The CFPB recently announced a proposal to allow companies to test consumer financial disclosures on a case-by-case basis as part of an effort to encourage financial institutions to participate in trial disclosure programs.
“As part of our efforts to foster innovation in consumer financial markets, the proposed policy will allow companies to conduct real world trials of disclosure alternatives,” Richard Cordray, the director of the CFPB, said. “That will help the Bureau identify what works and does not work to provide consumers with the clear information they need to make financial decisions in a marketplace of evolving programs and products.”
Under the 2010 Dodd-Frank Act, the CFPB is authorized to assist with consumer financial innovation and trial disclosure programs. In exercising that authority, the CFPB launched its Project Catalyst initiative aimed at encouraging consumer-friendly innovation in consumer financial products and services in November.
The CFPB would, under the proposed policy, approve institutions on a case-by-case basis for limited time exemptions from required federal disclosure in order for the firms to research and test disclosures and disclosure alternatives. The firms will then share the results of the disclosure trial with the agency, which plans to use the information in order to improve its disclosure models and forms.
Additionally, in deciding whether or not to exempt a firm from federal disclosure requirements, the CFPB will consider a number of factors, including whether the proposed trial effectively tests for consumer understanding regarding the risks, costs and benefits of financial products and services, as well as whether the institution’s proposal promotes cost-effective rules and minimizes consumer risk.