It Seeks to Tie Insurance to Hiring of Handicapped

Here's a frightening twist to the regulatory-burden debate: The Department of Labor says it can terminate deposit insurance at any bank or credit union that doesn't employ the handicapped.

The department has proposed an affirmative-action rule that describes deposit insurance and share insurance as contracts between the bank or credit union and the government.

Furthermore, its lawyers contend that the Americans with Disabilities Act gives the department the authority to void such contracts if an employer lacks an affirmative-action program.

This is exactly the same rule the department tried to adopt in 1980 and withdrew after complaints by banks and the Federal Deposit Insurance Corp.

Bankers thought the issue was dead.

Hard to Find

This time around, the FDIC and most of the industry didn't spot the rule - published in the Oct. 21 Federal Register - until this month, weeks after the official comment period had ended. The reason: The reference to deposit insurance is buried in one line in the middle of agonizingly plodding prose.

FDIC Chairman Andrew C. Hove wrote on Dec. 4, "We are deeply concerned by the Department of Labor's characterization of FDIC insurance as a government contract and the suggestion that the department may seek to terminate such insurance. We strongly urge the department to correct this misstatement."

The FDIC says deposit insurance is a license, not a contract.

In a similar vein, Kenneth Guenther, executive director of the Independent Bankers Association of America, wrote on Dec. 15: "As you know, all employers, ncluding FDIC-insured banks, must comply with the Americans with Disabilities Act, which addresses discrimination against disabled people.

"We do not believe that federal deposit insurance - which primarily benefits depositors in insured banks, not insured banks themselves - constitutes the type of federal contract that should subject an insured bank to a greater obligation in this area than any other employer.

"Nor do we believe that it is necessary to subject insured banks to the separate requirements of yet another regulatory agency in order to achieve the desired results in combating discrimination."

|An Expanding Burden'

The National Credit Union Administration spotted the rule, and its general counsel, Robert M. Fenner, mailed and faxed a comment letter to the Labor Department on Nov. 20.

He said the rule not only goes beyond the law "but adds to an expanding burden of regulation and paperwork that makes it increasingly difficult for thousands of small credit unions ... to continue in existence."

Asked about late comments, an official of the department responded, "We're not going to close our eyes." She said no action would be taken before year-end, because the department must go through 35 comments received before the deadline.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.