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Know Before You Owe: Just one example of our approach to policy-making

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As the mortgage disclosure team said last week, we based Know Before You Owe on the idea that disclosure information is clearer when the people who will have to use those disclosures participate in designing them. We got feedback from many sources in many ways:

  • In-person testing of the forms in cities across the country from consumers and from people in the mortgage industry, both before proposing the new disclosures and after;
  • Online publication of various iterations of prototypes of the forms as we tested them and getting more than 27,000 clicks and comments to tell us what worked (and what didn’t);
  • Quantitative validation study with about 850 consumers of how well consumers understand the new disclosures compared to the ones currently in use (we’ll talk more about the results of that study in the days to come); and
  • Ongoing dialogue with industry groups, financial institutions, consumer advocates, policymakers from across government, and designers throughout the design process.

This testing and iteration process occurred alongside legally required feedback such as a Small Business Review Panel before we issued the proposed rule, and the public comment period for the proposed rule.

We started this prototyping and research even before the Bureau began regulating consumer financial products and services. In the process, we established a pattern of public inclusion in what we create. We have since taken on additional projects that rely on this pattern to succeed. In each case, we believe it has made us better at our work and will continue to do so.

Consumer tools

In April 2012, we introduced a beta version of a tool to help students compare the costs of college. Based on the feedback we got, we made improvements and re-released it along with a number of other tools to help students understand paying for college.

Now we’re working on similar tools to help people interested in owning a home. In each case, we continue to take feedback. We don’t believe that products to help consumers understand their options are ever complete. When we make new consumer tools, we commit to analyzing how people use them. The tools should change as we understand more about what’s useful or necessary, and what’s not.

Making information more accessible

We maintain a regularly updated public database of consumer complaints we receive. We also maintain an API that lets people build on top of that data.

A few months ago, we created a new platform to publish home mortgage data. Not every good idea for using consumer financial market data is ours; these platforms give the public access to data about their own experiences.

Last month, we launched a prototype tool to make regulations easier to read, understand, and use. After a series of user interviews and a number of prototype usability tests, we’ve piloted eRegulations with one regulation. Before making any decisions on what to do with it next, we’re asking people who need to understand changes to Regulation E to use it and let us know how it works for them.

Prototyping better disclosures

The prototyping efforts of Know Before You Owe laid the groundwork for another initiative. Federal consumer finance regulations should protect consumers, not hinder innovations that help them. Through Project Catalyst, we work with innovators to do just that. Someone who spots a way to make regulations more innovation-friendly can work with us to design experiments. Someone who thinks there’s a way to make disclosures clearer can work with us to start a trial that tests how well their idea works.

Open source software

Source code written by our staff is public domain by default. Anyone can use and build on it as long as it meets a few standards. And we are committed to publishing it in an online source code community. CFPB Open Tech gives the public easy access to free, open source software they can use as the basis for their own new tools and approaches. In turn, we get to review ideas from other developers and decide whether to use them to make our software better.

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In short, we value building things with public participation. It comes back to the same basic point: if you know people are going to have to use something, you should work with them to figure out what makes it useful. It’s an idea we have espoused since the start of Know Before You Owe, one we’re going to continue to build on.

What do you think about our draft strategic plan for the next five years?

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We have an expansive, vital mission: to make markets for consumer financial products and services work for Americans. But, how do we do that with limited resources?

We’ll accomplish our mission by setting goals, establishing strategies, and measuring performance. Our strategic plan outlines this information and describes how we will focus our resources on the areas where we can have the biggest impact.

Check out our draft
Today it’s just a draft – take a look at our strategic plan for 2013 – 2018.

What do you think?
We want your thoughts and ideas on how to improve our plan. Weigh in by emailing your comments on the plan to StrategyPlanComments@cfpb.gov by October 25, 2012.

CFPB’s rulemaking agenda

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Today, we are posting a semi-annual update of the CFPB’s rulemaking agenda. The Office of Management and Budget (OMB) has not published the full federal Unified Agenda yet, but this is the version we submitted to OMB.

Federal agencies typically release regulatory agendas twice a year. Each spring and fall, OMB works with the agencies to compile a list that outlines the rulemaking activities of all federal agencies for the coming 12-month cycle. It also includes recently-completed rulemakings. Cumulatively, the list is called the Unified Agenda of Federal Regulatory and Deregulatory Actions.

As an independent agency, we voluntarily participate in the Unified Agenda process. When OMB finalizes the spring 2012 Unified Agenda for the federal government as a whole, it will be published at www.reginfo.gov. To give the public additional time to consider our work prior to that, today we’re posting our final submission.

