Consumerism's Impact on Deregulation Will Be Evident in '85, Fed Official Says; Symposium Forecasts Effects on Legislative and Regulatory Actions
Kahn, Ephraim, American Banker
WASHINGTON -- Consumerism is alive and well on the deregulatory scene, and its power will be evident in legislative and regulatory action this year, according to Griffith L. Garwood, director of the Federal Reserve's Division of Consumer and Community Affairs.
The American Bankers Association, in a recent closed-circuit broadcast, televised to 34 sites the first of what it hopes will be the annual Bank Compliance Symposium. It presented a fast-paced overview of what institutions must watch out for the comply with consumer-protection laws and regulations now in effect.
The symposium was held in Chicago.
One bank-compliance officer watching the broadcast here, overwhelmed by the torrent of fact and legal lingo pouring from the giant video screen, commented: "The best thing about this is that there's an outline, so I can look things up" in a distributed reference packet.
A cursory scan of audience evaluation reports, however, showed that those who attended gave the symposium's panelists very high marks.
Mr. Garwood noted that surveys "surprisingly have found that consumers say they are willing to pay" for the protection recent laws and regulations give them.
Consumers, he said, wnat the protection they now have, recognize and are willing to pay for the cost, and, "My guess is they're going to tell their legislators that they want some more."
He said he thinks "we're going to have legislation" on delayed funds availability, and added that account disclosure is also "a very big issue."
A lot of attention will be given to proper disclosure of service fees Mr. Garwood said, "and perhaps even something along the lines of truth in savings [a proposal requiring banks to explain more clearly to depositors the terms of their accounts]," which could prove "extremely difficult to calculate."
Some of the regulatory interest in account disclosures, he observed, stems from the new competitive environment, which has spawned "lots of new products."
These products, in turn, have contributed to "the continuing difficulty of consumers in sorting out what's the best kind of deposit."
With respect to account disclosure, he said, "Vigorous individual action could go a long way in insuring a voluntary, industry-driven solution, rather than a legislative or regulatory solution."
He noted, however, that it's probably too late" for voluntary action to forestall official movement on delayed funds availability.
Adjustable rate mortgages will come in for "some attention," Mr. Garwood said, particularly since some institutions hae shifted the interest rate risk on these "extremely complicated" products to consumers.
'Plenty' of Branch Closings
In addition, he said, there will be "plenty of branch closings, especially in low-income areas. This "has the potential of becoming quite an issue," he added.
Banking's responsibility to provide lifeline accounts that offer lower-income people minimal financial services at an affordable price may provoke legislation, unless "no-frills accounts can be designed" to fill this niche, and offer a free-market solution, he said.
Mr. Garwood said he expects a new, simplified, Regulation B, which deals with equal credit opportunity, to be proposed this spring. The revised regulation is likely to go into effect in September, if the Federal Reserve Board approves it.
Comments from bakers on changes to the regulation, he added, have urged restraint in making changes "just for the sake of rewriting," because bankers are familiar with the current rules. There are, however, "areas where improvements can, and do need to, be made."
Mr. Garwood had high praise for banks' compliance record with consumer-oriented requirements. …