CFPB Proposes Allowing Companies to Run Trial Disclosure Programs

Dec 13 - The Consumer Financial Protection Bureau has announced its proposed policy to allow companies to test new consumer disclosures on a case-by-case basis. As part of its Project Catalyst initiative, and in line with its statutory authority, the bureau’s goal is to encourage banks, credit unions and other financial services companies to propose and conduct trial disclosure programs.

“As part of our efforts to foster innovation in consumer financial markets, the proposed policy will allow companies to conduct real world trials of disclosure alternatives,” said Richard Cordray, director of the CFPB. “That will help the bureau identify what works and does not work to provide consumers with the clear information they need to make financial decisions in a marketplace of evolving programs and products.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, authorized the CFPB to facilitate innovation and to approve trial disclosure programs. As a part of that commitment, the bureau launched Project Catalyst in November. Project Catalyst is an initiative designed to encourage consumer-friendly innovation in markets for consumer financial products and services.

The bureau is continuing to foster new ideas with the proposal. Under the proposed policy, the bureau would approve individual companies, on a case-by-case basis, for limited time exemptions from current federal disclosure laws in order for those companies to research and test informative, cost-effective disclosures. The companies involved will then share the results of their trial disclosure with the CFPB. The CFPB will use that information to improve its disclosure rules and model forms. The public will have input through the rulemaking process.

When deciding whether or not to grant a company a waiver from current disclosure requirements, the bureau proposed policy would evaluate a number of factors including:

• 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.
• Cost Effectiveness: The bureau will evaluate how the proposed trial will help develop more cost-effective disclosure rules or policies.
• Minimizing Consumer Risk: The bureau will evaluate the extent to which the program is designed to mitigate any risk to consumers.                                                                     

The proposal builds on the CFPB’s broader dedication to improving disclosures for consumers.  Through its Know Before You Owe initiative, the CFPB has been working to create clear, easy-to-understand disclosures that allow consumers to better understand products such as mortgages, student loans and credit cards. The proposed policy also builds on the bureau’s streamlining initiative, which intends to update, modify, or eliminate outdated or unnecessary provisions in the bureau’s inherited regulations.

A copy of the proposed policy can be found at: http://files.consumerfinance.gov/f/201212_cfpb_trial_disclosures.pdf