new us laws and regulations requiring plain language
TRANSCRIPT
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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
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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.?
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What should the government do?
3 Paola Sapienza and Luigi Zingales. July 20, 2010 -- Chicago Booth/Kellogg School Financial Trust Index in 2008.
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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?
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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?
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"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)
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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
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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
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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
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“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
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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
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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
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Where’s the Accountability?
Between the thought and
the action there falls a shadow.
T.S. Eliot