new us laws and regulations requiring plain language
TRANSCRIPT
Dr. Deborah S. BosleyAssociate Professor of English
Permission needed to use any material in this presentation
New U.S. Laws | Regulations: Plain Language All the Way Down
student loanscell phone billsfinancial statementsinsurance policiesinternet | software agreementsmortgage contractscredit card statementsexplanation of benefitsdischarge hospital papers
confusion | costly mistakes | inability to comply
What’s the problem in the U.S.?
What should the government do?
3 Paola Sapienza and Luigi Zingales. July 20, 2010 -- Chicago Booth/Kellogg School Financial Trust Index in 2008.
51% of public is angry1
74% do not trust financial institutions2
intense federal scrutiny
emphasis on transparency
consumer skepticism
“In plain language and in plain sight.”
1,2 Paola Sapienza and Luigi Zingales. July 20, 2010 -- Chicago Booth/Kellogg School Financial Trust Index in 2008.
Why so many new laws now?
CCARD22 May 2009 | 22 Feb. 2010
Dodd–Frank Wall Street
Reform – Consumer Protection Act 21 July 2010 | 21 January 2011
Consumer Financial Protection Agency
SEC Form ADV, Part 226 July 2010 | 31 December 2010
What’s new?
"With this new law, consumers will have
the strong and reliable protections they
deserve. We will continue to press for
reform that is built on transparency,
accountability, and mutual
responsibility – values fundamental to
the new foundation we seek to build for
our economy…” President Obama
Credit Card Accountability, Responsibility and Disclosure Act (CCARD)
Disclose terms
in language consumers can see
| understand
Give clear account terms
before | after opening accounts
Show consequences of decisions
Display payment amount
total interest cost for 36 month payoff
http://www.creditcards.com/credit-card-news/new-look-credit-card-statement-1273.php
Give real information about financial consequences
Legislation
Promotes financial stability by improving accountability | transparency
Ends bailouts and abusive
financial services practices
Establishes Consumer Financial Protection Agency
Effect
Mortgages | Insurance | Disclosures
The Dodd-Frank Financial Reform
90% could not identify correct amount of up-front fees65% did not spot substantial penalty if refinanced within the first two years 25% could not identify settlement costs6
89% support requiring banks to disclose all mortgage fees upfront, clearly, and conspicuously7
Mortgage disclosures
6 Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms: A Bureau of Economics Staff Report (June 2007, FTC)
7 Caravan Opinion Research Corporation, Consumer Federation of America
“This agency will have the power to make
certain that consumers get information
that is clear and concise – in plain
language – so they can compare products
and know exactly what they’re getting
into…ensure that banks and other firms
cannot hide behind those ridiculously
confusing contracts – pages of fine print
that no one can figure out.” President Obama
Consumer Financial Protection Agency
Address all forms of credit | depositprepaid debit cards loan | debt servicesdebt servicesmortgage disclosures
Require all disclosures beclear | simple | concise
Test disclosures regularly
http://www.creditcards.com/credit-card-news/consumer-financial-protection-agency-house-vote-1282.php
Consumer Financial Protection Agency
SEC: Form ADV, Part 2: The “brochure”
New requirements
Use narratives | Improve format | Expand content
Ensure easy access | Use plain English
“In its current form … the format frequently does not correspond well to an adviser’s business…In some cases, the required disclosure may not describe the adviser’s business or conflicts in a way that is truly accessible to the investor.” SEC Chairman Mary L.Schapiro
Where’s the Accountability?
Between the thought and
the action there falls a shadow.
T.S. Eliot