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H.R. 4332, THE FINANCIAL CONSUMER HOTLINE ACT OF 2007: PROVIDING CONSUMERS WITH EASY ACCESS TO THE APPROPRIATE BANKING REGULATOR HEARING BEFORE THE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION DECEMBER 12, 2007 Printed for the use of the Committee on Financial Services Serial No. 110–84 ( U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 40–436 PDF : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\40436.TXT HFIN PsN: TERRIE HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania MAXINE WATERS, California CAROLYN B. MALONEY, New York LUIS V. GUTIERREZ, Illinois NYDIA M. VELÁZQUEZ, New York MELVIN L. WATT, North Carolina GARY L. ACKERMAN, New York JULIA CARSON, Indiana BRAD SHERMAN, California GREGORY W. MEEKS, New York DENNIS MOORE, Kansas MICHAEL E. CAPUANO, Massachusetts RUBÉN HINOJOSA, Texas WM. LACY CLAY, Missouri CAROLYN MCCARTHY, New York JOE BACA, California STEPHEN F. LYNCH, Massachusetts BRAD MILLER, North Carolina DAVID SCOTT, Georgia AL GREEN, Texas EMANUEL CLEAVER, Missouri MELISSA L. BEAN, Illinois GWEN MOORE, Wisconsin, LINCOLN DAVIS, Tennessee ALBIO SIRES, New Jersey PAUL W. HODES, New Hampshire KEITH ELLISON, Minnesota RON KLEIN, Florida TIM MAHONEY, Florida CHARLES A. WILSON, Ohio ED PERLMUTTER, Colorado CHRISTOPHER S. MURPHY, Connecticut JOE DONNELLY, Indiana ROBERT WEXLER, Florida JIM MARSHALL, Georgia DAN BOREN, Oklahoma SPENCER BACHUS, Alabama RICHARD H. BAKER, Louisiana DEBORAH PRYCE, Ohio MICHAEL N. CASTLE, Delaware PETER T. KING, New York EDWARD R. ROYCE, California FRANK D. LUCAS, Oklahoma RON PAUL, Texas STEVEN C. LATOURETTE, Ohio DONALD A. MANZULLO, Illinois WALTER B. JONES, JR., North Carolina JUDY BIGGERT, Illinois CHRISTOPHER SHAYS, Connecticut GARY G. MILLER, California SHELLEY MOORE CAPITO, West Virginia TOM FEENEY, Florida JEB HENSARLING, Texas SCOTT GARRETT, New Jersey GINNY BROWN-WAITE, Florida J. GRESHAM BARRETT, South Carolina JIM GERLACH, Pennsylvania STEVAN PEARCE, New Mexico RANDY NEUGEBAUER, Texas TOM PRICE, Georgia GEOFF DAVIS, Kentucky PATRICK T. MCHENRY, North Carolina JOHN CAMPBELL, California ADAM PUTNAM, Florida MICHELE BACHMANN, Minnesota PETER J. ROSKAM, Illinois KENNY MARCHANT, Texas THADDEUS G. McCOTTER, Michigan KEVIN McCARTHY, California JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel (II) VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\40436.TXT HFIN PsN: TERRIE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT CAROLYN B. MALONEY, New York, Chairwoman MELVIN L. WATT, North Carolina GARY L. ACKERMAN, New York BRAD SHERMAN, California LUIS V. GUTIERREZ, Illinois DENNIS MOORE, Kansas 4PAUL E. KANJORSKI, Pennsylvania MAXINE WATERS, California JULIA CARSON, Indiana RUBÉN HINOJOSA, Texas CAROLYN MCCARTHY, New York JOE BACA, California AL GREEN, Texas WM. LACY CLAY, Missouri BRAD MILLER, North Carolina DAVID SCOTT, Georgia EMANUEL CLEAVER, Missouri MELISSA L. BEAN, Illinois LINCOLN DAVIS, Tennessee PAUL W. HODES, New Hampshire KEITH ELLISON, Minnesota RON KLEIN, Florida TIM MAHONEY, Florida CHARLES A. WILSON, Ohio ED PERLMUTTER, Colorado JUDY BIGGERT, Illinois TOM PRICE, Georgia RICHARD H. BAKER, Louisiana DEBORAH PRYCE, Ohio MICHAEL N. CASTLE, Delaware PETER T. KING, New York EDWARD R. ROYCE, California STEVEN C. LATOURETTE, Ohio WALTER B. JONES, JR., North Carolina JUDY BIGGERT, Illinois SHELLEY MOORE CAPITO, West Virginia TOM FEENEY, Florida JEB HENSARLING, Texas SCOTT GARRETT, New Jersey GINNY BROWN-WAITE, Florida J. GRESHAM BARRETT, South Carolina JIM GERLACH, Pennsylvania STEVAN PEARCE, New Mexico RANDY NEUGEBAUER, Texas GEOFF DAVIS, Kentucky PATRICK T. MCHENRY, North Carolina JOHN CAMPBELL, California KEVIN McCARTHY, California (III) VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\40436.TXT HFIN PsN: TERRIE VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\40436.TXT HFIN PsN: TERRIE CONTENTS Page Hearing held on: December 12, 2007 ........................................................................................... Appendix: December 12, 2007 ........................................................................................... 1 33 WITNESSES WEDNESDAY, DECEMBER 12, 2007 Braunstein, Sandra F., Director, Consumer and Community Affairs, Board of Governors of the Federal Reserve System ..................................................... Kenney Jeannine, Senior Policy Analyst, Consumers Union ............................... McConnell, Cassandra, Director, Consumer and Community Affairs, Office of Thrift Supervision ............................................................................................ Mierzwinski, Edmund, Consumer Program Director, U.S. Public Interest Research Group ........................................................................................................ Neiman, Richard H., Superintendent of Banks, New York State Banking Department, on behalf of the Conference of State Bank Supervisors and the New York State Banking Department ......................................................... Skiles, J. Leonard, Executive Director, National Credit Union Administration Thompson, Sandra L., Director, Division of Supervision and Consumer Protection, Federal Deposit Insurance Corporation .................................................... Walsh, John G., Chief of Staff and Public Affairs, Office of the Comptroller of the Currency ..................................................................................................... 6 23 9 25 13 11 8 4 APPENDIX Prepared statements: Braunstein, Sandra F. ...................................................................................... Kenney Jeannine .............................................................................................. McConnell, Cassandra ..................................................................................... Mierzwinski, Edmund ...................................................................................... Neiman, Richard H. .......................................................................................... Skiles, J. Leonard ............................................................................................. Thompson, Sandra L. ....................................................................................... Walsh, John G. ................................................................................................. 34 42 53 61 69 78 87 100 (V) VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 K:\DOCS\40436.TXT HFIN PsN: TERRIE VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 K:\DOCS\40436.TXT HFIN PsN: TERRIE H.R. 4332, THE FINANCIAL CONSUMER HOTLINE ACT OF 2007: PROVIDING CONSUMERS WITH EASY ACCESS TO THE APPROPRIATE BANKING REGULATOR Wednesday, December 12, 2007 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The subcommittee met, pursuant to notice, at 10:03 a.m., in room 2128, Rayburn House Office Building, Hon. Carolyn B. Maloney [chairwoman of the subcommittee] presiding. Members present: Representatives Maloney, Waters, McCarthy, Green, Hodes, Klein; Biggert and Royce. Chairwoman MALONEY. This hearing of the Subcommittee of Financial Institutions and Consumer Credit will come to order. The hearing will focus on H.R. 4332, the Financial Consumer Hotline Act of 2007. The bill establishes a single toll free telephone number that consumers can call if they have a problem with their bank, and want to speak to the appropriate banking regulator. I would like to welcome all of the witnesses, and thank them for their time, their testimony, and for being here today. For our first panel, we will hear from representatives of: the Office of the Comptroller of the Currency; the Federal Deposit Insurance Corporation; the National Credit Union Administration; and the Office of Thrift Supervision. We will also hear from Superintendent Richard Neiman—a very special welcome to him from my home State of New York—who is here on behalf of the Conference of State Bank Supervisors. A second panel will include witnesses from consumer groups. This legislation builds on a suggestion that Comptroller Dugan put forward in a hearing before this committee back in June, to provide consumers one-stop service with their banking regulatory issues. Given that depository institutions in the United States can be regulated by any of five Federal regulators or a State regulator, consumers often don’t know what entity to call if they have a problem. Apparently, customers often end up calling their attorney general, or the FDIC, even if that is not the right regulator, because their bank window or Web site states that the institution is FDICinsured. (1) VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 2 We hope and expect this legislation will be cost-efficient as well as consumer-friendly. Right now, as our witnesses will explain, each of the agencies has a Web site, provides a phone number for consumers to call with questions, and has a staff to follow up on complaints or inquiries. The single hotline will help route calls to each agency more quickly, and encourage frustrated consumers to call and get answers to their questions. The establishment of a single, toll free number could also assist the banking regulators in compiling consumer complaints and inquiries, so that better information would be available about problems or issues that cut across institutions that the various agencies supervise. Congressional legislation and oversight would also be better informed by such centralized statistics. Also, the establishment of a single, toll free number could help raise the profile of banking regulators as consumer resources. This committee has called on the Federal bank regulators to provide more consumer assistance in a variety of contexts throughout this Congress, and this is a simple way to get this started. The legislation directs the Federal financial institutions’ examination council to set up the hotline. The council is an existing interagency body established by statute to prescribe uniform principles and standards for financial institutions, and to otherwise coordinate regulatory activity among the Federal banking regulators. The Federal Reserve, FDIC, NCUA, OCC, and OTS are all members of the council. The legislation also directs the council to work with State banking regulators to integrate them into the hotline service. And Superintendent Neiman of the New York State Banking Department is here on behalf of New York and the Conference of State Bank Supervisors to address how that will be implemented. He has also come forward with a number of suggestions to improve the legislation, and I thank him for that. The Act also requires the council to report to Congress 6 months after enactment on the Agency’s efforts to establish a public interagency Web site, likewise directing and referring consumer complaints and inquiries received on the Internet concerning any financial institution to the appropriate Federal or State financial institution regulatory service. I should note that not only the OCC, but the council as a whole has taken some steps in this direction on its own initiative, with an eye to both cutting costs and improving service to consumers. This past fall, the council formed a working group to study ways in which the separate consumer complaint handling systems of each regulator could be streamlined and leveraged to better and more efficiently serve customers. The council is considering hiring an independent consultant to evaluate the existing centers and make recommendations on how that might be consolidated. This legislation provides a statutory mandate that supports and guides these efforts in a framework for congressional oversight. It is an important step forward. It is simple to implement, but very necessary. I very much look forward to the testimony, and I recognize Mrs. Biggert, the ranking member, for 5 minutes. