The new Consumer Financial Protection Bureau (CFPB) published the first of a series of five question interviews with Treasury officials. Elizabeth Warren, Special Assistant to the President, is the lead administrator of the CFPB and answered the Questions below. This is of special interest to closing professionals because the CFPB will play a key role for Title Insurers and Closers in revising the closing process. A simplification of Documents would be greatly appreciated. For mortgage closers, the explanation process at closing has become quite complex and overly burdensome because, for most people, the mortgage process and mortgage fees are buried in a foreign language.
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.
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.
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 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.
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.
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.