The CFPB’s agenda primarily includes rulemakings mandated by the Dodd-Frank Act. For example, we are working on several mortgage-related rules and rules to implement our supervisory program for certain non-bank entities. This includes two proposed rulemakings that we published for comment on Monday, July 9, relating to the Bureau’s Know Before You Owe mortgage disclosure integration project and setting forth new protections for high-cost mortgages. This also includes an initial rule to define nonbank “larger participants” that are subject to examination. The Bureau is publishing today a final rule regarding the Bureau’s supervision of larger participants in the credit reporting marketplace. We are also seeking your input on an Advance Notice of Proposed Rulemaking about the consumer general purpose reloadable prepaid card market.

Beyond specific rulemaking activity, we continue to work on a variety of initiatives that address issues in consumer financial markets. For example, last month we joined several other financial regulators in a memorandum of understanding to clarify the coordination of our supervision efforts. And Director Cordray recently met with Secretary of Education Arne Duncan and ten college presidents to finalize a commitment by those college and university systems to present clear financial aid offer information to all incoming students. They’re modeling this effort on the Financial Aid Shopping Sheet that the Department of Education and the CFPB developed last fall.

Stay tuned in this space for further semi-annual updates to the Bureau’s rulemaking calendar as we look ahead to 2013.

Making consumer complaints available to the public

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Today marks a major step forward in our work to protect consumers. In a first by a federal financial regulator, the Consumer Financial Protection Bureau (CFPB) will share with the public individual-level consumer complaint data received by the CFPB.

Check out the Bureau’s policy statement for more details.

What does this mean for consumers?

No longer will consumer complaints only be known to the individual complainant, bank, regulator, and those in the public willing to pursue this information through the Freedom of Information Act. Instead this data-rich window into consumer financial issues will be widely available to everyone: developers, policymakers, journalists, academics, industry, and you. Our goal is to improve the transparency and efficiency of the credit card market to further empower American consumers.

And just to be clear, no personally-identifiable information, such as a consumer’s name, credit card number, or mailing address will be made available via the Consumer Complaint Database.

The Bureau’s Consumer Response function receives consumer complaints on a wide variety of products including credit cards, mortgages, student and other consumer loans, and other bank products (such as checking and savings accounts). And while the Consumer Complaint Database initially will contain only credit card complaints, the Bureau is proposing to extend the Database to all other consumer financial products and services covered by the CFPB.

What happens when a consumer files a complaint?

When a consumer files a complaint, Consumer Response intake specialists review each one for completeness, jurisdiction, and non-duplication. Complaints that meet these criteria are then forwarded to the appropriate company (bank or nonbank) for review and resolution. Companies are given 15 days to provide a substantive response to each consumer complaint, and are expected to resolve and close all but the most complicated complaints within 60 days.

Consumer Response prioritizes for investigation certain complaints based on a handful of risk-based criteria including the failure of a company to respond in a timely manner and those in which the consumer disputes the company-provided resolution. When potential legal violations are detected, Consumer Response works closely with other parts of the Bureau including the offices of Supervision, Enforcement, and Fair Lending to ensure potential violations are dealt with appropriately.

Throughout this process, consumers have the ability to log into the CFPB’s website to check the status of their complaint (and, when appropriate, dispute the resolution provided by the financial institution).

Why beta?

Today, we’re releasing the beta version of the Consumer Complaint Database. Why beta? While the complaint information in the database is actual data, the functionality, data fields, and “look and feel” of the database are all in the beta stage of development. In other words, this version of the Consumer Complaint Database is only the beginning. In addition to potentially enlarging the Database to include all other consumer financial products and services covered by the Bureau, we are looking into potentially expanding it in a number of other ways. These include the possible addition of narrative fields (to the extent we can do so while protecting personally-identifiable information), more sub-product and sub-issue data fields, regular and normalized data visualizations, and expanded data tools.

Lastly, you will note that initially the Database only contains complaints received by the CFPB on and after June 1st. Additional retroactive data will be added when we remove the “beta” tag later this summer.

What do you think?

We encourage you to tell us what you think about the Consumer Complaint Database by telling your story. All comments and suggestions are welcome.

Scott Pluta is the Chief of Staff and Acting Assistant Director for Consumer Response at the Consumer Financial Protection Bureau.

Protecting the public’s trust

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We would be hard pressed to ensure that markets for consumer financial products and services are fair, transparent and competitive without the trust of citizens and financial institutions in our work. To build and protect that trust, we are working to establish a strong ethics and compliance program.

As part of this effort we have determined that the existing government ethics laws and regulations, while robust, do not sufficiently address the ethics issues posed by the mission and responsibilities of the Bureau. To address these issues, we published our own ethics regulations that cover all Bureau employees. These CFPB-specific regulations establish:

  • Restrictions on outside employment and business activities ;
  • Prohibitions on the ownership of certain financial interests;
  • Restrictions on seeking, obtaining or renegotiating credit and indebtedness;
  • Prohibitions on recommendations concerning debt and equity interests;
  • Disqualification from participating in certain Bureau matters based on credit or indebtedness;
  • Prohibitions on purchasing certain assets; and
  • Restrictions on participating in particular matters involving outside entities.

