2012 NCHELP Knowledge Symposium

2012 NCHELP Knowledge Symposium

Financial Services Disclosures

PresenterWalter Witthoff

Senior Vice PresidentIowa Student Loan

[email protected](515) 273-7405

Navigating the Sea of Change 2012 NCHER

Knowledge Symposium2

mailto:[email protected]

DisclaimerThe information presented in this session represents the views and opinions of the presenters and does not constitute the opinion or endorsement of, or promotion by, Iowa Student Loan. Also, this session is for information purposes only and should not be construed as legal advice. The reader or audience participant is encouraged to consult with legal counsel before making any policy decisions based on the information contained herein.



So What’s the Brouhaha All About?

Events since 2008 have caused a profound transformation in the way we view the consumer’s relationship with the financial services industry



The Importance of Disclosures

• Disclosures are viewed as an important area of consumer protection

• Financial disclosures as a source of consumer protection are gaining prominence in public policy discussions



Financial Disclosures – A Bumpy History

Senator Paul Howard Douglas (D-Illinois)



Who are the Players?

• Consumer• Lender • School• Government



Disclosures – What’s in it for Consumers?

• Disclosures provide useful information to consumers

• Create efficient markets (which results in lower prices)

• Can be a useful comparison tool in the spirit of the Truth in Lending Act

• The disclosure itself is a financial literacy tool



Consumers

Coincidentally, consumers also pay the costs



Disclosures – What’s in it for Lenders?

If the lender is a good actor, accurate disclosuresare useful

• Shows off a good product

• Publicizes product pricing and features

• Transparency is good for the lender’s reputation



Good for Business

Accurate disclosures help legitimate lenders in the marketplace



Think about it…

• The magic bullet!

• Perfect disclosures would satisfy consumers, regulators could back off, and the lenders’ costs would go down – a good thing!



Disclosures – What’s in it for Schools?

• Helps students borrow responsibly

• Being active in helping students may enhance school’s reputation



Disclosures – What’s in it for Government?

• Ideological agenda + manipulating consumer behavior = Power

• Create efficient markets

• Consumer protections?

• Government assumes that creditors can provide information at a reasonable cost



Government: The 800 Pound Gorilla

• Invites itself to the game

• The player none of us can ignore

• Assumption that creditors can provide information cheaply is not always true; however, government doesn’t care



Preferred Lender Rules

The student loan preferred lender rules are a good example of government law-making interfering with the flow of information designed to help consumer



The Quest for Information

Consumer Creditor•Advertising•Independent Research•Product Reviews•Disclosures

•Application•Credit Report•Previous Experience



Economics of Information

In theory, free markets ensure optimal outcomes



Asymmetric InformationUnequal information

•Different terms

•Different rates

•Different origination fees

•Different loan amounts



Transparency

• Transparent information is the goal

• The comprehensive whole of the product so that the consumer can make an informed decision

• Important issue for consumer protection policy



Information Economics v. Behavioral Science

Behavioral Scientists

Economists

•Focus on the behavior of individuals•Interesting to note that private industry marketers operate in the same fashion

Focus on the functioning of markets

(Durkin/Elliehausen; pg. 81)



Primary Disclosure Items

• Annual Percentage Rate

• Finance Charge

• But keep in mind there are plenty others…



Annual Percentage Rate

• Oddly enough, mathematically not really all that complicated

• The more variations in the underlying equation the more difficult it becomes

• Which brings us to the “finance charge”



Finance Charge – Now it Starts to get Messy…

• The gift that keeps on giving

• Reg Z elaborates on what is and what is not a finance charge – very complicated



It’s All About Cash Flows

Money received Money paid out



Closed-end Credit

• Disclosure for the whole of the transaction

• Fairly straight forward math



Closed-end Credit (cont’d)

Not without its problems

• Variable rate loans

• Loans rarely run to maturity



Open-end Credit

Different from closed-end credit

• Future events

• Grace periods



Open-end Credit (cont’d)• Unlike closed-end credit (or, at least, what the

schedule of events suggest might happen), a lender can’t disclose what will happen in the future

• Is providing hypotheticals meaningful?