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 3 Mrs. BIGGERT. Thank you very much, Madam Chairwoman, and thank you for calling today’s hearing. In these challenging times, it’s important that consumers be able to quickly and easily get in touch with State and Federal banking regulators to provide comments or to make complaints about their financial institutions. I think, given the complexity of our banking system and the various regulators that work in this area, consumers may not know where to turn when they have a dispute with their institutions. The chairwoman has introduced legislation to create a single hotline to try to alleviate any consumer confusion. I think this idea is worthy of consideration, and I am interested to learn more about it today. It is my understanding that regulators already have an informal system in place to redirect misplaced consumer complaints, a system that they are constantly trying to improve. For example, when the OCC receives a complaint from a consumer about a thrift that should have been directed to the OTS, it is my understanding that these informal agreements exist to make every reasonable effort to redirect the complaint to the overseer of that thrift. I hope to hear more about this informal network, and how the regulators ensure that no consumer complaint falls through the cracks. Consumers should not be punished for misplaced complaints. I am also interested to hear what our witnesses think about such a hotline, and how that would work. It is—in my view, any hotline should be, number one, easy for consumers to register complaints or inquiries, and number two, simple for the regulators to obtain and evaluate the meaningful information provided. I look forward to the testimony today and to working with the chairwoman to ensure that consumer complaints are heard and that regulators are responsive. I yield back. Chairwoman MALONEY. Thank you. I now recognize Congressman Green for 5 minutes, and welcome him up to the top panel, since not a lot of people are here. Thank you for being here. Mr. GREEN. Thank you, Madam Chairwoman, and I thank the ranking member, as well. And I would like to associate myself with the comments made by each of you. I would also like to thank the persons who are here to testify today. I have had an opportunity to meet several of you, and I am very much impressed with the outstanding list of witnesses that we have. I, too, am of the opinion that a hotline can be of great benefit to consumers, especially given the amount of concern that is currently in the marketplace with reference to banking, financial institutions, and some of the home mortgage concerns. I think that, while this may not address all of the consumer complaints and concerns, I think it is a good means by which we can have some semblance of one-stop shopping, such that persons will have a line that they can depend on to acquire some intelligence about concerns that they may raise. I think that one of the things that will make it efficacious is having access to the statistical information. I think that can drive a process, knowing that the information is available, and knowing that others will have an opportunity to evaluate the program itself. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 4 So, I am honored to associate myself with the comments of the chairwoman and the ranking member and I would endorse the chairwoman’s proposal and would be honored to be a cosponsor of the legislation. I yield back the balance of my time. Chairwoman MALONEY. Congressman Royce, for 3 minutes. Mr. ROYCE. Thank you, Madam Chairwoman. I would like to commend the chairwoman for holding this hearing. We are here today to discuss legislation which is going to establish a single telephone number that consumers with complaints or inquiries can call, anywhere around the country, and thereby locate the appropriate Federal or State regulator. I am sure that this is going to be a useful tool for consumers trying to file a complaint, or consumers who have an inquiry about something, and thus will be able to get in touch on the banking issue that they need to discuss. Now, I have coauthored the National Insurance Act with my colleague, Representative Melissa Bean, which would create an optional Federal charter for insurance. And some of those opposed to that legislation argue that, even if it creates greater market efficiencies, the creation of an OFC might cause confusion among insurance customers trying to determine the company’s regulator. Well, in reviewing the Financial Consumer Hotline Act, which is going to be a Federal act, I believe this endeavor for the insurance sector would be beneficial, should a Federal regulator be created in the future. Any meritorious effort to increase consumer disclosure and shorten the distance between consumers and the appropriate regulator should be encouraged. So, I encourage the chairwoman, and I would like to thank the regulators here for their work on this issue, and I look forward to hearing about the progress made in the future. Thank you again, Madam Chairwoman, for the bill and for the hearing. Chairwoman MALONEY. Thank you. And, without objection, all members’ opening statements will be made a part of the record. I welcome all of the witnesses. First, we have Mr. John Walsh, Chief of Staff and Public Affairs, Office of the Comptroller of the Currency, and then we will go right down the line. Thank you. You are recognized for 5 minutes. And thank you for coming forward with the idea in the first place. STATEMENT OF JOHN G. WALSH, CHIEF OF STAFF AND PUBLIC AFFAIRS, OFFICE OF THE COMPTROLLER OF THE CURRENCY Mr. WALSH. Subcommittee Chairwoman Maloney, Ranking Member Biggert, and members of the subcommittee, on behalf of Comptroller John Dugan and the Office of the Comptroller of the Currency, I thank you for this opportunity to discuss H.R. 4332, which would direct the Federal banking agencies to establish a single toll free number to help consumers reach the right banking agency for assistance with a complaint or inquiry. Banks come in a variety of sizes, with both State and Federal charters, which offers choice and diversity to consumers. However, it can also present a complex maze for them to navigate when they have a problem and need help from their bank. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 5 When direct contact with the bank does not resolve an issue, figuring out where to turn next may be very challenging. The consumer with a complaint or inquiry must sort through dozens of phone numbers, Web sites, and addresses for the various State and Federal agencies. Few bank regulators are household names, and most are unfamiliar to consumers. The result is that consumers with a problem often reach the wrong regulator. Misdirected calls represent a significant portion of the 70,000 total cases opened by the OCC each year. This year, the OCC has received 11,000 referrals of misdirected complaints and inquiries from other Federal and State regulators, and has referred 10,000 misdirected complaints and inquiries to other regulators. This volume suggests that a large percentage of people who have questions or concerns about their financial service provider do not know where to turn for help. The OCC believes that this burden should not fall upon the consumer, and supports the goals of this legislation to develop simpler means for consumers to find their way to us, by phone or Internet, and for banking agencies to expedite the routing of misdirected consumer complaints. Development of a single toll free number, in coordination with the Federal financial institution’s examination council would make it easier for consumers to register a complaint with the appropriate banking regulator. It would eliminate the burden of searching for the right agency, the frustration of being referred from one agency to another, and most delays that result from misdirected calls. A single toll free number would also help banking agencies compile and act on consumer complaints more efficiently. Eliminating the burden associated with rerouting misdirected calls would make existing agency complaint handling processes more efficient, and free up resources for use in responding to consumer concerns. A second objective of the bill on which Federal regulators would be required to report back to Congress in 6 months is establishment of a public interagency Web site for directing and referring Internet consumer complaints and inquiries, and a system to expedite the prompt, effective rerouting of any misdirected consumer complaint or inquiry documents. The OCC is currently working with other members of the FFIEC to study options in this area. This study will examine how we might leverage existing agency resources to simplify the process for identifying the appropriate regulator for consumers, and improve the complaint filing and resolution process. The council approved this study at its December 4th meeting, and we look forward to a report and recommendations by the end of 2008. The OCC itself has taken the initiative to reduce obstacles that consumers may face in registering complaints, and to improve the service they receive when they reach our customer assistance group, or CAG. The OCC has expanded the CAG’s capabilities through a number of investments and upgrades in the last several years, most recently launching a new consumer Web site, HelpWithMyBank.gov. The OCC is developing a Web-based complaint referral system to reduce inefficiencies involved with forwarding documents associated with misdirected complaints. And the system will transmit VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 6 complaint-related documents via the Web to authorized users, while