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Public Policy & Consumer Testing
 

Public Policy & Consumer Testing

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At the 2012 Face of Finance Conference, at Bentley University, in Waltham, MA, Susan Kleimann (Center for Plain Language) and Richard Horn (Consumer Financial Protection Bureau) presented "Public ...

At the 2012 Face of Finance Conference, at Bentley University, in Waltham, MA, Susan Kleimann (Center for Plain Language) and Richard Horn (Consumer Financial Protection Bureau) presented "Public Policy & Consumer Testing".

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  • Each of is speaking for ourselves; none of us is speaking for CFPB.The views we express are our own; they do not represent the views of CFPB.
  • Generally, TILA covers the loan transaction and REPSA covers the real estate transactionHowever, TILA figures depend on settlement costs and RESPA disclosures currently contain loan informationThese statutes are mandated at two points in the process: (1) at the loan application and (2) at the closing. We’re focused on the application disclosures.
  • The Truth in Lending Initial Disclosure was revised over the years as Congress continued to add new requirements. This form complies with the newest requirements which became effective Feb 1, 2011.
  • HUD implemented a new Good Faith Estimate in 2008, which lenders were required to use beginning in 2010. These new forms were designed to encourage shopping and ensure consumers understand when brokers received yield spread premiums as part of their compensation. Implementation has been quite difficult. HUD has issued over 300 Qs and As since the rule was finalized.
  • This is even before the Plain Writing Act
  • What we mean by “improve understanding is: “aid understanding by utilizing readily understandable language to simplify the technical nature of the disclosures.”
  • Foreclosures in US--as of Friday May 18, 2012
  • Other constraints: No color, 8 ½” x 11”, plain language: some technical terms, but make key features accessible
  • 5 sites for LE2 sites for CD3 sites for bothBaltimore first and lastNeed to mention that things were also posted on the web site with over 12,000 comments on the first round.
  • Loan details are the tricks and traps—where factors change
  • Lots of debate about the choices. The 2010 form (which we’re not showing) used a lump sum based on the research that said consumers were overwhelmed by large quantities of numbers. Industry hated the lump sum and wanted detailed; advocates wanted lump sum.Bias, if any, was to go with the lump sum. Round 2 (CA) –preferred the detail; ask more questions with detailRound 3 (IL) - preferred the detail; ask more questions with detailRound 3 (IL) -preferred the detail; ask more questions with detailRound 4 (MA) same thingRound 5 (NM): Went with detail
  • Industry wanted Closing Cost Details of the CD to remain like the current HUD-1. Saw the details of HUD-1 as a distribution of funds record; not intended for consumers to use.
  • First round of testing on the Closing Disclosure.
  • Round 7 AlabamaRound 8 PennsylvaniaRound 9 TexasRound 10 Maryland
  • Sometimes it’s the little things that drive you crazyConsumers thought it meant they would never be able to refinance and was part of the loan terms
  • Consumers thought it meant they would never be able to refinance and was part of the loan terms
  • Policy & testing EntwinedFragile relationship with consumersResponsible to meet mandates of requirements & performance (make it clear)Responsive to consumersIntelligent saves redo of work AFTER the policy is final.

Public Policy & Consumer Testing Public Policy & Consumer Testing Presentation Transcript