CFPB Targets ‘Shorter and Clearer’ Forms

One of the Consumer Financial Protection Bureau’s first orders of business will be to review ― and possibly revamp ― loan documents and forms.

For instance, mortgage lenders may have to consolidate Truth in Lending and Real Estate Settlement Procedures Act documents, Treasury Department Special Adviser Elizabeth Warren told the Independent Community Bankers Association this week.

The ultimate goal is to facilitate consumer understanding of the forms.

“When it comes to piles of paperwork, less is better for you and your customers,” she said. “And we’ll be on the hunt for other places where we can do the same thing—find a way to give the consumer something shorter and clearer, and to cut your regulatory costs at the same time.”

Here are two questions:
• For auto finance forms, what specific changes might be required?
• Will simpler language and shorter forms open the door to potential lawsuits? In my mind, a lot of the language on these forms probably stemmed from lenders trying to protect themselves from potential legal threats.

Tags: cfpb, disclosure, forms, warren

Replies to This Discussion

Permalink Reply by Thomas B. Hudson on March 24, 2011 at 3:01pm

Marcie -

You're right about forms "growing" as we lawyers have added provisions to protect against new types of lawsuits. But try this - take a typical retail installment sales contract and strip out of it all the text required by federal and state law. You still end up with a decent-sized form, because you have to address security interests, insurance, events of defauls, repossession and other issues, but it will be a dramatically shorter document.

Even without stripping out required language, current motor vehicle retail installment sales forms are not huge documents. They are usually printed on the front and back of a single sheet of long paper or appear as several letter-sized pages, printed on one size, when they are in electronic form. I'd bet most people could read one all the way through in perhaps 10 minutes. It will be interesting to see how the Bureau suggests shortening these forms.

Permalink Reply by Brian Reed on March 24, 2011 at 3:08pm

Please correct me but since indirect auto lending is not under the control of the CFPB, is this applicable? It seems that this would be an issue for the FTC that does have the regulatory oversight of indirect lending?

Permalink Reply by Jason Buchanan on March 24, 2011 at 4:30pm

Stay tuned on this one... I think that changes to lending forms, contracts, etc. is an understatement. The entire dealer, indirect, and automotive financing industry is going to change in 2011. Everything is on the table from standardized margins, to payment quoting, to F&I menus, to a nationwide cool off period, etc. The FTC is conducting upcoming consumer oriented round table research this April per this link http://www.ftc.gov/opa/2011/03/autodealers.shtm. Also, the CFPB is expected to have more power than any other consumer oriented government agency, so it's likely the FTC will work hand in hand with the CFPB following it's lead. Due to Dodd-Frank, the Federal Reserve will supply the equivalent of 10% of its expenses to the formation of the CFPB through the first year. That percentage increases to 11% in 2012 and to 12% every year thereafter estimated at $500 Million. Here is the link to keep up to date with the new "Bureau" http://www.consumerfinance.gov/

Permalink Reply by ANDRES HUERTAS on March 25, 2011 at 10:56am

Hi Marcie,

You are right regarding the protection aspect of it, but it is also COMPLIANCE; with every new law, modification of a law, or interpretation of a law on litigation comes a new form, a new sentence or a new disclosure that needs to be added to a finance contract; as of now there are so many laws coming from different regulatrory agencies that lenders have to ensure there is compliance with all of them.

RSS

Welcome to
AutoFinanceNews.net

Sign Up
or Sign In

Or sign in with: