The Small Business Administration on Tuesday officially asked the Federal Reserve to postpone the April 1 implementation date of its loan officer compensation rule, saying the central bank did not provide "sufficient" or "proper" guidance for small mortgage firms and loan brokers to comply with the new requirements.
The Fed recently issued written guidance on the Truth in Lending Act LO rule, which is designed to ban compensation arrangements that incentivize LOs and brokers to steer consumers into higher cost loans.
The SBA's Office of Advocacy says the four-page guidance issued by the Fed does not "include a description of actions needed" to meet the requirements of the rule, as mandated by the Small Business Regulatory Enforcement Fairness Act.
"Small entities have advised Advocacy that the guidance answers almost none of the questions that the industry has about the rule and view it as simply a summary of a complex issue and not guidance on how to comply with the requirements of the rule," says SBA chief counsel of Advocacy Winslow Sargeant.
Sargeant suggests the Office of Advocacy arrange a meeting between small mortgage firms and Fed officials to discuss areas of the compensation rule that need more specific guidance.
"Because the effective date of the rule is rapidly approaching at a time that industry does not feel as though it has workable guidance, Advocacy once again encourages the Board to postpone the implementation date for small entities," writes the SBA chief counsel in his Feb. 1 letter.
"A delay to educate small entities on the proper implementation of the requirements of the rule will benefit the small entities and the consumers who utilize their services," he added.
