specific banks under its supervisory jurisdiction. Complaints about financial institutions that are not supervised by the Federal Reserve System are referred to the appropriate federal agency.
As a federal regulatory agency, the Federal Reserve System investigates consumer complaints received against State chartered banks that are members of the System. If you think a bank has been unfair or deceptive in its dealings with you, or has violated a law or regulation, as a consumer you have the right to file a complaint.
If the consumer has a complaint against a financial institution, the first step is to contact an officer of the institution and attempt to resolve the complaint directly. Financial institutions value their customers and most will be helpful. If the consumer is unable to resolve the complaint directly, the financial institution’s regulatory agency may be contacted for assistance.
The agency will usually acknowledge receipt of a complaint letter within a few days. If the letter is referred to another agency, the consumer will be advised of this fact. When the appropriate agency investigates the complaint the financial institution may be given a copy of the complaint letter.
The complaint should be submitted in writing and should include the following:
- Complainant’s name, address, telephone number;
- The institution’s name and address;
- Type of account involved in the complaint–checking, savings, or loan–and account numbers, if applicable;
- Description of the complaint, including specific dates and the institution’s actions (copies of pertinent information or correspondence are also helpful);
- Date of contact and the names of individuals contacted at the institution with their responses;
- Complainant’s signature and the date the complaint is being submitted to the regulatory agency.
The regulatory agencies will be able to help resolve the complaint if the financial institution has violated a banking law or regulation. They may not be able to help where the consumer is not satisfied with an institution’s policy or practices, even though no law or regulation was violated. Additionally, the regulatory agencies do not resolve factual or most contractual disputes.
Although the Federal Reserve investigates all complaints involving the banks it regulates, it does not have the authority to resolve all types of problems. For example, it is unable to resolve contractual disputes, undocumented factual disputes between a customer and a bank, or disagreements about bank policies and procedures. These matters are usually determined by bank policy and are not addressed by federal law or regulation. In many instances, however, by filing a complaint a bank may voluntarily work with you to resolve your situation. If, however, the matter is not resolved, the Federal Reserve will advise you whether a violation of law has occurred or whether you should consider legal counsel to resolve your complaint.
Bank and Credit Union Regulatory Contacts
Board of Governors of the Federal Reserve System
Division of Consumer and Community Affairs
20th and C Streets, N.W., Stop 801
Washington, DC 20551
(202) 452-3693
Federal Deposit Insurance Corporation
Compliance and Consumer Affairs
550 17th Street, N.W.
Washington, DC 20429
(202) 942-3100 or 1 (800) 934-3342
Comptroller of the Currency
Office of the Ombudsman
Customer Assistance Unit
1301 McKinney Street
Suite 3710
Houston, TX 77010
1 (800) 613-6743
Office of Thrift Supervision
Consumer Programs
1700 G Street, N.W.
Washington, DC 20552
(202) 906-6237 or 1 (800) 842-6929
National Credit Union Administration
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, VA 22314-3428
(703) 518-6330
Federal Trade Commission
Consumer Response Center
6th and Pennsylvania, N.W.
Washington, DC 20580
877-FTC-HELP – toll free (877-382-4357)
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