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Volume 23 - Number 26

December 21, 2012

CFPB Proposes to Allow Limited Trial Disclosure Programs

The CFPB has proposed allowing banks, credit unions and other financial services companies to test new consumer disclosures on a case-by-case basis.

The bureau would have to approve of the disclosure programs ahead of time.

Under the proposal, the CFPB would exempt certain qualifying individual companies for a limited time from existing federal disclosure laws so they can research and test “informative, cost-effective disclosures.”

The participating companies would then share their results with the agency so it can improve the disclosure rules and model forms under its consumer mortgage disclosure project.

There are at least three key factors officials will consider when deciding if they will grant a company an exemption, the first of which is consumer understanding.

“The bureau will assess how effectively and efficiently the proposed trial will test for potential improvements to consumer understanding about the costs, benefits and risks of products and services,” the CFPB said.

The agency also will evaluate how the proposed trial will help develop more cost-effective disclosure rules or policies.

The CFPB also said it plans to evaluate the extent to which the program is designed to mitigate any risk to consumers.

The bureau said the public will be able to provide input through the usual rulemaking process.

The proposal is part of the bureau’s Project Catalyst, an initiative designed to encourage consumer-friendly innovation in markets for consumer financial products and services.

Officials at the American Land Title Association said the CFPB’s trial disclosure program proposal is a step in the right direction, but their title agent members are concerned about potential problems in how these disclosures will work in the real world.

“We are hopeful this will not be an academic exercise and CFPB will actually use the results of this real-life testing to improve the disclosure rules and ensure the model forms achieve their stated goals,” said CEO Michelle Korsmo.  

“ALTA members, the ones sitting at the closing table with homebuyers, are in a perfect position to offer constructive feedback on reaction to the mortgage disclosures. We welcome this opportunity.”   

Another industry lobbyist confided, “This is very welcome news.”

On a related note, senior officials at the National Federal Credit Union Administration paid a visit to the CFPB on Dec. 17 to participate in a roundtable discussion about Project Catalyst.

 


Other areas of interest

Poll

What is it going to take to convince lenders to loosen the credit box (i.e., remove underwriting overlays)?

The recent rep and warranty changes announced by the Federal Housing Finance Agency should go a long way in protecting lenders from future buybacks and help expand mortgage credit.
There won’t be any significant elimination of underwriting overlays until the government stops seeking huge mortgage-related penalties and settlements from lenders.
There shouldn’t be any expansion of the mortgage credit box since looser underwriting is what caused the recent mortgage crisis.

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