American Association of Bank Directors - Publications And Communications

About AABD Mission Statement Leadership, Advisors,
and Staff AABD Committees

Why Become A Member Criteria for Membership Top 10 Reasons Membership Application

Current Policy Positions Regulatory Burdens on Bank Directors Federal Banking Agencies Congress State Banking Agencies State Legislatures

AABD Major Publications Bank Director News Press Releases, Letters,
Articles, and Speeches Recommended Reading Pocket Guides for Directors Order Publications

Education Needs Institute For Bank
Director Education (IBDE) Bank Director Certification IBDE Course Guide

American Association of Bank Directors Announces Federal Legislation that Jeopardizes Bank Directors' Service on College Boards of Trustees

August 22, 2007—Bethesda, Maryland

The American Association of Bank Directors ("AABD") today announced its opposition to certain provisions in The Student Loan Sunshine Act (H.R. 890) that may jeopardize bank directors' service on college boards of trustees. The House of Representatives passed the measure on May 9, 2007, and on August 1, 2007, the Senate Banking Committee reported out a similar measure. AABD believes that there may be hundreds if not thousands of bank directors who also serve on the board of trustees of colleges throughout the United States.

The Appendix to this press release describes specific provisions in H.R. 890 and the Senate Banking Committee bill that could be read to either prohibit dual service or to ban a bank from compensating directors for their service as directors of the bank if they also serve on the board of trustees or in another capacity at a college.

"The House of Representatives and the Senate Banking Committee want to prevent colleges and their personnel from steering students into loan arrangements because the colleges or their personnel benefit monetarily from the arrangement," David Baris, Executive Director of AABD said. "However, they have used exceedingly broad language in the legislation that may unintentionally result in bank and savings institution directors being prevented from serving on the boards of trustees of colleges, whether or not the bank or savings institution has a preferred lender status with the college or even makes loans to students of the college," David Baris, Executive Director of AABD said.

"Even if there were a preferred lender status involved between a college and a bank, the college and the bank could resolve any appearance of a conflict simply by implementing internal systems that would assure that the decisions by the college and bank were each made on an arms length basis solely by disinterested board members."

On May 9, 2007, the U.S. House of Representatives passed H.R. 890 without the benefit of hearings by the two committees assigned the legislation (Committee on Education and Labor and the Committee on Financial Services) or committee reports on the legislation.

On August 1, 2007, the Senate Banking Committee reported out The Private Loan Transparency and Improvement Act as a substitute for another bill, but has not assigned a number to the bill. That committee also did not hold hearings or prepare a report on the legislation.

AABD has written to the Chairmen and Ranking Members of the House Committee on Education and Labor and the Senate Banking Committee to request that amendments be introduced that will clarify that there will be no bar on dual service or on compensating directors of banks for their service as bank board members even if they happen to serve on a board of trustees of a college.