Interest rate v. APR

• Interest is the most common form of finance charge. It is what the consumer pays for the use of money

• The APR, on closed-end credit, is a measure of the cost of credit. It includes all costs of credit, including interest



Interest Rate v APR (Cont’d)

• Latest trend is to de-emphasize the APR, because…

• Consumers don’t understand it



Interest Rate v APR (Cont’d)

The APR can be helpful

• Generally, better than it was prior to 1969

• APRs are a consistent standard and can be monitored

• Consumers know that low APRs are better than high



Ultimately Political

Whether economic or behavioral, the motivation behind disclosures is ultimately political



The Challenge of the “Least Sophisticated Consumer”

• Can one argue that it is impossible to simplify the disclosure of complex financial services to the degree that even the most unsophisticated among us can understand them?

• Should we even try?

• Should we just assume a certain social casualty rate?



The Limitations of Disclosures

The consumer may simply not care or the material is too complex



Hey Dummy!

Are we all the least sophisticated consumer?



How Hard Could It Be?

• Fixed rate or variable rate?

• What will the variable rate be three years from now?

• What does the history of the index tell us?



You've got to ask yourself one question:

Do I feel lucky? Well, do ya, punk?



Less is More

The only people who truly believe that consumers read financial disclosures are politicians



Less is More (cont’d)• ‘Less is more’ often remains true. Too much information

can overwhelm consumers or distract their attention from key content.

Federal Reserve Bulletin, August 2011

• More disclosure is not necessarily better disclosure U.S. Supreme Court (Millhollin v.

FMCC)

• In financial regulation, as in so many other areas of life, simpler is better

Wall Street Journal 9-12-12Navigating the Sea of Change

2012 NCHER Knowledge Symposium

40

Less is More (cont’d)Credit cards: Should we provide all of this disclosure gobbledygook or just say: “Hey you! If you pay more than the minimum payment each month you will pay your credit card balance off faster!”



What Exactly are Congress’ Goals?

‘It is still worthwhile to try to ensure both competition and good information conditions overall, and this is precisely what Congress was attempting to do when it passed the Truth in Lending Act in 1968…’

Durkin/Elliehausen



As for Ensuring Competition…

•Yeah, well, we’re there!

•Look at the wide-range of financial products available today



Goals to Strive for…

• Effective financial disclosures will find a way to accommodate both short and long term memory capabilities

• Don’t overload consumers’ mental processing abilities at the decision point



What Should be the Role of Government?

The passage of Dodd-Frank raised the ante on the debate about the role of government in the regulation of financial services and products



Public Utility v. Free MarketCommon ground

Providing loans to students and parents fits into a public policy niche in that this country has a social and economic need for a productive work force



Why are Student Loans Different?

If the purchase of an education is critical to public policy goals and worthy of extra protections, then why not car loans? Otherwise, how does one explain public transportation?



Is there Anything that is not critical to the public good?

‘In a society that obsesses about risk, we need to understand that there is a danger in being too risk-adverse.’

― Gordon MarionProfessor of Philosophy at St. Olaf College and trainer of boxers (pugilists, not dogs)



Not entirely on point, but you get the drift:

As the authors [Messrs. Haldane and Madouros] note, ‘Many of the dominant figures in 20th century economics—from Keynes to Hayek, from Simon to Friedman—placed imperfections in information and knowledge centre-stage. Uncertainty was for them the normal state of decision-making affairs.’

Wall Street Journal 9-12-12



How to get there?Public Utility

Free Market

It is the government’s job to ensure that this need is met, and managing the financing of post-secondary education is part of that process

The best way to meet this need is to let an unencumbered market supply a service and allow the lender to price the product in such a way that the lender’s risk is covered and an on-going supply of loans is forthcoming



Milton Friedman versus “Behavioral Science”

This is essentially a debate between those with different views of the proper role of government, the dynamism of American enterprise and the nature of a free society



The Dilemma“…greed that preys on human misery, we think, should be punished, not rewarded. And yet we worry when judgments about virtue find their way into law.”

― Michael J. Sandel, author of Justice (What’s the Right Thing to Do?)



Food for ThoughtThis dilemma points to one of the great questions of political philosophy: Does a just society seek to promote the virtues of its citizens? Or should law be neutral toward competing conceptions of virtue, so that citizen can be free to choose for themselves the best way to live?

― Michael J. Sandel



New Behavior Models

“… the theories [on new behavior models] are incomplete and have not been thoroughly tested.”

Durkin/Elliehausen



The Future: Interactive Disclosures?

Consider advances in technology



The Problem Is Human Nature

The trouble about the law is that it can diagnose the trouble but it cannot effect a cure



Shouldn’t There Be More To It Than That?