ensuring information security and privacy. The OCC is also working with the Conference of State Bank Supervisors and with State regulators on a number of initiatives to expedite the referral of misdirected questions and complaints. In November 2006, the OCC and CSBS agreed on a model memorandum of understanding to improve referrals and information sharing regarding misdirected consumer complaints, and provide needed assurance of confidentiality for sharing that information. To date, 30 States and Puerto Rico have entered into agreements with the OCC. In conclusion, the OCC fully supports the goals of H.R. 4332, creation of a single toll free number and call routing system, and a companion routing system for Internet-based inquiries and complaints. Improvements in these areas will promote timely assistance for consumers of bank services. I thank the subcommittee for the opportunity to testify and I appreciate Chairwoman Maloney’s leadership in this important area. [The prepared statement of Mr. Walsh can be found on page 100 of the appendix.] Chairwoman MALONEY. Thank you very much for your testimony. I now recognize Sandra Braunstein, Director of Consumer and Community Affairs, Board of Governors of the Federal Reserve System. Thank you for joining us once again. STATEMENT OF SANDRA F. BRAUNSTEIN, DIRECTOR OF CONSUMER AND COMMUNITY AFFAIRS, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Ms. BRAUNSTEIN. Thank you. Chairwoman Maloney, Ranking Member Biggert, and members of the subcommittee, thank you for the opportunity to discuss the recently introduced Financial Consumer Hotline Act of 2007. In addition to its responsibilities for rule writing and enforcing many Federal consumer financial protection laws, the Federal Reserve’s Division of Consumer and Community Affairs administers a national consumer complaint and inquiry program. The proposed legislation would amend the FFIEC Act by requiring the Federal regulatory agencies to establish a single telephone number that consumers with complaints and inquiries concerning financial institutions or issues could call and be routed to the appropriate Federal supervisory agency or State bank supervisor for assistance. The Federal Reserve concurs with the intent of the proposed bill, and strongly supports the current efforts by the regulatory agencies to improve the consumer’s experience with getting complaints involving banking services and transactions addressed promptly and accurately. However, given that the regulatory agencies are collaborating and cooperating on how to facilitate the consumer complaint handling and resolution process in ways that are consistent with the proposed bill, and the considerable progress being made already on both an interagency basis, as well as through our own efforts, legis- VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 7 lation does not appear to be needed to ensure the continued momentum. Additionally, it is important that the agencies maintain flexibility so that they may benefit from recommendations that will result from the current agency initiatives and future technological advances. The regulatory agencies have been coordinating on consumer complaint processing since the 1970’s. For example, the agencies have had procedures in place for decades to promptly refer misdirected consumer telephone calls and misdirected consumer complaints and inquiries to the appropriate Federal and State regulator. Recently, the agencies have started using new technology to speed up and improve the referral process, which has significantly reduced the paper flow between the regulatory agencies. Moreover, the agencies meet periodically to share complaint data, and to discuss emerging issues identified through the complaint process. To build upon the efforts of the agencies, in September, the FFIEC formed an interagency working group to identify ways to collectively improve the agencies’ consumer complaint programs, and to make those programs even more consumer friendly. This group advanced several promising initiatives that will produce results similar to those envisioned by the proposed legislation. Additionally, it was recommended that a third party vendor be engaged to address the ideas for improvement, and to explore the feasibility of pursuing the initiatives related to leveraging the agencies’ resources. Earlier this month, the FFIEC approved the working group’s recommendations, and has begun the process of hiring a vendor. We believe the vendor’s work will provide the agencies with the insight needed to develop a comprehensive strategy to further enhance the consumer complaint process. Consistent with the intent of the proposed legislation, and the Federal Reserve’s longstanding commitment to consumer protection, we have recently announced enhancements to our own consumer complaint handling procedures. On November 19th, we launched Federal Reserve Consumer Help, a new centralized resource that consolidates and streamlines the Federal Reserve’s consumer complaint and inquiry program. This resource includes a toll free number and centralized Web site for easy consumer access. Trained customer service professionals are available to answer questions and assist with a wide range of issues relating to financial products and services and consumer protection laws. Simply put, it serves as a one-stop complaint and inquiry site where consumers can go to get help from the Federal Reserve, or be directed to the appropriate regulator or agency. Consumers do not have to know which Federal bank regulator supervises the financial institution that they are concerned about in order to file a complaint or inquiry. Our customer service representatives query a national database in order to determine the appropriate regulator responsible for the institution in question. Misdirected telephone calls are transferred directly to the correct agency, and misdirected written or electronic correspondence is for- VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 8 warded. And for agencies with the capability, these complaints and inquiries are passed on electronically. Through our work with the other agencies, and through our own program, the Federal Reserve remains strongly committed to ensuring that consumer issues and inquiries are handled promptly, courteously, and thoroughly, and that consumers have access to an effective and efficient means for resolving complaints. [The prepared statement of Ms. Braunstein can be found on page 34 of the appendix.] Chairwoman MALONEY. Thank you. Next, Sandra L. Thompson, Director of the Division of Supervision and Consumer Protection of the Federal Deposit Insurance Corporation. Thank you for being here. STATEMENT OF SANDRA L. THOMPSON, DIRECTOR, DIVISION OF SUPERVISION AND CONSUMER PROTECTION, FEDERAL DEPOSIT INSURANCE CORPORATION Ms. THOMPSON. Chairwoman Maloney, Ranking Member Biggert, and members of the subcommittee, I appreciate the opportunity to testify today on behalf of the FDIC. The FDIC recognizes the importance of providing consumers a convenient and timely way to get help with complaints and questions about a financial institution or other banking matters. From a supervisory perspective, consumer complaints and inquiries often provide our examiners insight into problems in an institution and developing industry issues. Currently, consumers can contact the FDIC through our Web site, as well as through our toll free phone number, 1–877–ASK– FDIC, which is answered by our call center staff. The call center has received over 133,000 calls this year. In addition to consumer issues and concerns, the call center staff handles questions about deposit insurance and bank resolutions. For example, last year’s deposit insurance reform led to many inquiries about the increase in coverage for retirement accounts. And, when a bank fails, the FDIC provides institution-specific information for customers about the insured status of their deposits. When the call center receives a consumer complaint about an FDIC-supervised institution, or an inquiry that requires subject matter expertise, the caller is connected to the FDIC’s consumer response center. As part of the investigation of complaints, response center staff informs consumers of their rights under Federal consumer protection laws, and they review the bank’s actions to assess its compliance with the law. In order to help consumers determine where to send complaints, the FDIC Web site features a search tool called Bank Find. By entering the name of a bank, a consumer can immediately access information on the bank, including financial data, insured status, and its primary Federal regulator. The consumer can also link directly to the Web sites of the other bank regulatory agencies. The FDIC Web site also offers an online complaint form that consumers may use to file a complaint or inquiry. We are also working with our colleagues at the other Federal and State banking agencies to streamline the process for referring com- VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 9 plaints between agencies. A little over half of the complaints and inquiries received by the FDIC this year related to institutions supervised by other Federal and State regulators, and we promptly and directly referred those consumers to the appropriate regulator. Last week, the agencies that are members of the FFIEC agreed to explore the feasibility and technical requirements of additional improvements to the interagency referral process. We want to ensure that future enhancements to the agencies’ processes are both technically feasible and cost effective. The FDIC supports the intent of H.R. 4332, the Financial Consumer Hotline Act of 2007. The bill is consistent with the approaches that the Federal banking regulators have already committed to study through the FFIEC. Although conceptually simple, the creation of a single toll free number and Web site for interagency activities raises a number of issues and technical challenges. We must ensure that any improvements that the agencies undertake actually can achieve efficiencies that will benefit consumers. And because consumer correspondence, often by necessity, contains confidential, personally identifiable information, such as bank account numbers, Social Security numbers, and other financial data, it is imperative that any new information sharing system has sufficient controls to protect the consumer’s privacy and confidentiality. Because our consumer contact system addresses several issues that are unique to the FDIC, we are recommending a clarification that the bill’s requirement of a single toll free number and interagency Web site are intended to supplement, rather than replace, existing systems. Customers with questions about deposit insurance issues or issues regarding a failed bank should be able to continue to contact the FDIC for assistance directly, as they do now. In conclusion, the FDIC supports systems to ensure that consumers can get the answers they need on a convenient and timely basis. We look forward to working with the Congress and our fellow regulators to maintain and develop systems that achieve this goal. This concludes my testimony, and I would be happy to address any questions. [The prepared statement of Ms. Thompson can be found on page 87 of the appendix.] Chairwoman MALONEY. Thank you. Thank you very much. Ms. Cassandra McConnell, Director, Consumer and Community Affairs, Office of Thrift Supervision. STATEMENT OF CASSANDRA McCONNELL, DIRECTOR, CONSUMER AND COMMUNITY AFFAIRS, OFFICE OF THRIFT SUPERVISION Ms. MCCONNELL. Good morning Chairwoman Maloney, Ranking Member Biggert, and members of the subcommittee. Thank you for the opportunity to present the views of the OTS on Chairwoman Maloney’s bill, ‘‘The Financial Consumer Hotline Act,’’ to establish a single toll free telephone number for consumers to call if they have a complaint or inquiry regarding a regulated institution. