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Dec 13, 2010
Categories: Board and Governance Consumer Lending Accounts

NCUA Board Meeting Agenda Available; More on Elizabeth Warren

Posted by Anthony Demangone

NCUA has released the agenda for this Thursday's board meeting. This meeting practically overflows with big compliance issues.  Such as...

  • NCUA will issue a final rule concerning Fiduciary Duties.  (The rule also addresses merger and conversion issues.)  This rule is a big deal, as it will create federal standards of duty and care. In addition, NCUA may clarify expectations on financial literacy and educational requirements concerning federal credit union boards. 
  • A proposed rule regarding insurance coverage for non-interest bearing transaction accounts. 
  • A proposal to amend NCUA's "accuracy of advertising and insured status" regulation.  
  • There's other stuff as well, so please review the agenda.

More on Elizabeth Warren.  Here are a few additional items regarding Elizabeth Warren. (I keep focusing on news stories where she is quoted, as I find her views important.  She's putting the CFPB together, so her views be stamped into the new agency.)

  • Earlier, I noted this article from Kiplinger.But I forgot to highlight a very telling quote from Ms. Warren. Here's the last Q and A from the article:

"What's your advice for Kiplinger's readers while they're waiting for this to happen? Anyone who carries credit-card debt from month to month is in financial trouble. This is not a normal state, nor is it sustainable over time. Not paying off that credit card is always a bad sign, so pay it off. That's my best advice."

Whoah, Nelly! Anyone who carries credit card debt month-to-month is in trouble? Really? I understand that it is sound financial advice for consumers to pay off their credit card debts each month when possible.  But to assume that anyone carrying any balance is in trouble goes a bit far. There is a product that requires consumers to pay off their balance each month.  It is called a charge card.  A credit card is designed to be used, and carrying a balance is a basic option of the product.  This quote makes it seem that Ms. Warren finds credit cards, by their very nature, to be fundamentally bad for consumers. Sort of financial cigarettes, if you will. 

1) With hundreds of problems in the consumer financial products and services marketplace that the CFPB could chose to focus on, how do you decide where to dive in and begin? What have your top priorities been out of the blocks?

Credit cards are a top priority because they are the most widely held credit product in the country. Four out of five families have a credit card and 50 million American families cannot pay off their credit card debt each month in full.  Man, she hates credit cards. Forget payday lenders, fly-by-night "credit repair companies, and auto-title loan companies.  Credit cards are front and center on her agenda.  
 
Mortgages are the other top priority because they are the single most important financial decision that most families will make. We have learned from recent history that a bad mortgage can not only destabilize an entire family, but that enough of them can destabilize the entire economy.
 
2) You frequently cite streamlining disclosures as a way to level the playing field and give families better tools to make the choices that are best for them.  When will consumers start seeing a difference?

Consumers can already see a difference. Look at what the banks are advertising right now and see how often phrases like “simplicity,” “no tricks” and “clarity” are showing up. The industry recognizes that these consumer credit markets have to change.  Advertising is not always the best measure of progress.  Case in point.   Personally, I think a consumer advocate would do better to look at ads like these. (YouTube.com) Do American consumers rack up debt because of credit cards, or because we've created a national culture of consumption?
 
3) Your first week on the job, you and Secretary Geithner held a mortgage disclosure forum at Treasury and just this week, the CFPB implementation team held a follow up symposium. What have you learned from these sessions?

The current disclosures increase costs for lenders while providing very little benefit for consumers. We've been saying this for years. We want to reverse that and decrease the costs of disclosure while increasing the value to consumers. The way to do that is to make that disclosure clearer and more usable for consumers.  Amen. 
 
4) You’ve spoken a lot about how the consumer credit market is “broken.” How do we know the market isn’t working and what can the CFPB do to fix it?

When a family cannot tell the cost in full of a credit card, when it is not possible to determine the risks of a mortgage in advance, and when people can’t directly compare three or four products– apples to apples – to tell which costs the most and which bears the most risk, then the market is broken.
 
This agency will drive toward making the costs clear, making the risks clear, and making it easy for consumers to compare one product with another. When they can do that, credit markets will work for families.  Keep in mind that many regulators have gone before you with this same task in hand.  The Federal Reserve has spent a good deal of time on consumer issues and consumer testing of financial disclosures.  No matter how much work you throw into this, keep in mind that you'll run into one basic problem: many consumers simply do not attempt to read disclosures.  I agree that some credit card agreements are complex, but the Schumer Box gives consumer more than enough information to compare credit card products.  And to say that the mortgage problems we face today are due to poor disclosures while not talking about broker misrepresentations, predatory lenders, and consumer responsibility is simply not telling the whole story.  
 
5) What roles will personal responsibility and financial education play in the consumer credit market once the CFPB is stood up?

I believe in personal responsibility, but it only works when prices and risks are clear up front and not buried in pages and pages of incomprehensible fine print. But, I also believe in American families. When they have better information they will make good decisions and those good decisions will make families stronger and ultimately will make the entire economy stronger.  I am not aware of any credit union in America that buries the cost of a mortgage or credit card.  They may exist, but I don't deal with them.  The Schumer Box, MDIA, RESPA and Truth in Lending generate a ton of price-related information for consumers.  But consumers have to take responsibility.  It is disappointing that when directly asked about consumer responsibility, Ms. Warren takes another shot at lenders for their alleged sins.

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