Opinion: Regulatory overhaul ordered at U.S. Treasury should consider Dynamic Disclosures

Steven Mnuchin, the Secretary of the Treasury, should empanel a “blue-ribbon Consumer Finance Advisory Committee” to examine outmoded banking rules and requirements, many of which are out of step with consumer needs today, writes Jeremiah Buckley of Buckley Sander LLP.

In particular, Buckley calls for a panel to consider authorizing Dynamic Disclosures, which is an interactive, electronic credit profile that provides them with more understanding of their creditworthiness than just the common credit score. Dynamic Disclosures assess a borrower’s prospects for default, how this affects their access to credit and the interest they will pay for it, and what would have to change to improve their position.

“If this were possible, we could move to a world in which borrowers are not just passive applicants for credit, but join lenders in deciding what loan terms make sense,” Buckley wrote in American Banker.

Additionally, such an advisory committee should consider how current federal consumer financial policy “focuses on the liability side of the consumer’s balance sheet.” Buckley noted that among a landscape of student loans, credit cards, auto loans, mortgages and home equity loans, “federal policy seems to encourage borrowing at all stages of life.

“There is almost no guidance or encouragement given to consumers on how to create a path to financial self-sufficiency,” Buckley argues.

Noting that federal policies may have been written and adopted as the best measures for their time, Buckley also pointed out that time for many of them was back in the 1970s. In present day, banks spend billions to comply with regulations and make disclosures, most of which go unread, particularly as consumers interact with lenders more and more through electronic means.

Buckley was the Republican staff director for the U.S. Senate Banking Committee in the 1970s. He participated in the drafting of legislation including the Fair Credit Reporting Act and amendments to the Truth in Lending Act of 1968, and assisted in drafting the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act.

He is currently of counsel to the Electronic Signature & Records Association.

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(Cover image of the U.S. Treasury building from treasury.gov)