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 10 The consumer complaint process is an important link between the institution’s regulator and its customers. It enables agencies to assist consumers in addressing problems at regulated institutions, and it helps agencies identify potential areas of risk at an institution for follow-up during an examination, as well as industry trends that warrant closer scrutiny. It also informs the agencies on areas where consumer education may be beneficial. A strong consumer complaint program is a valuable regulatory tool that strengthens the examination function. At the OTS, consumer complaints have revealed important information about weaknesses in internal controls, violation of Federal consumer protection laws, and potential unfair acts and practices. We share the concerns of the Chair, that consumers be able easily to identify the appropriate place to file a complaint or inquiry about a regulated institution. This not only helps the consumer, it helps us do our job more effectively. Establishing a single toll free consumer hotline is long overdue. We applaud the leadership of the Chair on this issue. The OTS is committed to fair access to financial services for all consumers, and fair treatment of customers at the institutions we regulate. OTS staff works directly with consumers to address their questions and inquiries, to investigate allegations and complaints, and to ensure that thrifts are in compliance with all applicable consumer protection laws and regulations. We use consumer complaint data to identify higher risk practices at institutions for follow-up by our examiners during regularly scheduled examinations. When warranted, we initiate specialized targeted investigation of particular institutions, based on information provided to the agency by consumers. All of this, of course, is predicated on the timely receipt of consumer complaints on the institutions we regulate. When this fails to occur, consumers become frustrated and may be harmed by the inability of a regulator to address their concerns. The FFIEC recently adopted a proposal to identify ways to improve the interagency consumer complaint process. This effort is aimed at simplifying the process for identifying appropriate regulators, creating easier complaint filing procedures, and improving the complaint filing procedure. It is intended to identify opportunities for enhancing the consumer experience, and leveraging the FFIEC agency resources to ensure that consumers reach the appropriate regulator. The OTS is working closely with the FFIEC to implement the initiatives set forth in the Financial Consumer Hotline Act, as well as additional items, to improve consumers’ access and confidence in our financial system. The proposals outlined in the bill are among the highest priority for the FFIEC. Given the work currently being conducted by the FFIEC, our only concern is the extent that the legislation could be viewed as limiting our ability to craft consumer solutions that it does not currently address, or delaying development of an FFIEC-sponsored proposal because of uncertainties surrounding a final framework of the legislation. The Financial Consumer Hotline Act sets forth a number of sound consumer protection initiatives that should be incorporated VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 11 in our banking system. These will improve the accessibility and confidence of consumers in our system, by providing a clear mechanism for filing consumer complaints. Given that the FFIEC is working hard to address these issues and other similar initiatives, we ask that you consider allowing the FFIEC to move forward on its work unfettered by legislative overlay. While we understand and appreciate your desire to address these issues expeditiously, we believe the FFIEC process will do that, while minimizing disruption to existing agency consumer protection programs. Thank you for your leadership on this issue, Madam Chairwoman, and for the time and effort of all the members of the subcommittee. I am happy to answer your questions. [The prepared statement of Ms. McConnell can be found on page 53 of the appendix.] Chairwoman MALONEY. Thank you very much. Mr. Leonard Skiles, executive director, National Credit Union Administration. Thank you for being here. STATEMENT OF J. LEONARD SKILES, EXECUTIVE DIRECTOR, NATIONAL CREDIT UNION ADMINISTRATION Mr. SKILES. Thank you Chairwoman Maloney, Ranking Member Biggert, and members of the subcommittee. I appreciate this opportunity to testify on behalf of the National Credit Union Administration regarding the proposal to improve the process by which consumers have their problems addressed and resolved. NCUA commends you for identifying this important consumer issue, and for formulating a well thought-out and sensible legislative approach. This proposal is consistent with NCUA’s longstanding position that every effort should be taken to safeguard consumers. We particularly note your interest in eliminating confusion about which regulators should be responding to the consumer. I think it is safe to say that we in Washington are somewhat familiar with the alphabet soup of Federal regulatory bodies, but it is unfair to expect average Americans to know which government agency can best help them. Frankly, they just want the problem fixed. And this proposal would improve the process to do just that. As you are aware, credit unions differ from other financial institutions in several respects. These differences are important, and are relevant to how complaints are addressed. First, they are not-for-profit financial cooperatives owned by their members. That member ownership carries with it certain rights, including the right of a member to be informed about decisions made by their credit union. Second, Congress has recognized the unique structure of Federal credit unions, and mandated, by statute, that each have a supervisory committee. This committee, comprised of three to five credit union members, is responsible for independent oversight of the board of directors, and to advocate the best interest of the members. In practice, members, because of their relationship with their credit unions and NCUA, have viewed the supervisory committee as a first responder for credit union members who seek redress. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 12 When a complaint is received, we encourage direct contact with a credit union. We believe this is consistent with the cooperative structure of credit unions. At the initial stage of the complaint process, we contact the supervisory committee, and direct a thorough review of the complaint. While that review normally resolves the issue in a timely manner, in case the member is not satisfied with the outcome, or the supervisory committee’s explanation suggests noncompliance with laws or regulations, NCUA has the authority to intervene. Importantly, at all stages, NCUA is actively engaged and oversees the process, to ensure that the member’s rights are protected. I should also mention that NCUA has taken steps to ensure consumers know who to contact if they do have an inquiry or complaint. This information is available on loan denial forms, posters, statements, and a centralized 800 number posted prominently on the NCUA Web site, through which a consumer can register complaints or make inquiries. This line averages about 120 calls per month, and is a focal point of the consumer contact with the agency. In short, NCUA encourages and facilitates consumer contact, has a structure in place to investigate complaints and provide answers, and, through our experience in regulating and supervising credit unions, we have a high degree of confidence that the system is working to the benefit of the credit union member. Turning to the proposed legislation, NCUA supports this initiative. Given the multitude of regulators, the distinction between Federal and State regulatory responsibility, and the increasing complexity of financial institution ownership structures, it provides another avenue for consumers to better understand the efficacy and procedures in place to protect their interests. Since a centralized call routing system would be a widely advertised process, it could, however, have an unintended result for credit union members. It is our experience that credit union members do not appear to be confronted with at least some of this government labyrinth. The name ‘‘credit union’’ provides a strong initial indicator of where a consumer should direct a contact, and NCUA believes it is important to preserve this distinction. So, while NCUA would be pleased to participate in any new consumer complaint structure, we want to emphasize the importance of a separate ability to assist consumers who are members of credit unions. The established NCUA method of dealing with consumer input, where the decentralized national system of regional offices can respond quickly, combined with the statutorily mandated supervisory committee structure overseen by NCUA, is a process that we believe Congress should want to preserve. The member-centric focus by credit unions is an element that NCUA not only recognizes, but attempts to foster. A credit union is expected to treat its members in a fair, beneficial, and, above all, legal manner. When that does not occur, NCUA proactively and aggressively polices the process, and makes certain that the members’ rights are protected. It is our view that the current system for credit unions is working. We believe it can continue to work in the proposed consumer complaint structure. And NCUA looks forward to opportunities to VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 