Public officials will spend less time slugging bankers when the economy improves, but Dodd-Frank will stick around, changing the rules in fundamental ways, says one of the top lobbyists in Washington D.C., for the financial industry, Steve Bartlett.
Speaking to a crowd of hundreds of bankers at Bank Director’s Acquire or Be Acquired Conference in Scottsdale, Arizona two weeks ago, Bartlett said politicians have been criticizing the financial industry because the economy is hurting.
“The beatings will stop when morale improves,’’ he said. “It helps a lot for you to tell your story to members of Congress. Go to their town hall meetings and sit in the front row. They will be less inclined to beat the hell out of you the next time they make a public statement.”
Bartlett said he’s already noticed a change of tone in the Obama administration in the hiring of the president’s new economic advisor, Gene Sperling, and chief of staff Bill Daley, a veteran of JP Morgan Chase. Sperling once consulted for The Goldman Sachs Group. The Obama administration also has announced plans to review government regulations to weed out rules that seem burdensome to business and ineffective.
But the Dodd-Frank legislation passed by Congress last year is going to stick around, perhaps with only some changes here and there, Bartlett said.
He called the Durbin amendment’s limits on debit fees a “shocking” part of the legislation that will limit bank access to low and moderate income customers. (Editor’s note: Some bank analysts say more regulation is doing away with products like free checking for everyone, although free checking without a minimum balance requirement was getting dropped before Congress passed Dodd-Frank last year anyway).
But another fundamental change in Dodd-Frank is the shift away from simply requiring disclosure of the terms for financial products, Bartlett said. The new legislation requires that customers actually understand them, he said.
Dodd-Frank requires the new Consumer Financial Protection Bureau to end “abusive” practices and requires that disclosures be written in “plain language.” It goes on to say that the bureau should rely on consumer testing to figure out if those disclosures are understood. The specific language of Dodd-Frank asks the agency to consider evidence of “consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.”
Bartlett said Dodd-Frank will not just impact subprime loans, but other types of financial products.
“It’s no longer what you say to your customers but what your customers understand,’’ he said. “The statute says that you as a regulated entity will be held to the standard: Did the customer understand it? Not whether you said it plainly.”
Travis Plunkett, the legislative director at the Consumer Federation of America, did not attend the conference, and he disagrees with Bartlett.
“He is vastly overstating the impact,’’ Plunkett said, adding that he doesn’t believe companies will be punished just because a customer misunderstands something. He said the law is taking care of a minor gap in regulation that has allowed companies to create products that are so complex, they are designed to hide fees and charges from consumers, he said.
Elizabeth Warren, who is charged with setting up the Consumer Financial Protection Bureau, has said she wants to clean up disclosures and get rid of the “shrubbery” inside credit card disclosures. To see the interview she gave last month on the topic, read the Associated Press interview.