If we think of compliance solely in terms of the law and stop there, we make the compliance function only about obeying the law and our professional life consists solely of a series of transgressions waiting to be punished



PresenterArthur Rotatori

MemberMcGlinchey Stafford

[email protected]

(216) 378-9932



Disclosures Old and New• Numerical Information vs. Narrative• Facts vs. Guidance• Law vs. Marketing



H-2 Loan Model Form



Loan Model Form for Closed-End Credit

• Very plain, mostly numerical• Explanation is limited to Fed Box• APR is the most prominent feature• Static for many years



Model Privacy Disclosure



Model Privacy Disclosures• New forms replaced model forms that were seen

as uninformative• Narrative/Tabular format• The format is intended to explain why the

information provided is important• Uses defined terms and ordinary speech



Development of TILA Subpart F Disclosures

• FRB engaged a research & consulting firm and a design firm for help in designing the model forms

• The consultants were asked to use consumer testing to determine effective presentation of the required information



First Attempt at Designing the Disclosures

• Two rounds of in-person cognitive interviews with 10 consumers (December, 2008)

• The interviewers were students and parents• The interviews were designed:• to learn what information consumers care about• to determine how easy it was for consumers to

find the information• to assess consumers’ understanding of the

information



Second Attempt at Designing Disclosures

• Two more rounds of testing interviews with 10 consumers (April, May, 2009)

• Final round of testing using the same sample size (June, 2009)



Testing Results – Application and Solicitation Disclosure

• Confusion over range of rates – highest rate shown was thought to be highest rate possible

• Split rate information into two narrative paragraphs

• Consumers were confused by detailed variable rate information; reference to LIBOR

• Consumers wanted to see specific dollar amounts of fees, total loan cost information



Application and Solicitation Disclosure



Testing Results – Approval Disclosure

• Consumers didn’t understand the difference between the APR and the interest rate

• Consumers understood the interest rate, FRB decided to emphasize it

• Consumers didn’t understand detailed explanations of how the rate can vary; satisfied to know that the lender couldn’t change the rate at will

• Total loan amount was more easily understood than amount financed

• Consumers felt that the monthly payment schedule was critical; useful



Approval Disclosure Model Form



Final Disclosure Testing Results

• Consumers understood and liked the presentation of the right to cancel

• Consumers felt that federal loan information was not useful at this stage, so FRB deleted it



Final Disclosure Model Form



Credit Card Model Contract• Two page plain language form• Underlined terms are defined in an online

glossary• Online glossary is five pages long with small

type



Model Credit Card Forms



Model Credit Card Forms – Contract Definitions

Credit card contract definitions

How the definitions workIf your credit card contract says that it is using the Consumer Financial Protection Bureau Definition of Credit Card Terms, then any word or phrase in your credit card contract that is underlined will have the definition set out in “Defined Terms” below. For any such underlined word or phrase, the definition below will be part of your contract with your credit card issuer.Please note that the terms “we,” “us” or “our” in the “Defined Terms” section below have the meaning given to them in your credit card contract with your issuer. Thus, they do not refer to the Consumer Financial Protection Bureau (the “CFPB”). Please also note that even if your issuer uses the Consumer Financial Protection Bureau Definition of Credit Card Terms, you are not entering a contract with the CFPB. Your credit card contract is between you and your issuer. The CFPB is not a party to that contract. Finally, please note that if your credit card contract uses a word or phrase listed under “Defined Terms” below and either (1) the word or phrase is not underlined in your contract, or (2) your contract does not say that is using the Consumer Financial Protection Bureau Definition of Credit Card Terms, you should not assume that the word or phrase has the exact meaning set out below.

Definitions

Address on fileYour address on file is the address that you provided on your application to open this credit card account, unless (1) we have received and processed your written notice of a change of address provided in accordance with the terms disclosed on the back of your bill, in which case that new address is the address of record; or (2) in the event that your address changes before we have sent out your first bill, we have received and processed your written notice of a change of address sent to us at the address for mailing payments.

APR or Annual percentage rateAPR or “annual percentage rate” is an annualized interest rate. Different APRs may apply to different balances on your account, such as your purchase balance or your cash advance balance. We use the APR that applies to each balance to calculate the interest that you owe us on the account.

AssignWe assign your credit card contract if we sell or pass to a third party any or all of our rights or obligations under the contract, including any amount that you owe under the contract. Subject to the extent of the assignment, any party to whom we assign your contract will enjoy all our rights under the contract, including contractual rights to collect amounts that you owe on the account.