13 collaborate with Congress and the FFIEC, as we take steps to assist consumers. Congress has recognized a need for improvement, and NCUA wants to be a part of the solution of ensuring that consumers do not, as earlier stated, fall through the cracks. Thank you very much. [The prepared statement of Mr. Skiles can be found on page 78 of the appendix.] Chairwoman MALONEY. Thank you. Thank you very much. I would like to give a very special welcome to the superintendent of banks from New York, Superintendent Neiman. He is here today testifying on behalf of the Conference of State Bank Supervisors, not just New York, but the whole conference of all State banks in our country. I thank you, and I welcome your testimony. STATEMENT OF RICHARD H. NEIMAN, SUPERINTENDENT OF BANKS, NEW YORK STATE BANKING DEPARTMENT, ON BEHALF OF THE CONFERENCE OF STATE BANK SUPERVISORS AND THE NEW YORK STATE BANKING DEPARTMENT Mr. NEIMAN. Thank you, Madam Chairwoman, Ranking Member Biggert, and distinguished members of the subcommittee. On behalf of the Conference of State Bank Supervisors, and the New York Banking Department, I really appreciate this opportunity to speak with you today. I personally also want to commend Chairwoman Maloney for her efforts on this very important issue. I am pleased to share our perspective on the proposal to establish a national call number and centralized intake for consumer inquiries directed to Federal regulators. States are on the front lines, and have provided many innovations with respect to handling of consumer complaints, including Web-based and consumer satisfaction surveys. We believe that the creation of a national system, one that also routes calls to the respective State agencies, when appropriate, is much needed. For those of you who are familiar with New York City’s general hotline information line, I envision this functioning as a national 311 for financial complaints. This issue has been on the Department’s agenda for some time. My predecessor, Diana Taylor, as superintendent of banks, also promoted this 311 concept before I joined the Department. And I concur that the time is right to put the idea into practice. Ideally, over time, if successful, this could be expanded to include a wider range of financial services beyond just those regulated by Federal bank regulators and State regulators, with the possible inclusion of the FTC. Consumers with a variety of concerns, whether related to credit cards, payment billing, or funds availability would benefit from an enhanced interagency information sharing. And in the context of the present turmoil in the mortgage market, a streamlined approach for handling consumer inquiries would be especially useful in outreach to borrowers facing a mortgage hardship. The goal is to connect with these homeowners early in the delinquency process, before their credit history is damaged, or they lose their homes to foreclosure. With our complex, financial services VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 14 system, however, consumers who want to be proactive may be confused, and understandably so, when trying to identify the correct government agency to contact. A consumer should not need to know whether their financial institution is a thrift, a savings bank, or a commercial bank, or a State-chartered institution or a national-chartered institution, or a sub of a bank or a sub of a holding company in order to receive assistance. And with many citizens unaware of the chartering authority for their financial institutions, State agencies regularly receive local inquiries related to institutions that are federally supervised. Troubled consumers tend to look locally first, when seeking help, and the statistics bear this out. In 2006, the New York Banking Department referred more than 1,300 complaints to the Federal regulators, well over half of the volume of the approximately 2,200 complaints we received. The figures for the year-to-date are virtually the same. It is critical, however, that any national hotline linking the Federal regulatory agencies include the capability to refer consumer inquiries back to the States. Resolution of the underlying issues that prompted the complaint often requires assistance at the local level. This is especially true in the case of mortgage lending, which, due to the nature of the collateral, is unavoidably local. Therefore, I am pleased that the current proposal provides for this referral to the States. In reviewing the draft of The Financial Consumer Hotline Act of 2007, we are encouraged that it represents a positive development toward the type of integrated system that is needed. In my remaining time, I would like to offer a few suggestions to further enhance the current proposal. First, while the Federal-toState referral mechanism is addressed in the proposed legislation, the reverse ability, to refer State to Federal, is not directly addressed in the current draft. We would suggest making this a twoway process more explicit, as there could be significant flow of referrals in this direction. Troubled consumers tend to look locally first when seeking help. And with many citizens unaware of the chartering authority for their financial institution, State agencies regularly receive local inquiries related to institutions that are federally supervised. Second, the database connected to a centralized intake system would be a source of vital statistics about trends and consumer complaints. This information could also be used to identify institutions generating a high volume of complaints that may warrant a target exam, or other form of enhanced supervision, or to identify the need for regulatory or legislative changes. The same system could also be used to track case resolution status and response times. We recommend expanding the proposed legislation to mandate the FFIEC to produce such monitoring reports to maximize the value of the system. And, third, consideration should be given to the development of model forms and intake processes, to ensure that all participating agencies collect consistent and sufficient information. CSBS has developed a model form and is preparing best practices for agencies in the operation of their call centers. A copy of the form and a list VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 15 of the standards that CSBS is developing for its members is included in my written submission for your reference. The States welcome the opportunity to share our perspective on the approaches to complaint case management that we have tried, and have found to be effective. The New York State Banking Department was the first State regulator to enter into a complaint sharing agreement with the OCC, and we offer our positive experience with this partnership in support of the concept of a nationwide hotline. I thank you for your time this morning, and for inclusion of the States’ perspective. I would be glad to address any questions. [The prepared statement of Mr. Neiman can be found on page 69 of the appendix.] Chairwoman MALONEY. Thank you very much. I would like to ask Mr. Walsh, the statistics on consumers who call the wrong number are certainly impressive, the numbers that you gave. And the FDIC alone, it seems that about a third to half of all the people who call a Federal bank regulator call the wrong one. I would say that it seems logical that if each agency spends a third of its time sending calls to the other agencies, that a great deal of consumer frustration and needless cost and time to the agency occurs. Would you say that these statistics are strong support for this bill? Mr. WALSH. Madam Chairwoman, certainly the numbers are support for the contention that a lot of calls wind up in the wrong places. Of course, it’s worth bearing in mind that receiving a call that needs to be redirected does not take the time of handling a case, or sorting through a complex issue. So, it—the numbers are too large to be acceptable, but they wouldn’t represent a third of the time that our consumer assistance people spend. Chairwoman MALONEY. You also mentioned the need for a public relations campaign to raise consumer awareness of the hotline. What sort of campaign do you envision, and do you believe that it is required to be part of this bill? Mr. WALSH. Well, the notion there was that if there—if FFIEC, for example, decides to create some of these centralized functions, that the natural part of including that process would be to publicize the creation of a single number, or a single Web site, whatever it might be, and that process of making consumers aware of a single Web site would, of course, increase awareness, generally, of the service that is available. So, we would expect that to be part of any plan to roll out any new system that would be agreed to. Chairwoman MALONEY. Thank you. Superintendent Neiman, I liked your idea to add a mandate to collect data on consumer calls to the centralized hotline. What should such a mandate include? And I liked, also, your idea of a centralized form, to have uniformity in the system. But what would you see in this mandate, and what are the key measures that should be part of it, for us as regulators, to monitor? Mr. NEIMAN. Certainly trends in the nature of the complaints. Are they folks in a particular area? Within credit cards? And even VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 16 within credit cards, is there a particular segment of complaints around a particular issue? As some of the other regulators mentioned, that type of information is extremely helpful in preparing for examinations, as well as follow-up supervisory reviews at those institutions. I think it also is important to identify those institutions that do have a higher rate of complaints in comparison to their peers. So I think it is extremely useful information for individual regulators taken separately, but also taken as a group, to identify trends and areas requiring further review, further supervision, or possibly areas that require regulatory change, if these areas of concern are expansive. Chairwoman MALONEY. It would also be very helpful for congressional oversight. You mentioned in your testimony that sharing information with the OCC was pioneered by New York State. Are other States following your lead? Do the other States have these types of programs? Mr. NEIMAN. There are certainly a number of States. I think the specific number now—I bet John has it—is 30. Thirty States have now signed on to that memo of understanding confidentiality agreement. Chairwoman MALONEY. Okay, and how could the establishment of a single toll free number help raise the profile of banking regulators as a consumer resource for registering complaints and inquiries. Mr. NEIMAN. Well, I agree that a consistent marketing approach would be an important element of