WASHINGTON In testimony before the Senate Banking
Committee today, acting Comptroller of the Currency Julie L. Williams told a
Senate panel that disclosure is at the heart of consumer protection, that there
has been much criticism of the state of credit card disclosures, and that there
is room for improvement.
I urge that we take a new approach, premised on obtaining input,
through consumer testing, to learn what information consumers most want to know
about, and how to most effectively convey it to them, Ms. Williams said. Quick fixes without consumer input and
issue-by-issue patches to information gaps are not in the long-term best
interest of consumers.
She discussed the need to begin a serious re-examination of
how all involved in the consumer disclosure process go about developing,
designing, overseeing, and evaluating consumer disclosures for financial products
and services. The direction set by
Congress and the experience of the Food and Drug Administration using input
from consumers to develop the Nutritional Fact disclosure for food provides
valuable lessons on how to provide disclosures that are both understandable and
useful to consumers, she said.
Ms. Williams told the panel that credit card issuers have
responded to increasing market competition with innovations in card products,
marketing strategies, and account management practices with the goal to gain
new customer relationships and that in some instances, this has resulted in an
important secondary benefit of expanding access to credit by consumers with
traditionally limited choices.
Unfortunately, she said, the account management and marketing practices
of credit card issuers have come in for criticism in recent years, from both
consumer protection and safety and soundness standpoints.
She pointed out that the OCC has issued supervisory guidance
alerting national banks of concerns about credit card account management and
loss allowance practices, secured cards, and credit card marketing practices,
and has used the agencys enforcement authority, in combination with the
prohibition on unfair and deceptive practices contained in the Federal Trade
Commission Act, to take formal enforcement actions against several banks to end
unfair and abusive practices and make restitution to consumers totaling
hundreds of millions of dollars.
Ms. Williams pointed out that the OCC does not have
statutory authority to issue regulations defining particular credit card
disclosures or practices by banks as unfair and deceptive under the Federal
Trade Commission Act, nor does the agency have the authority to issue
regulations setting standards for disclosures credit card issuers must make
under Truth in Lending Act; in both cases, that authority is vested exclusively
in the Federal Reserve Board. For this
reason, she noted, the agency took the unusual step of submitting a comment
letter responding to the Federal Reserve Boards Advance Notice of Proposed
Rulemaking on Regulation Zs open-end credit rules implementing TILA.
The OCC has addressed many of the recent changes in credit
card practices through its examination process, enforcement actions where
necessary, and supervisory guidance, Ms. Williams concluded.
But consumers also depend on high quality, user-friendly
disclosures to help guide them through the increasing complexities of the
credit card marketplace, Ms. Williams said.
The Federal Reserves review of Regulation Z disclosures holds promise
in this regard, but I respectfully urge that we also need to rethink our
approach to disclosure generally, along the lines I have described. The benefits for consumers, for marketplace
participants, and for our economy will be well worth it.
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The
Office of the Comptroller of the Currency was created by Congress to charter
national banks, to oversee a nationwide system of banking institutions, and to
assure that national banks are safe and sound, competitive and profitable, and
capable of serving in the best possible manner the banking needs of their
customers.