Authorized chargeAn authorized charge is any charge that you or any authorized user makes on the account, and any fees and interest charges owing on the account.Any charge made by an authorized user is an authorized charge. This is true even if you told the authorized user not to make that specific charge. A charge will still be authorized even if it is an illegal transaction (like illegal gambling charges), or it puts you over your credit limit, or it is made after your account has closed.An authorized charge can be made over the telephone, in person, on the Internet, or in any other way that your account can be used.



Model Credit Card Forms – Contract DefinitionsAuthorized user

If you ask us to issue a credit card on this account to another person, he or she is an authorized user. In addition, if you give your card or card number to another person, he or she is an authorized user.Average daily balance method with compounding According to this method, we calculate the interest charges for each balance by applying the “daily periodic rate” for that balance to the “average daily balance” for that balance. We multiply the result by the number of days in the billing cycle. That gives us the total interest charges for that balance for that billing period. The “daily periodic rate” is a daily interest rate. The daily periodic rate for a given balance is equal to the APR for that balance divided by 365. We calculate the “average daily balance” for each balance. We do this by starting with the beginning amount of that balance for each day. We add any new charges for that day, add any interest on the previous daily balance if there is one in that billing cycle, and subtract any payments or credits. This gives us the “daily balance.” We calculate the “average daily balance” for each balance by adding all the daily balances for each day in the billing period and then dividing by the total number of days in the billing period. The addition of the prior day’s interest to the daily balance calculation causes interest to compound daily. We add fees that are specific to a particular charge to the same daily balance as that particular charge. We add all other applicable fees to your purchase balance as of the first day of a billing period. Average daily balance method without compoundingAccording to this method, we calculate the interest charges for each balance by applying the “daily periodic rate” for that balance to the “average daily balance” for that balance. We multiply the result by the number of days in the billing cycle. That gives us the total interest charges for that balance for that billing period. The “daily periodic rate” is a daily interest rate. The daily periodic rate for a given balance is equal to the APR for that balance divided by 365. We calculate the “average daily balance” for each balance. We do this by starting with the beginning amount of that balance for each day. We add any new charges for that day, excluding any unpaid finance charge, and subtract any payments or credits. This gives us the “daily balance.” We calculate the “average daily balance” for each balance by adding all the daily balances for each day in the billing period and then dividing by the total number of days in the billing period. We add fees that are specific to a particular charge to the same daily balance as that particular charge. We add all other applicable fees to your purchase balance as of the first day of a billing period.

BalanceWe put each charge on your account, including interest or fees, into a balance category. We use the different balances to calculate the correct interest charges on your account. If any type of charge has a separate interest rate, we will put it into a separate balance. This means that your account may have separate balances for purchases, cash advances, and balance transfers. It also means that if any charges are subject to an introductory or other promotional interest rate for a period, we will place such charges into a separate balance for the time period that you qualify for the special rate. We place interest charges into the balance that generated those charges. For example, we place interest charges on purchases into your purchase balance. We place fees that result from a specific charge into the same balance as that specific charge. For example, we place a foreign transaction fee that we assess on a cash advance into your cash advance balance. We place fees that do not result from a specific charge, such as a returned payment fee, into your purchase balance.

Balance transferYou make a balance transfer when you use a balance transfer check that we send you or when you contact us to transfer a balance electronically or by phone.

Billing periodThe billing period is the fixed period of time covered by the bill we send you. The bill will show your new charges, including interest and fees, and any payments that posted to your account during that period. Each bill that we send will identify the billing period that it covers.If you have a credit or debit on the account of $1 or more at the end of any billing period, we will send you a bill, showing what you owe us as of the end of that billing period.



Model Credit Card Forms – Contract DefinitionsBill

Your bill is the statement of your account. Your bill will tell you the total amount that you owe us as of the end of the last billing period. It will also tell you the minimumpayment that you must make to us by the stated due date. We will send you a bill at the end of each billing period if at that point you have a credit or debit on theaccount equal to or more than $1. We may not send you a bill, however, if we have decided your account is uncollectible or if we have sent the account for collectionproceedings against you. In our discretion, we may choose to send you a bill even if you do not have a credit or debit of $1 or more.

Cash advanceYou receive a cash advance when you use your card or account to do any of the following:1. obtain cash from an automated teller machine (ATM); or 2. obtain cash from any other source; or 3. make a wire transfer; or 4. buy foreign currency; or 5. buy traveler’s checks; or 6. buy money orders; or 7. buy Lottery tickets; or 8. buy gambling chips and wagers; or 9. cash an access check.