identifying for consumers a single national hotline to call for financial complaints. Chairwoman MALONEY. And I would like to ask—some of the panelists raised concerns that this legislation may interfere with initiatives that they already have in place. That was certainly not the intent. It was more of referring to the appropriate place, saving consumers time, helping monitor trends, and so forth. Are there any specific examples in the legislation where it, in any way, interferes with what is happening in your own agency’s regulation and oversight? Anyone? Ms. BRAUNSTEIN. Well, I think our concerns are that mandating certain kinds of practices, like the 1–800 number and other things in the legislation, could end up conflicting with whatever we learn from the third-party vendor that we hire. We all have—we recognize the intentions of the legislation, and I think we are all on the same page, that we need to do whatever we can to improve the complaint process for consumers. But we, the agencies, just decided to hire a third-party vendor to get some professional advice about what would improve things for consumers. And suppose the recommendations that come out of that study somehow conflict with what is in the legislation, but we’re locked in by the legislation? I think that is one of our concerns. We also have concerns, in terms of legislation locking us in in the future, in terms of being able to take advantage of technological advances in the future. Who knows, 10 years from now, what kinds of operations people will use to file complaints? VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 17 And so, we want to be able to remain—we just want to be able to have some flexibility, in terms of the changes and the enhancements that we do make to the systems. Chairwoman MALONEY. Well, just to be clear, the legislation does not relieve any agency of the responsibility to respond to consumer complaints, it only takes away the significant burden of helping consumers find the right agency. And I would say that is a valuable resource. And, obviously, legislation is always updated to respond to new technology. I now call upon my good friend and colleague, the ranking member on this committee, Congresswoman Biggert, for 5 minutes. Mrs. BIGGERT. Thank you, Madam Chairwoman. My line of questioning is somewhat similar. But I think that we, a couple of years ago, passed legislation that was to deal with financial literacy in education, and asked the various agencies to work together so that there wasn’t duplication, and so that the agencies would know what the others were doing. But my goal was always to do no harm. And I think when we look at legislation like this, it still is to do no harm. And when I hear the word ‘‘mandate,’’ I get a little concerned. But maybe you can relieve me of that concern. For example, do you see any other unintended consequences arising from the proposed legislation? And another question I have is, how is this paid for? Ms. Braunstein, you talked about the Federal Reserve having a hotline now, and directing it to other agencies, and the FDIC, too. Of course, I would assume that is something that comes out of your pocket. But with this bill, I don’t know where that comes from. Would all the agencies have to get together? Would this just be something else that comes out of the Federal Government? Ms. BRAUNSTEIN. I would think we would all have to chip in to enact whatever is done in the legislation. But the current system, as you said, comes out of our budget. Our system, as do the other agency systems come out of their budgets. Also, I do want to clarify something that Congresswoman Maloney raised, and also you just raised, is that, frankly, the consumers now don’t have to know which agency to go to, because we have established some pretty robust systems among us to get them to the right place. So, I know if they call us, and it’s a misdirected call, we get them to the right place very quickly. I am not sure that’s any different than if they call a 1–800 number and they still will have to be transferred to the right place. Mrs. BIGGERT. How do they get— Ms. BRAUNSTEIN. I believe that is going to get very— Mrs. BIGGERT. How do they get to you, though, right now, with the hotline? How do they know to call you? Ms. BRAUNSTEIN. Well, we have advertised the hotline. I would assume there is information in some of their financial institutions. And some of the consumers we find just—they kind of take a shot in the dark. And they know—the Federal Reserve is known, so we get a call. Or the FDIC is known, so people pick up the phone and call them. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 18 And, like I say, if they did call the wrong place, or they wrote to the wrong place, we get it to the right place very quickly. Mrs. BIGGERT. Ms. Thompson, would you like to comment on that? Ms. THOMPSON. Yes. Certainly, the FDIC supports the intent of the legislation, and we would just like to make a recommendation that there is a clarification in the bill that a single toll free number is intended to supplement, and not replace, existing processes. The FDIC logo is prominently displayed on all insured depository institutions, and we do get lots of calls. Apart from consumer complaints and inquiries, we get lots of calls about deposit insurance, such as, ‘‘Am I covered if a bank fails, or is having problem?’’ People want to know what their deposit insurance status is. So we just want to make sure that this supplements, and does not replace. Mrs. BIGGERT. Are you concerned about the possibility that the legislation could slow down the projects that you are currently working on to improve customer service? Ms. THOMPSON. Well, we are going to move forward with the FFIEC program, and we are supportive of anything that makes a process easier for consumers to understand. But we would like to work out the details. Mrs. BIGGERT. What would be the—I do not know if there would be liability, but say somebody does call the hotline, and is misdirected to the wrong place, and the consumer never does kind of find the right place to—for their complaint, or—and then they are not helped. Is there any issue on that, or any issue of privacy? Ms. THOMPSON. There are issues regarding privacy, and also information security. When people call, they usually call with a specific question about their specific bank account, so they have to provide identifying information. So, we would be very concerned that any system—whether it was through the Web or through a telephone—made sure that a customer’s private information was secure, and that the information was safe. Mrs. BIGGERT. Anybody—Mr. Walsh? Mr. WALSH. Yes, if I could. I think, in this case, since the legislation—since the idea here is focused on a facing-the-world new piece of technology, if you will, or a new place that people can go to that is unified in nature, and its basic purpose is to route calls to the right end point, it has not been—I think it was agreed by the council when they met that, as Ms. Thompson has mentioned, the idea in the project that we are looking at is to add something to the process that would handle this routing issue, not to change or interfere with other processes. The project itself is funded through a cooperation within the council, and any eventual 1–800 number, whatever else, would similarly be shared cost among the agencies, and that is quite routine within the activities of the council. So—and as to questions of privacy or protection of the information of the consumer, that problem, that issue, exists no matter how that intake occurs. So, I think as long as we’re talking here about simpler and more assured routing, I don’t see that any substantial problems arise. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 19 Mrs. BIGGERT. Thank you. My time is expired. I yield back. Chairwoman MALONEY. I would like to just add that in the Act establishing the council, as Mr. Walsh says, everyone would chip in, unless they agree otherwise, so as to maintain maximum flexibility. And certainly, the intent is not in any way to supplant the wonderful activities that many of you are doing already in your agencies; it is just to provide a more simplified routing system to save consumers time and help them receive the information that they need to have more quickly. I now recognize Mr. Green for 5 minutes. Mr. GREEN. Thank you, Madam Chairwoman. And, again, I thank you for this most valuable piece of legislation. Let us start with identifying a term. There is a French term, ‘‘voir dire.’’ Lawyers are familiar with it. Some of you may not be familiar with the term. It is a term that means, ‘‘to speak the truth,’’ and we use this in trials, so as to examine large numbers of persons en masse when we are asking our questions. So, I am going to ask questions of you en masse, and hopefully I will get through this a little bit faster. If you agree that we need one number so that all consumers can call one number and be properly routed to the correct agency, if you agree that one number is needed that will not preempt other numbers, would you kindly raise your hand? [Show of hands] Mr. GREEN. Thank you. Let the record reflect that everyone agrees that one number that does not preempt other numbers is needed. If you support this bill, as currently drafted, would you kindly raise your hand? [Show of hands] Mr. GREEN. Okay. All right. Now, if you did not raise your hand then, would you raise your hand now? [Show of hands] Mr. GREEN. All right. So, let the record reflect that all but one of the witnesses seems to support the bill as currently drafted. If the bill can be tweaked such that you can find a means by which it is acceptable and supported—this would apply to Ms. Braunstein—would you conclude that it can be tweaked, such that you can support it? Ms. BRAUNSTEIN. Yes. And I do want to say we support the intent of the bill, absolutely, 100 percent. We just are not sure that it is necessary to sustain momentum, and that we are already moving in the direction— Mr. GREEN. Well, now— Ms. BRAUNSTEIN. —that the bill is— Mr. GREEN. Let me just ask you this, Ms. Braunstein. My initial question was, do you think we need one number? And your response to the initial question was ‘‘yes.’’ Ms. BRAUNSTEIN. Well, we—that is why we hired a consultant, was to move in that direction. Mr. GREEN. Okay. Now, in Texas— Ms. BRAUNSTEIN. I support that we are— VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 20 Mr. GREEN. So you are getting ready now to do something, you are starting to do something. In Texas, we call that, ‘‘fixing to do.’’ And I appreciate what you are fixing to do, but I don’t see how that would preclude us from doing what we are fixing to do. Why would what you want to do preempt in some way what we are trying to do? Or should it preempt what we are trying to do? Why should it? Ms. BRAUNSTEIN. I guess I do not want to presuppose what the conclusions of our consultant will be. Mr. GREEN. Let us assume— Ms. BRAUNSTEIN. And so I cannot predict— Mr. GREEN. Let us assume that your consultant tells you to do whatever you can imagine. Would your consultant say to you that we don’t need that single number, do you think? Ms. BRAUNSTEIN. I don’t know that. I would think not, that it would not be a problem, which is why I raised my hand about the 800 number. But I don’t know what the consultant will or will not say. I don’t think we can predict that. Chairwoman MALONEY. Will the gentleman— Ms. BRAUNSTEIN. But we are hiring somebody. Chairwoman MALONEY. Will the gentleman yield for a second? Mr. GREEN. Always to the Chair, absolutely. Chairwoman MALONEY. The planned study apparently will not yield a report until the end of 2008. And don’t you think that consumers should get the benefits of one-stop shopping and information sooner than that? The chairwoman yields back. Mr. GREEN. I would gladly want to hear the lady’s response to the question. Ms. BRAUNSTEIN. Well, yes. I agree with anything that will improve the process for consumers. Mr. GREEN. How is it, Ms. Braunstein, that you would conclude that we need the number, but we really do not need the number if the number impacts my operation. Let me retract that. The number has no impact on what you are doing. You continue to do what you are doing. You continue to publish your number. You continue to be effective in doing what you are doing. Now, why would this number become a problem? Ms. BRAUNSTEIN. It is not. Mr. GREEN. Okay. One more thing. On the question of privacy— and, Mr. Walsh, you addressed this, but I just want to go back to it—did you not say, sir, that the same question exists, regardless of what number we have? Is this correct? Mr. WALSH. Well, we would be—we are concerned, we do deal very carefully with protection of privacy of any case that is brought to us by whatever means, and that would be true whether it came through a referral through an 800 number or— Mr. GREEN. So this doesn’t present some peculiar set of circumstances that we don’t already have to cope with? Mr. WALSH. I don’t believe so. Mr. GREEN. Okay. My final question is this: Do you each now have a number for consumers to call? If you do, raise your hand. [Show of hands] Mr. GREEN. All right. You all have a number. So now, can you agree that if you all have a number, if one number can get the con- VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 21 sumer to each of your numbers, can you agree that would be beneficial? If so, would you raise your hand? [Show of hands] Mr. GREEN. Okay. Let the record reflect that all persons agreed. Thank you, Madam Chairwoman. I yield back. Chairwoman MALONEY. Thank you for your questioning. I now recognize Mr. Hodes for 5 minutes. Mr. HODES. Thank you, Madam Chairwoman, and thank you for offering this legislation. I noted in the testimony of the OCC that there are 70,000 total cases opened each year. Of those, what is the current inventory in active cases? How quickly are your cases turning over? Mr. WALSH. Within that number, there are about 40,000 that are, in fact, inquiries. They are the kind of questions that can be answered relatively expeditiously. And about 28,000, in the most recent year, became what we call actual complaints that were opened, that then have to be processed. And the goal, with those complaints, is to complete them within 60 days. We have—I am not sure at this moment of the backlog. There is always a kind of a time trail behind that. Our staff has actually been doing Saturday work to work at that backlog, because the numbers have been up a bit, although not as much as one might expect, given some of the problems taking place out in the credit markets. Mr. HODES. Thank you. I appreciate the importance that the regulators who are testifying here today place on handling consumer complaints, and the efforts that you are making, sort of interagency, to work together towards the goal of efficient handling and directing of the kinds of complaints we are dealing with. Are there any statistics that tell us how many total consumer complaints, among all the groups of regulators that are here today, that we are seeing on an annual basis now? Do we know what that number is? Mr. WALSH. We certainly know individually. I have not consulted with the others to add them together, but we can certainly provide that number. Mr. HODES. So, for instance, that piece of information is not something that, so far, regulators have gotten together to talk about yet. Is that correct? Ms. THOMPSON. We do get together periodically. In fact, we get together quite often. A couple of years ago, the FDIC sponsored a conference where we talked about these issues. This year it was at the OCC. Next time it is at the Federal Reserve. We do speak frequently. But, to your point, there is no mechanism. We would all have to get together and bring our numbers. There is no central repository of information for that data. Mr. HODES. So, would you agree that it is possible that this legislation, and the creation of this number, would facilitate that kind of data sharing? Ms. THOMPSON. Yes. Mr. HODES. Ms. Braunstein, you said an interesting thing during your oral testimony. In answer to a question about what was available to consumers, you said that you assume there is some infor- VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 22 mation in their financial institution telling consumers who to reach and how to reach them. The use of the word ‘‘assumed’’ to me was interesting, because I am trying to think back—I go into my bank quite frequently— about what is displayed, and how I know about where to go if I have a complaint. And I am not the most observant person in the world, but I cannot think of any prominent display in my financial institutions, the ones I use regularly, that say, ‘‘If you have a problem, here is where to go.’’ And so, what strikes me in listening to the testimony, and reading the testimony that all of you have presented, is that the good news is that, in some way, each of the folks here have good access for consumers’ complaints. Everybody has an 800 or an 888 number, and everybody is trying to do something. That is the good news. The bad news is that everybody has a different 800 number, or 888 number, and everybody is trying to do something. And it strikes me that, both in terms of data and the ability to facilitate sharing, as well as being able to provide one-stop shopping for consumers, the number is a good idea. I confess I have not read the legislation in detail, so I don’t know whether this is in there. Would you find that a requirement that there be a prominent display in the covered financial institutions of the 800 number—assuming that the legislation goes through and there is an 800 number—that there be a prominent display in each financial institution that says, ‘‘Here is your 800 number. If you have a problem, here is where to call,’’ would be a good idea? I will take it from any one of you. Ms. BRAUNSTEIN. I think that is an excellent idea. Mr. HODES. Anybody have a problem with it? Anybody— Mr. NEIMAN. I don’t have a problem. I think it is very important. And, in fact, even more important with respect to operating subsidiaries of institutions. So, if you have a mortgage subsidiary that is a mortgage subsidiary of a Federal bank, those States would not have any jurisdiction, and that complaint should be directed to a banking regulator. If it is a subsidiary of a holding company, and the mortgage subsidiary is regulated by the State, it should be directed to the State supervisors. So, a mandated number, a national number, whether it be prominent in a statement or a brochure or a Web site of that service provider, would be extremely helpful. Mr. HODES. Okay. I am actually thinking about some kind of poster that is right there, where people are dealing with it, where they cannot miss it. That kind of thing, that can direct to State or Federal, or whoever it ought to go to, but the consumer now knows there is one place to call if you have a problem. Ms. BRAUNSTEIN. A poster in the lobby is an excellent idea, but a lot of people don’t go into their banks anymore, so you might also think of other means— Mr. HODES. Sure. Understood. Great. Thank you. I have no further questions at this time. Thank you very much. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 23 Chairwoman MALONEY. I thank my colleagues for their questions, and I would like to note that all of the witnesses’ testimony, their written testimony, will be made a part of the hearing record. And I would like to note that members who may not have been able to be here—it is a busy week—will have an additional opportunity to ask questions of this panel. They may submit them in writing and without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record. I thank you very much for your time and for your excellent testimony today. Thank you for being here, and we will go to the next panel. I now recognize and welcome Jeannine Kenney, the senior policy analyst of the Consumers Union, and Edmund Mierzwinski, the consumer program director of U.S. Public Interest Research Group. Thank you both for being here. First, Ms. Kenney, the senior policy analyst of Consumers Union. STATEMENT OF JEANNINE KENNEY SENIOR POLICY ANALYST, CONSUMERS UNION Ms. KENNEY. Thank you, Madam Chairwoman, and members of the subcommittee. On behalf of Consumers Union and the Consumer Federation of America, we appreciate this opportunity to talk about the significant barriers that consumers face when they simply want to complain about their bank. Assuming consumers even know they have the right to complain in the first place, it is understandable that they have such difficulty in knowing where and how to complain. Consider what consumers must understand to know where to complain. They must know that there is a difference between a national bank and a State chartered bank, and that there is an OCC, and that it regulates national banks. They must know that the national bank operating subsidiaries—which may not call themselves banks—are regulated by the OCC, as well. They must know that the Fed supervises State-chartered banks that are members of the Reserve system, but that the FDIC supervises State-chartered banks that are not members of the Federal Reserve system. They must know that there is a difference between a bank and a savings and loan, that a savings bank is a thrift, and that the OTS regulates them. And they must know that credit unions can be State- or federally-chartered, and that there is an NCUA. This sounds ridiculous, and it is. To most consumers, a bank is a bank is a bank. Regardless of how and by whom it is regulated, they need to know how to complain. And when they have a problem, it should be easy for them to do so. Right now, it is difficult for all but the most persistent consumer to determine where, how, and to whom they should complain. And faced with a dizzying array of options, consumers may simply give up. A single consumer toll free complaint hotline provided for in your legislation, Madam Chairwoman, The Financial Consumer Hotline Act, is an excellent first step in rectifying the inherent difficulties created by what is a fragmented and Byzantine regulatory system, and we are pleased to offer our support for it. