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#302731 - 01/12/05 07:02 PM New Approach to Disclosures
Rocky P Online
Power Poster
Joined: Jun 2003
Posts: 7,650
Florida
This looks like the OCC wants disclosure simplification.

FOR IMMEDIATE RELEASE

Contact: Kevin Mukri (202) 874-5770

January 12, 2005
Acting Comptroller Williams Urges New Approach to Disclosures To Enhance Consumer Protection

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 it's reached that point not because consumers are getting too little information, but because they are getting too much information that's not what they're really after; and because the volume of information presented may not be informing consumers, but rather obscuring what's 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 they're 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 FDA's 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.

"Let's just admit that we can't throw a bunch of lawyers-however talented-into a room and expect that they are going to come up with consumer disclosures that are understandable to most people," she said. "There's a critical element that's been missing from our consumer disclosure rulemaking process-testing 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 bank's information sharing policies and an easy means for customers to opt out of that sharing might mean-that customers will actually understand those policies-and 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 aren't 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 burden-and a more robust financial services marketplace for all."

The speech can be found at: www.occ.treas.gov

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General Discussion
#302732 - 01/12/05 07:11 PM Re: New Approach to Disclosures
Anonymous
Unregistered

Quote:

"And it's reached that point not because consumers are getting too little information, but because they are getting too much information that's not what they're really after;" she added............"Let's just admit that we can't throw a bunch of lawyers-however talented-into a room and expect that they are going to come up with consumer disclosures that are understandable to most people," she said.




Amen sister!

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#302733 - 01/12/05 07:31 PM Re: New Approach to Disclosures
Jay-Risk Offline
Gold Star
Joined: May 2004
Posts: 274
New England
In essence, the Acting Comptroller is saying that there may be a bit of over-reacting and over-caution on the part of bankers, but this is because bankers perceive a level of disconnect between what is said by regulatory executives, such as Ms. Williams, and what actually takes place out in the field, as practiced and enforced by the examiners. One need only look at the fear bankers have regarding what they perceive to be unusually agressive enforcement of BSA/OFAC/PATRIOT -- which has resulted in mass filings by bankers of CTRs, SARs, etc. Bankers want to do the right thing, but there is definately mixed signals between what regulatory executives are espousing -- versus what is really happening in the field.

Comptroller Williams makes a good point that bankers should try to make disclosures more succinct and easily understood, but who wants to be first in line? If one takes the risk to truly make disclosures meaningful, the flip-side fear is that you'll get whacked by a field examiner claiming the disclosure omitted material disclosure issues.

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#302734 - 01/13/05 02:41 PM Re: New Approach to Disclosures
Anonymous
Unregistered

"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 bank's information sharing policies and an easy means for customers to opt out of that sharing might mean that customers will actually understand those policies and decide to opt out," she said.

Seems like she is forgetting that the regulators were the ones that wrote the sample language for us to go by. And I doubt many banks that are "uneasy" about simplified privacy disclosures resulting in more customers opting-out - the real reason is that revising the disclosure (and others) means a large expense in time and money to change forms, train employees, update systems, etc. Revision in disclosures mean more regulatory burden for us, not less. Its hard enough to keep up with all the new laws the government is writing without them going back and revising all the old ones too. We are getting one regulation after another, and she complains about having only 6 months for the regulators to write one.

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#302735 - 01/13/05 07:53 PM Re: New Approach to Disclosures
Terry Offline
Gold Star
Terry
Joined: Sep 2001
Posts: 314
Midwest
I agree with the Acting Comptroller all the way. She said that bankers complain that the disclosures are overly burdensome and not very useful. And she said that there's merit to those complaints. Yes, she scolded the bankers alittle. Her point was that when the agencies admitted that their model privacy notice was as clear as mud and proposed a more consumer-friendly version a number of comment letters received from bankers shot it down. I don't really think she's advocating that banks should drop the model language for any disclosure, throw caution to the wind, and draft our own disclosures from scratch in order to give the consumer something easier to understand. I think she's really asking the industry to support the agencies when they attempt to revise requirements and model disclosures to make them clearer and more useful. At the same time she challenged all the other players, including her fellow regulators, to focus their efforts with this same goal in mind. I think she got it right.

I also agree with the other main theme in her address that banks need to realize that their long-term prosperity is hinged on their relationship with their customers. While it's correct to look to the regulations as the limit on what we can and can't do, she's saying that bankers also need to look at new opportunities by asking themselves if it's the right thing to do.
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