WASHINGTON Acting Comptroller of the Currency Julie L.
Williams today urged bankers, government officials, and consumer advocates to
work together to improve our current system of disclosure for financial
consumers.
In a speech before Women in Housing Finance and The
Exchequer Club, Ms. Williams said that such disclosures are at the heart of our
current system of consumer protection, in which bank customers are to be
provided with the information they need to make informed choices about
financial products and services.
However, she added, the system is on the verge of breaking down.
And its reached that point not because consumers are
getting too little information, but because they are getting too much information
thats not what theyre really after; and because the volume of information
presented may not be informing consumers, but rather obscuring whats
most helpful to understanding of financial choices, she added.
Ms. Williams pointed to the work the Food and Drug Administration
did in developing the highly-effective Nutrition Facts disclosures that
appear in a box on food products. That
effort, she said, was the result of painstaking work, in the field, the
laboratory, plus extensive input from consumers.
The clear labeling of nutrition content has not only
enabled consumers to find products with the nutritional characteristics theyre
seeking, it has influenced food producers to develop products that consumers
want, Ms. Williams said. In other
words, these disclosures have been effective and useful to consumers.
Ms. Williams said every party to the process Congress,
consumer advocates, bankers and regulators must rethink its approach to
consumer disclosures if the process is going to be made to work for consumers.
The FDAs experience, Ms. Williams said, suggests that
Congress should consider more emphasis in financial services legislation on
articulating the goals to be achieved through a particular consumer protection
disclosure regime, rather than the precise elements of mandated disclosures.
In addition, she said, Congress should look for
opportunities to require, and please provide adequate time for, regulators
to include consumer testing as part of their rulemaking process.
Regulators need to embrace consumer testing when we design,
or attempt to redesign, consumer protection measures, she said.
Lets just admit that we cant throw a bunch of
lawyershowever talentedinto a room and expect that they are going to come up
with consumer disclosures that are understandable to most people, she
said. Theres a critical element
thats been missing from our consumer disclosure rulemaking processtesting how
consumers interpret particular disclosures and how to make disclosures usable
to them.
Bankers, she said, complain about excessive regulatory
burden, but seem fearful of the consequences of a clearer, less burdensome
approach to consumer disclosure such as a streamlined, short form privacy
notice containing only certain key information.
Marketing departments get uneasy because simple and
straightforward disclosure of a banks information sharing policies and an easy
means for customers to opt out of that sharing might meanthat customers
will actually understand those policiesand decide to opt out, she
said.
While noting the vital role consumer advocacy organizations
play in the bank regulatory environment, Ms. Williams said what seems to be
absent in the dialogue with these groups is a discussion of the interplay of
how to better inform consumers by disclosing better, but not necessarily
more, information, and the impact of regulatory disclosure burdens on banking
institutions.
Why arent consumer organizations berating us to do
consumer testing to find out what consumers really want and think is
important?
Ms. Williams urged all major participants in the process of
developing financial services consumer disclosures to muster the resolve to
change the current approach.
The benefits will be better-informed, better protected consumers,
clearer accountability concerning consumer treatment and consumer behavior,
reduced regulatory burdenand a more robust financial services marketplace for
all.
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