How to Write a Comment Letter on a Regulatory Proposal

When the Agencies issue a proposal introducing a new regulation or modifying an existing one, financial institutions typically have 30 to 60 days to comment on its impact.

Given this short timeframe, financial institutions must respond quickly to regulatory proposals affecting them.

Most FIs require a systematic way to stay updated on new regulatory proposals and address them promptly. With a dedicated compliance management solution, banks and credit unions can receive daily updates on regulatory proposals and effectively submit their comments to the relevant Agency.

What is a Regulatory Proposal?

A regulatory proposal is just what it sounds like: a proposal put forward by the Agencies to ensure the financial system's stability and integrity and protect consumers. Proposals can become rules after the public comment period has closed.

By law, Agencies must respond to public comments in the introduction of their final regulatory rule, making it essential that your financial institution submits comments within the window mentioned above.

Submitting public comments on proposed regulations matters because if the response is large and convincing enough, the Agencies may modify the proposed rule or withdraw it entirely.

What is the Difference between Rules and Guidance?

When Congress passes a law such as Dodd-Frank or the Truth in Lending Act (TILA), the Agencies are responsible for implementing them through regulations. Proposed regulations must go through a process before they become legally enforceable rules. Your financial institution can impact changes to rules during this process and lessen your regulatory burden.

But first, you must know that a proposed regulatory rule is coming. Compliance management is not simply about reacting to Agency rules but tracking proposed regulations as they emerge to put your institution in the best possible position.

Due to the challenge of instituting regulatory rules – see the recent court cases surrounding the CFPB’s attempt to implement 1071 from Dodd-Frank – Agencies sometimes opt to issue guidance to financial institutions rather than execute rules with the force of law.

Guidance refers to the materials that Agencies publish that clarify existing regulations. The Agencies use interagency statements, announcements, and advisory documents to help financial institutions comply with regulations, but they are not legally binding, and they are not meant to impose new obligations.

Regulators might refer to regulatory guidance during an exam to demonstrate best practices if they note deficiencies in a financial institution’s compliance with laws and regulations.

Related: Laws vs. Regulations vs. Guidance: What’s the Difference?

The Process of Submitting a Comment on a Proposed Banking Regulation

You can submit comments on regulatory proposals by mail or email. If you visit regulations.gov, you can submit and view public comments from associations and individuals.

Many Agencies prefer to receive public comments online because it cuts down on paperwork and the time it takes to review hard copies.

When a proposed regulation is released, the Agencies will often provide specific instructions on how they want to receive public comments. For example, in 2020, when the OCC and FDIC proposed to modernize the Community Reinvestment Act (CRA), there were specific instructions on where to send public comments, what to include in the email subject line, and a reference number for the regulation in question.

The different Agencies have preferences for how to submit comments on proposed regulations, and your association will often help guide you through the submission process.

9 Tips for Writing an Effective Comment Letter on a Proposed Banking Regulation

1. Thoroughly Review and Understand the Proposal: Read the proposal to understand how it will impact your institution. You might also review industry journals and other resources to understand the proposed regulation’s impact better. 
2. Answer the questions. Many requests for comments will actually include questions crafted by the agency. Looking for these questions and offer an opinion on the ones most meaningful to your institution – whether that’s in expertise or in impact. 
3. Stick to the Facts: While you may be annoyed or think it unfair that a proposed regulation is asking more of you and your institution, comment letters are not an occasion to blow off steam. You want to offer real insights that demonstrate the validity of your points. Agencies respond particularly well to data and examples. 
4. Be Specific: Regulatory proposals can be long reads. When composing your comment letter, cite specific aspects of the regulatory proposal that you find concerning. Agencies respond better to particular objections than a general sense of dissatisfaction. 
5. Offer Suggestions, Not Just Criticism: While you may be tempted to rattle off a list of your complaints, it’s a far better strategy to suggest refinements for improving a regulatory proposal. Sharing your thoughts on how to make a regulatory proposal more effective and operationally feasible will be better received by regulators. The idea is to be part of the solution and not come across as merely complaining. 
6. Gather Input from Others: When composing a comment letter objecting to specific aspects of a regulatory proposal, you should seek the input of others from across your organization. The more insight you can add to your letter, the more effective it will be. 
7. Don’t Feel Obligated to Go It Alone. You don't have to start from scratch when writing a comment letter. Your trade association will likely ask for your institution’s thoughts (and the thoughts of your peers) and compile them all into one well-crafted letter. You can either create your own or join your association's efforts if you are limited in time. 
8. Keep It Short: If you look at the comments on regulations.gov, you’ll notice they’re short and to the point. The agencies will have many letters to consider, so you’ll want to avoid unnecessary bloat. You don’t need to address every issue raised in the proposal. Focus on the elements most important to you and your institution. Other institutions and associations will likely have the same issues as you with specific aspects of a regulatory proposal, so keeping your comment letter short works to your advantage as the Agencies may notice a theme that encourages them to modify their proposal. 
9. Offer Counterpoints to Arguments: If you read other comment letters or media reports, you’ll understand those who disagree with your take on a regulatory proposal. By thoughtfully considering others’ arguments, you can craft intelligent counterpoints. 
10. Be Careful About Oversharing: Remember that comment letters are public documents. Any sensitive information or potentially embarrassing facts about your institution should be left out of your letter. Also, keep is professional. You are representing your institution in a public forum. 
11. Submit Your Letter by the Deadline: The Agencies will give you a deadline for submitting comment letters. You must adhere to this deadline, or your letter and concerns will not be considered.

Meeting the Deadline for Comment Letters on Regulatory Proposals

When handling new regulatory proposals, knowing when they’re coming is the most important thing. You can’t meet the deadline for composing a thoughtful comment letter stating your objections to a proposed rule enforcement if you’re in the dark about what’s coming.

With Ncomply, you can track regulatory updates in real-time, enabling you and your team to stay ahead of proposed rule enforcements and respond quickly.

Manage regulatory proposals and stay current on the latest developments from the Agencies with Ncomply!