When John S. Allison, who has served as commissioner of Mississippi Department of Banking and Consumer Finance for eight years and as acting commissioner for two more years, first started working for the department, it only regulated banks, credit unions, small loan companies, premium finance, motor vehicle sales and sale of checks (money orders). But in recent years, the scope has been expanded to regulate a number of new industries such as mortgage companies, payday lenders, pawn shops and title pledge lenders.
‘In the past seven or eight years, the number of businesses regulated has gone through the ceiling,” Allison said. “Last year was the first year in about five or six that we didn’t get anything new to regulate.”
The department has two divisions. The banking division regulates 76 commercial banks, one savings bank, 30 credit unions and one independent trust company. On the consumer finance side, the biggest industry regulated is mortgage companies.
“We are actually close to 7,000 registrations or licenses for that industry in Mississippi,” Allison said. “Then there are check cashers/payday loans, which are over 1,000. There are about 600 small loan companies under consumer finance. Then we do motor vehicle sales, premium finance (large commercial insurance policies), pawn shops and title pledge lenders. All told, we probably oversee $42 to $43 billion worth of Mississippi assets.”
But you won’t find Allison, a Vietnam veteran who came up through the ranks of the department serving as bank examiner, chief examiner and deputy commissioner before taking over the top spot, complaining about the increased workload. He has found the challenge invigorating.
“I love it or I wouldn’t have been here this long,” Allison said. “I do tell people if, as in some states, we only regulated the banking industry, it would be a lot easier. Banks have been regulated since the founding of the U.S. They understand regulation. They have been a regulated industry for well over 200 years. So, they understand the job we have to do.
“Everything else we regulate keeps me energized. There is a lot new going on. It is like a baby who wakes up in a new world every day. A lot of new stuff we now regulate is people who haven’t been regulated before, and don’t understand regulations. It has taken a while to get them into a conformant position. The mortgage industry has been regulated six or seven years, and before that was accustomed to going unregulated and thinking it could do anything it wanted.”
While there have been some challenges, Allison feels his department has a very good working relationship with the industries it regulates. Although fines are given and permits revoked when necessary, he strives to have a cooperative relationship with the businesses being regulated. He works closely with trade groups that represent the industries such as the Mississippi Bankers Association.
“This department is more than banking, but everyone we regulate has a comfort level with someone who has come up through the ranks and knows the ins and outs of everything we regulate,” Allison said. “I feel good support from all the industries we do regulate.”
Allison avoids adversarial relationships. He has seen adversarial relationships elsewhere in the U.S., and feels that gets in the way of getting the job done.
“Credibility goes a long ways in what we do and how we do it,” he said.
Allison started with the department when he was 25 after a tour with the Army in Vietnam in 1972. He served as acting commissioner for two years, but at the time didn’t become commissioner because it would have meant a cut in pay. He also wasn’t sure about the politics involved in the job. After the salary of the commissioner was changed, and Gov. Ronnie Musgrove nominated him to be banking commissioner, Allison accepted the slot. He was reappointed by Gov. Haley Barbour four years ago.
“I have decided I would like to stay another term, but that is up to the wishes of the governor,” Allison said. “We haven’t yet discussed it.”
Over the years, the focus of the bank examinations has changed. The department used to come into banks unannounced and count cash and run ledger checks. But with banks having so many branches, and most branches acting as little community banks, unannounced exams made it difficult to do the job.
Now, the department relies a lot on technology to capture most of the information needed. And the focus is on how the board runs the bank — policies and procedures that are in place and risk managements for assets and liability.
“We grade that against various norms we have out there,” Allison said. “We want to make sure the bank is keeping up. We focus more on the human assets that manage the bank and bank management policies to make sure those areas are carried out in a way that protects the institution and the shareholders.
“We are fortunate to have the funds appropriated so our examiners have cutting-edge technology in the field. We interact with the FDIC on the bank side a whole lot. We transmit reports back and forth. We download bank’s portfolios before we enter the bank to concentrate in any areas they might have problems in, to see if they are doing it right. We also review consumer complaints, and if we are getting more than we think normal, we concentrate on finding out why they are having so many complaints in that area.”
While the department is a regulator, Allison said it tries to help as much as possible while fulfilling the duties to make sure the bank is sound.
“A lot of small community banks rely on what we do as a way that tests their system,” Allison said. “We try to keep them informed about what is happening in Washington, and what is coming down the pike, by working with the Mississippi Bankers Association and other industry associations. Sometime we have to agree to disagree, but we have good relationships with everyone we regulate.”
One of the most controversial businesses the department regulates is payday lenders. Short-term unsecured debt is high risk, and high risk usually dictates high rates. While some consumer advocates are critical of the high rates, Allison said if the consumer uses the product as it is designed to be used, it can fill an important role in helping people with loans smaller that what they could get approved at a bank.
“We have very few formal complaints on the industry,” Allison said. “We do find from time to time companies don’t do what they are supposed to do. They are brought to task, which can include civil fines and rebating any overcharges. We probably average $75,000 to $100,000 in fines annually, and probably refund $50,000 per year in overcharges to customers.”
Contact MBJ contributing writer Becky Gillette at email@example.com.