I am pleased to join you to champion the cause of transparency, which the FCC is advancing today with its proposed disclosure for broadband consumers. But before I start, let me be among the first to wish a happy birthday to Chairman Wheeler. Like me, he grew up in central Ohio, which helps explain both his practical good sense and our warm friendship.
The Consumer Financial Protection Bureau is the first federal agency dedicated to protecting consumers in the financial marketplace. For many people, mortgages, student loans, and credit cards will be among the most significant financial transactions they will ever make. Too often, they are also the most complex and confusing. Among our goals at the Bureau is to make that process more understandable and less intimidating, as well as to protect consumers and ensure that they are treated fairly. Our experience shows that clearer disclosures laying out the terms and costs of transactions play a part in helping consumers make more informed decisions.
This is true not only for high-dollar products such as mortgages, but also for more everyday products such as broadband or mobile internet. The relevant information is usually presented in writing up front, and people should be able to understand the terms being offered before they sign on the dotted line. They should be able to compare costs and make the right choices that fit their needs.
Today the FCC is unveiling its own proposed disclosure for broadband consumers, whether delivered over cable or phone. I commend the FCC for this step and we are pleased to be their close partner on this project. Although the Consumer Bureau is fairly new, we already have considerable experience designing disclosures for financial products that use clear language to inform consumers. At the outset, we launched our “Know Before You Owe” campaign, which now embraces mortgages, student loans, and more.
Our first challenge was to demystify the mortgage process. One consumer described it this way: “The print is font-size ‘flyspeck’ and the language is boilerplate.” The mortgage closing process was complicated for everyone involved, but most of all for homebuyers. We worked to change that. The result is our “Know Before You Owe” mortgage disclosure forms, which took effect in October. The forms are simpler and clearer and offer apples-to-apples comparisons. People tell us they can better understand the explanation of risks and costs. And the forms focus consumers on the most crucial information, such as the interest rate, monthly payments, and total closing costs, as well as risky terms that could increase their payments over time.
The Bureau took a similar approach to student loans, where the growing cost of higher education has created serious financial hardship for millions of former students. For many, the complex and confusing process makes it difficult to calculate college costs, assess loan options, and figure out how much debt to take on. Our “Know Before You Owe” student loan project produced a one-page “financial aid shopping sheet,” a model disclosure form that colleges and universities can use to clarify the costs and risks of student loans up front, before students have enrolled. This disclosure has now been adopted by more than 3,000 institutions. It makes it easier for students and their families to compare offers side-by-side, using the same format and standard terms. It clearly lays out options for federal aid, and estimates both the total student loan debt and the monthly payments after graduation.
The Bureau is also considering standard disclosures for consumers of prepaid cards and accounts to assure more transparency and facilitate comparison shopping. We are still working to finalize these new rules, but some elements under consideration would require standard information to be delivered up front and posted on the issuer’s website, highlighting key information such as fees for purchases or ATM withdrawals. As with all of these approaches, the goal is to help consumers have the information they need to make the right decisions that best fit their lives.
That is why the FCC’s efforts toward delivering greater clarity are so important. Internet access is a key gateway to economic opportunity, and the majority of Americans have broadband. Signing up for this service represents a significant financial commitment. Consumers must be able to understand the terms of the agreement, and if there are options, they need to be able to comparison shop for the best deal. People across the country would benefit by the improvements made in the disclosure the FCC is releasing today. So we are glad the FCC is pursuing this initiative to help consumers better navigate the broadband marketplace.
Consumers deserve to feel confident about the information they receive, the companies they work with, and their ability to make good comparisons. These things are far more likely to happen when you “know before you owe.” And with the announcement today, the FCC is moving forward in this positive direction. Thank you to Chairman Wheeler and the FCC team on this important accomplishment, and we look forward to working together on other such projects in the future.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.