We carefully studied the ethics regulations of other financial regulatory agencies, such as the Federal Deposit Insurance Corporation , the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency when crafting our own rules. In many cases the Bureau’s rules are very similar to the rules imposed by other financial regulatory agencies. For example, the Bureau will require that all employees seek prior approval before engaging in outside employment.

In other cases, however, the new rules are modified to reflect the scope of the Bureau’s supervisory authority over both banks and nonbanks that provide a wide range of consumer finance products. For instance, the Bureau decided to create a list of specific financial holdings that employees may not own rather than a general prohibition on a class of financial holdings. This list is tailored to include only businesses that are subject to examination by the Bureau.

By taking these affirmative steps to ensure the Bureau’s work is not affected by actual or apparent conflict of interest concerns, we seek to build and maintain the trust of consumers and the financial institutions we oversee.

The rules will take effect on June 26, 2012.

We welcome your comments. You may submit comments via email, mail, or hand delivery.

Postal Address:
Consumer Financial Protection Bureau
Attention: Ethics Office
1700 G Street, NW
Washington, DC 20552

The CFPB’s source code policy: open and shared

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The Consumer Financial Protection Bureau was fortunate to be born in the digital era. We’ve been able to rethink many of the practices that make financial products confusing to consumers and certain regulations burdensome for businesses. We’ve also been able to launch the CFPB with a state-of-the-art technical infrastructure that’s more stable and more cost-effective than an equivalent system was just ten years ago.

Many of the things we’re doing are new to government, which has made them difficult to achieve. But the hard part lies ahead. While our current technology is great, those of us on the CFPB’s Technology & Innovation team will have failed if we’re still using the same tools 10 years from now. Our goal is not to tie the Bureau to 2012’s technology, but to create something that stays modern and relevant – no matter the year.

Good internal technology policies can help, especially the policy that governs our use of software source code. We are unveiling that policy today.

Source code is the set of instructions that tells software how to work. This is distinct from data, which is the content that a user inputs into the software. Unlike data, most users never see software source code; it works behind the scenes while the users interact with their data through a more intuitive, human-friendly interface.

Some software lets users modify its source code, so that they can tweak the code to achieve their own goals if the software doesn’t specifically do what users want. Source code that can be freely modified and redistributed is known as “open-source software,” and it has been instrumental to the CFPB’s innovation efforts for a few reasons:

  • It is usually very easy to acquire, as there are no ongoing licensing fees. Just pay once, and the product is yours.
  • It keeps our data open. If we decide one day to move our web site to another platform, we don’t have to worry about whether the current platform is going to keep us from exporting all of our data. (Only some proprietary software keeps its data open, but all open source software does so.)
  • It lets us use tailor-made tools without having to build those tools from scratch. This lets us do things that nobody else has ever done, and do them quickly.

Until recently, the federal government was hesitant to adopt open-source software due to a perceived ambiguity around its legal status as a commercial good. In 2009, however, the Department of Defense made it clear that open-source software products are on equal footing with their proprietary counterparts.

We agree, and the first section of our source code policy is unequivocal: We use open-source software, and we do so because it helps us fulfill our mission.

Open-source software works because it enables people from around the world to share their contributions with each other. The CFPB has benefited tremendously from other people’s efforts, so it’s only right that we give back to the community by sharing our work with others.

This brings us to the second part of our policy: When we build our own software or contract with a third party to build it for us, we will share the code with the public at no charge. Exceptions will be made when source code exposes sensitive details that would put the Bureau at risk for security breaches; but we believe that, in general, hiding source code does not make the software safer.

We’re sharing our code for a few reasons:

  • First, it is the right thing to do: the Bureau will use public dollars to create the source code, so the public should have access to that creation.
  • Second, it gives the public a window into how a government agency conducts its business. Our job is to protect consumers and to regulate financial institutions, and every citizen deserves to know exactly how we perform those missions.
  • Third, code sharing makes our products better. By letting the development community propose modifications , our software will become more stable, more secure, and more powerful with less time and expense from our team. Sharing our code positions us to maintain a technological pace that would otherwise be impossible for a government agency.

The CFPB is serious about building great technology. This policy will not necessarily make that an easy job, but it will make the goal achievable.

Our policy is available in three formats: HTML, for easy access; PDF, for good presentation; and as a GitHub Gist, which will make it easy for other organizations to adopt a similar policy and will allow the public to easily track any revisions we make to the policy.

If you’re a coder, keep an eye on our GitHub account. We’ll be releasing code for a few projects in the coming weeks.