CardYour card is the physical card, the account number, or any device (including a check) that can be used to access your credit card account.

Daily balance method with compoundingAccording to this method, we calculate the interest charges for each balance by applying the “daily periodic rate” for that balance to the “daily balance” for that balance.We do this for each day in the billing cycle and sum the resulting interest charges. That gives us the total interest charges for that balance for that billing period. The “daily periodic rate” is a daily interest rate. The daily periodic rate for a given balance is equal to the APR for that balance divided by 365. We calculate the “dailybalance” for each balance. We do this by starting with the beginning amount of that balance for each day. We add any new charges for that day,add any interest on theprevious daily balance if there is one in that billing cycle, and subtract any payments or credits. This gives us the “daily balance.” The addition of the prior day’s interestto the daily balance calculation causes interest to compound daily. We add fees that are specific to a particular charge to the same daily balance as that particularcharge. We add all other applicable fees to your purchase balance as of the first day of a billing period.

Daily balance method without compoundingAccording to this method, we calculate the interest charges for each balance by applying the “daily periodic rate” for that balance to the “daily balance” for that balance.We do this for each day in the billing cycle and sum the resulting interest charges. That gives us the total interest charges for that balance for that billing period. The “daily periodic rate” is a daily interest rate. The daily periodic rate for a given balance is equal to the APR for that balance divided by 365. We calculate the “daily balance” for each balance. We do this by starting with the beginning amount of that balance. We add any new charges for that day, excludingany unpaid finance charge, and subtract any payments or credits. This gives us the “daily balance.” We add fees that are specific to a particular charge to the samedaily balance as that particular charge. We add all other applicable fees to your purchase balance as of the first day of a billing period.

Daily periodic rate or DPRDPR stands for “Daily Periodic Rate.” This is a daily interest rate. The daily periodic rate or DPR for a given balanceis equal to the APR on that balance divided by 365.



Model Credit Card Forms – Contract DefinitionsDefault

You are in default on the account if: 1. You do not make any payment when it is due; or 2. You have exceeded one or more of your credit limits; or 3. A payment you make is rejected or cannot be processed; or 4. You provide us false, misleading, or fraudulent information; or 5. You fail to comply with any term of the contract; or 6. You are bankrupt or insolvency proceedings are filed against you; or 7. You die or are legally declared incompetent or incapacitated; or 8. We become aware that you are using your card for illegal or fraudulent purposes.9. If governing law requires us to, we will give you notice and/or a right to cure your default before taking any action because of your default.

Due dateThe due date is the date by which we must receive your payment in order for it to be on time. Your bill lists the due date. Your due date will always fall on the same calendar day of the month. It will be at least 21 days from the date that we send you the bill, and at least 25 days from the endof your most recently ended billing period. To be on time, we must receive your payment on or before the due date and by the time stated on your bill. If the bill does notstate a time, then your payment is on time if we receive it by 5 pm on the due date. The 5 pm deadline is measured in the time zone in which we receive the payment,which may not be your time zone. If we do not receive or accept payments by mail on the due date, your payment will be on time if it is received by the next day that weaccept or receive payments by mail.

Grace periodA grace period exists with respect to a specific balance when you do not have to pay interest on that specific balance. Your agreement will tell you which balances, if

any,are subject to a grace period. For balances that are subject to a grace period, as long as you continue to pay your full account balance every month by the due date

listedon your bill, there will be a grace period and we will not charge interest on those balances. However, if you do not pay by the due date the full balance owing as of the

endof a given billing period, there will be no grace period and you will owe interest on the unpaid balance from the end of that billing period. After the end of that billing

period,all charges will accrue interest from the date you make them. To take advantage of the grace period again, you must pay your full account balance on time for the

numberof billing periods stated in your agreement.

Foreign currency transactionA foreign currency transaction is a purchase and/or cash advance that you make in a foreign currency, i.e. not U.S. dollars. The card network that processes thesetransactions will calculate a U.S. dollar amount for each such transaction. The type of card you have determines which network (Visa, MasterCard, Discover or AmericanExpress) does this calculation. Each network uses either a government-mandated or wholesale rate in effect on the date that the network processes the transaction. Therate in effect on the processing date may be different from the rate on the date that you made the transaction or on the date that the transaction posts to your account.

Late paymentA late payment is your failure to make at least the minimum payment so that it reaches us by or before the time and due date on your bill.

