Over the past two months, behind-the-scenes skirmishes over regulations to implement two new federal laws have illustrated how important it is for people to pay attention to the rule-making process.
The first proposed rule is aimed at protecting people’s wallets, while the other is intended to protect people’s lives.
The Consumer Finance Protection Bureau (CFPB) reported that more than 2,900 comments were submitted for the Know Before You Act, a law intended to simplify paperwork for homebuyers and make it easier for them to understand the financial contract they are entering. (Before new regulations go into effect, there is a comment period allowing the public to submit thoughts on how the rule should change or be implemented.) According to a review by the Sunlight Foundation, of the 2,900 comments submitted to the CFPB, almost all were from people who work in the mortgage business.
In a blog post about the final rule, the CFPB said it made “significant” changes in its original proposal as a result of the comments complaining that the new requirements would be too cumbersome on banks and mortgage companies.
While it’s true that this new law would add work for people who work in the mortgage industry, the lack of pushback from consumers in the massive stack of comments is striking.
Specifically, according to the CFPB blog post, two original provisions were omitted in the final rule. The agency also altered a rule requiring a three-day waiting period for the banks before finalizing paperwork intended give consumers a chance to read and understand the deals they enter into. That waiting period is also supposed to be renewed if there are any changes to contracts during that three day period. The banks are still required to give consumers three days to mull things over, but the waiting period will only start over if there are changes that are considered significant by the bureau. According to the blog post, that includes things like the annual percentage rate changing, or the type of loan changing. One more minor change regarding a timed response by banks to mortgage applications received was intended to go easy on small banks and credit unions that are not open on Saturdays: Originally banks had to give customers applying for loan applications an estimate within three days, and Saturdays were included in that period. Now, if banks are closed on Saturdays, they aren’t forced to do business on Saturdays, according to the CFPB.
Even with the amount of influence the industry commenters had on shaping this final rule, the changes didn’t make the American Bankers Association happy. A post on the ABA’s Banking Journal website dismissed the changes as inadequate and argued that the changes are counter to the services the CFPB says they were trying to provide consumers. Specifically, the author of the blog post says that the newly-formatted disclosure forms intended to clear things up for consumers actually hide the important information such as the lifetime cost of the loan. The author even suggests that a clever lawyer could argue that a creditor didn’t comply with the Truth in Lending Act when they use these forms because they are faulty and misguided.
However, other associations representing the banking and real estate industries, including the the Consumer Bankers Association, an organization that focuses mainly on retail banking (automobile finance, credit cards, etc.) and the National Association of Realtors applauded the CFPB’s final product. In statements, both groups said the final rule would be good for consumers.
Another rule being handled by the National Highway Transportation Safety Administration (NHTSA) shows that the seemingly boring and mundane rule-making process can affect issues of life and death. More than five years ago Congress mandated the NHTSA to create a rule that requires all new cars to include technology that allows drivers to see behind their cars while in reverse. The aim is to decrease the number of deaths of small children.
The deadline for this rule has been delayed four times with officials citing the need for more research. The rule was sent to the White House again for review in December of last year.
This rule has gone through the entire rule-making process one time before; research was done, comments were submitted by both child safety advocates and industry insiders, and a final rule was written, but at the very last minute implementation was put on hold. The next deadline is January of 2015.
This rule will cost car manufacturers some money, which will likely be passed on to the consumer. And those costs are probably at the root of the debate of how to implement the law, but meanwhile, experts say that anywhere from 95-112 lives could be saved each year. But that can only start after the rule-making process is complete.