Wednesday, May 18, 2011
Consumer Reports Poll: Consumers Have Difficulty Understanding Financial Forms & Want Lenders To Make Them Easier to Understand
WASHINGTON, D.C. – The Consumer Financial Protection Bureau released two draft mortgage disclosure forms today that aim to make it easier for consumers to understand the real cost of borrowing. The CFPB is collecting input on the forms on its web site and intends to conduct focus groups to gather additional feedback.
Simplifying financial disclosure forms should be a top priority for the new consumer watchdog according to a recent Consumer Reports National Research Center poll that found consumers had a difficult time understanding loan documents.
“Most consumers have a tough time wading through all the fine print typically found on mortgage documents and other financial disclosure forms,” said Norma Garcia, senior staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports. “The draft mortgage disclosure forms prepared by the CFPB will help borrowers compare loans more easily and help eliminate surprises at closing and during the life of the loan. But it’s important to remember that consumers need strong protections against shady mortgage practices not just improved disclosure.”
Garcia noted that the draft forms include a clear statement that the borrower is under no obligation to choose a loan product, which is important to reduce undue influence in the mortgage lending process. “This statement will help encourage consumers to shop and compare products, which will have the added benefit of increasing competition among lenders for borrowers’ business.”
A November 2010 Consumer Reports national poll found that 76 percent of respondents said that requiring mortgage and other documents for financial products easier for consumer to understand should be a priority for the CFPB. 84 percent of those respondents who had applied for or received a loan or credit card in the past twelve months indicated that they had some difficulty with the financial disclosure. Thirty-one percent described the disclosures as not clear and easy to understand.
Financial disclosure forms are not seen as consumer friendly instruments. Only one percent of respondents felt that the primary purpose of the disclosure is to protect the consumer, while nearly two-thirds (63 percent) concluded that the disclosure’s main objective is to protect the financial institution.
The Consumer Reports National Research center conducted a telephone survey of nationally representative probability sample of telephone households and cell phones. 1,259 interviews were completed among adults aged 18+. Interviewing took place over October 28-October 31, 2010. The margin of error is +/- 2.8 percent at a 95 percent confidence level.
Michael McCauley – 415-431-6747, ext 126, Kara Kelber- 202-462-6262