Minimum PaymentThe bill we send you will state your due date and the minimum amount that you must pay us by that date. This amount is your minimum payment. If you do not pay theminimum payment by the due date, we may charge you a late payment fee. You will also be in breach of the contract. You may pay all or part of your account balance atany time. However, for each bill, you must pay at least the minimum payment by the due date stated on that bill.



Model Credit Card Forms – Contract DefinitionsPrime Rate

This is the U.S. Prime Rate published in the Wall Street Journal. If the Wall Street Journal no longer publishes a prime rate, we will use a similar published rate that we choose.

Protected balancesProtected balances are amounts owing on the account that under law are not subject to an increase in interest rates or fees. In general, a protected balance includes any charge incurred before or within 14 days after we send notice of such an increase. If you receive notice of an increase in an interest rate, the notice will tell you the charges to which the new rate will apply.

PurchasesA purchase is the use of your card to buy or lease products or services. The purchase of cash or cash equivalents, like casino chips or lottery tickets, is a cash advance, not a purchase.

Returned paymentThis is a payment that you make to us that is not honored by your financial institution. We may charge you a returned payment fee if your payment is returned.Your agreement will state the amount of any returned payment fee that we charge. Your financial institution may also impose fees on you for the same returned payment. If we re-submit a returned payment to your financial institution, and your financial institution subsequently honors it, we may still assess a fee because your payment was initially returned to us unpaid. However, if the same payment is returned unpaid more than once, we will not charge more than one returned payment fee. But if you make a new payment to us and it is not honored by your financial institution, we may impose a new returned payment fee.

Standard payment instructionsYou must pay your credit card bill in a manner that meets all the following conditions: You must pay in U.S. Dollars; and You must not pay in cash, unless you pay at one of our branches; and Except for payments made pursuant to (2) above, your payment must be drawn on a U.S. deposit account, or by a cashier’s check drawn on a U.S. bank or a foreign bank branch in the U.S.; and You must not attach any restrictive language to your payment; and You must not pay from a credit account that we provide you, such as a check drawn on any credit card account that you have with us; and If you make payment in a paper form (like a check, money order, or cashier’s check), you must include the payment coupon from your statement OR write your credit card account number on the payment.In addition:If we decide in our discretion to accept a form of payment that does not meet these standard payment instructions, we do not waive our rights to continue to require payments that comply with these instructions; and If we decide in our discretion to accept a payment that you make to us in a foreign currency, we will choose the conversion rate.

Workout arrangementThis is a special arrangement between us and you in which we agree to a temporary reduction in applicable interest rates or fees in return for your agreement to follow a defined payment schedule. Any such agreement will be in writing. It may provide that upon completion of the workout arrangement or upon your failure to comply with the terms of the workout arrangement, interest rates and fees may increase up to the same terms as were in effect before the workout arrangement.



Reaction to Credit Card Model Contract

• Easy to have short contract if all of the technical definitions are taken out

• Not compliant with state law• Doesn’t cover every term that is important• Where is arbitration?• APR is first term disclosed



College Know Before You Owe Shopping Sheet

• Provides students “real numbers” and a format that “makes sense”

• Distinguishes between a loan and a scholarship• Indicates total post-graduate debt; payment

information• Mandatory for schools that accept Tuition

Assistance and GI Bill funds; voluntary otherwise unless commits to use the form



College Know Before You Owe Model



Combined TILA-RESPA Mortgage Disclosure

• CFPB worked with a design firm to create and test:

• Loan Estimate• Closing Disclosure• Objectives:• Comprehension – basis loan terms and costs• Comparison – compare loan offers and identify

differences• Choice – ability to make informed decisions• Quantitative testing with 92 consumers, plus

commentsNavigating the Sea of Change

2012 NCHER Knowledge Symposium

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Proposed TILA-RESPA Model Forms



Comments and Criticisms• 1099 Page NPRM for a 3-page form and 5-page form• 684 page preamble• 415 pages on the rules and guidance• Emphasizes interest rate, APR appears only on last

page of each form• APR would not be the traditional APR but a new

inclusive APR that removes exclusions for real estate costs

• FTC wants quantitative testing of the forms with large representative samples of consumers in a controlled setting; focus on actual performance rather than consumer opinions, preferences, and beliefs, the use of a control group



2012 NCHELP Knowledge Symposium

Documents

Transcript of 2012 NCHELP Knowledge Symposium