As Elizabeth Warren gears up the Consumer FinancialProtection Bureau (CFPB), she has made it plain that lenders of allkinds will be considering how to make terms and conditions a lotclearer if the CFPB has anything to say about it.If the industry’sexperience with recent Reg E changes is any indication, one mightconsider any calls for increased transparency to have a real silverlining.
Look at the early results coming in on overdraft opt-inrates which have exceeded many issuers’ expectations.This speaks totwo key dynamics:
- Overdraft programs have value in the market and peopleuse them.
- Financial institutions actively educated consumers on thevalue of these programs through multi-channel outreachprograms.
There is a big lesson to be learned here as the USfinancial institution industry transitions itself to a fee-basedchecking account model, and it is that educating consumers as tothe value of the products and services they receive matters.Now,one might argue that in this case the banks were forced to do thisand that is true, but it doesn’t make the effort and the resultsany less impressive.
In the short term, there will be an opportunity in themarket to leverage disclosure requirements as a means of positivelycommunicating the benefits of financial products and services.Somefinancial institutions may even consider getting ahead of themandates and creating an early adopter advantage in themarket.Transparency – use it or lose it.