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 24 We also applaud the legislation’s directive that the agencies report back to Congress on their efforts to establish a single interagency Web site for the routing of complaints, and are pleased that the agencies are working together to look for improvements. But to be truly effective, a complaint system must do the following: It must be easy for consumers to access and use; it must be effective for the individual consumer; and it must provide transparent and meaningful results to the Congress, to the public, and to the regulators. To that end, we would argue that the agencies should establish a seamless, integrated complaint system on the front-end—not just a referral site or a toll-free number—with a consistent complaint procedure, a single, easy-to-understand complaint form, a single snail-mail and e-mail address, and a single fax number. So long as the agencies maintain their own stovepipe Web pages, the confusion will simply not end. The agencies should work out the difficulties and complexities on the back-end, and those complexities should remain hidden to consumers. In addition, both formal and informal complaints should be accepted by phone and via secure online connection. The current requirement by most agencies that consumers mail their formal complaints erects just one more barrier to the process. And any single Web site and hotline should be widely promoted, as the prior panel suggested. But perhaps most importantly, an effective complaint system should not discourage consumers from complaining, but encourage consumer input, commentary, and complaints. We believe that the current system is structured not just so that the process itself discourages complaints, but so that the substance of the Web sites and the brochures that the agencies provide subtly discourage consumers from complaining. Consumers are told to contact their bank first, before complaining. Someone upset by the conduct of their bank is understandably discouraged by this advice, and it probably means that some violations of law will go undetected by the regulator. Consumers are also told that their complaint will be routed to the bank for a response, a process unlikely to be encouraging to a consumer who has been down that road, only to hit a dead end. They are told that when it comes down to believing what the bank said and the consumer said—that is, when there is a question of fact—the consumer is on her own, and advised to consult legal counsel, an option ludicrous on its face for all but the most significant financial injuries. OCC’s HelpWithMyBank Web site advises consumers to contact the complaint line if they cannot find their answer online. Unfortunately, when they look for the answer online, they are more frequently than not told that what the bank is doing that is so bothering them is perfectly legal. The content on the Web site provides, more often than not, what the bank’s rights are, not what the consumer’s rights are. Also, as we point out in our written testimony, in some cases, the information is flat out wrong. On an issue I know you have been very concerned about, Madam Chairwoman, overdraft loan fees, on HelpWithMyBank, consumers are told that there are no limits on the size of fees that banks must VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 25 charge, that banks are not required to process checks so as to avoid overdraft fees, that banks get to choose whether to reject the check or charge the overdraft fee, that the law does not require deposits be processed before debits, and so on. Nowhere, by the way, are consumers told that they could opt-out of this service and pursue other, less costly, overdraft protection services. Would any rational consumer bother to tell the regulator that they don’t like what the banks are doing on overdraft loan fees in the face of this information? Of course not. And that means the regulators are missing out on critical consumer input. The reality is that consumers will not waste their time when the consistent message from the regulators is, ‘‘We cannot or we will not help you.’’ And although most complaint centers describe themselves as neutral arbiters, consumers can be forgiven for thinking the deck is stacked against them. When they bother to file a formal complaint, they are going to, more often than not, receive a ‘‘toughluck’’ letter. Consumers deserve a regulator that serves as their advocate, not their adversary. Finally, we would urge a single technical platform for the agencies with a uniform complaint coding system, so that we can facilitate information sharing of trends regarding the types of complaints. And the coding system should be granular, so we know exactly what consumers are complaining about, not just the broad categories that we hear about in the OCC Ombudsman Report. Finally, the complaint system must be more transparent to policymakers and the public. Right now, it is not. We receive general information. We don’t even know, unless we do the math ourselves, how many complaints the agencies are receiving. So, with that, Madam Chairwoman, thank you very much. [The prepared statement of Ms. Kenney can be found on page 42 of the appendix.] Chairwoman MALONEY. Thank you very much for your testimony. Mr. Edmund Mierzwinski. STATEMENT OF EDMUND MIERZWINSKI, CONSUMER PROGRAM DIRECTOR, U.S. PUBLIC INTEREST RESEARCH GROUP Mr. MIERZWINSKI. Thank you, Chairwoman Maloney, and members of the committee. I am pleased to testify in support of your legislation to establish a joint hotline among the several Federal bank regulators, and also the requirement that there be a study done of a joint Web site for the regulators, as well. We support, in addition, a number of other suggestions and changes to improve the legislation, and some other changes that may go beyond the intent or the scope of the legislation, but that we think would be important for the subcommittee to consider in future legislation. The great science fiction writer and futurist, Arthur C. Clarke, once said that any sufficiently advanced technology is indistinguishable from magic. Unfortunately, there is nothing magical about dealing with a Federal bank regulator. Consumers who complain to us are very VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 26 frustrated with their interactions with the banks. We believe, however, that your legislation will go a long way toward creating a seamless interaction. The first recommendation we would have—and we concur with Consumers Union and the CFA on this, of course—is to establish one-stop consumer complaint shopping, no matter what the point of entry is, whether it is phone, Web, e-mail, fax, snail mail, or perhaps even a walk in. Consumers should have one Web form, one complaint form, and they shouldn’t have to deal with figuring out anything. The Web site or the bank telephone numbers should figure out, ‘‘Okay, here is a complaint. We have taken it in, we will figure out who to send it to, we are not going to ask the consumer to decide is it a national bank or is it a State bank, is it a national bank or is it an operating subsidiary.’’ The OCC’s Web site currently requires this sort of forensic examination by a consumer through a set of drill-down menus. The consumer should not have to deal with anything like that. We believe that this intake system, this centralized source, should also be in both English and Spanish, to start, and perhaps in other languages in the future. Also, and I believe some of the bank regulators even may have supported this concept, which surprised me—is that we believe there should be advertising at point-of-sale in the banks. We suggest something like a complaint busters logo, modeled after the Ghost Busters, ‘‘Who are you going to call,’’ or Mr. Yuck at the Poison Control Center, something easy to remember, something easy to identify, something that consumers will see and say, ‘‘Look, if I have a problem with my bank, I see the poster on the wall, or I see the link on the Web site, and I will contact this number.’’ Something like that would greatly aid in pushing this out into the public’s eye. And even if we can’t get legislation enacted that requires it to be posted in every bank, it should certainly be promoted by the regulators in some way. Much of the problem that consumers face is that the problem isn’t finding a bank regulator, it is getting a bank regulator to do something about their problem. The most recent studies of the GAO on the bank complaint handling process at the regulators suggest that the number one recommendation of the regulators is, ‘‘Sorry, we cannot help you, it is a contractual matter.’’ ‘‘Go to court,’’ or something like that, but ‘‘Sorry, we cannot help you, go away.’’ And the least common response of the bank regulators to a complaint is that, ‘‘The bank made an error.’’ In our view, the bank regulators aren’t even balanced in the middle. They are, essentially, on the side of the banks. So we would suggest that you take some of the money that the regulators receive in the form of fees—and they mostly are outside the Federal budget process, they mostly get their money from fees from regulated institutions—and put that money into the centralized source, and make the centralized source into an advocate for consumers. We already have a model in about 40 States that have a national association of State utility consumer advocates. They take a portion VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 27 of utility fees, and they create a regulator who simply acts on behalf of consumers. To go even further, you could establish something that consumer groups have been supporting for years, and then-Congressman Schumer supported 20 years ago, which was the establishment of a financial consumers association that is chartered by the government, but run by consumers and paid for by dues, that has an opportunity to raise money by putting inserts in bank account statements. Again, I think Mr. Neiman strongly supported a lot of this—we need to require accountability of complaint systems. We need to have data more easily available to you, the policymakers, to me, to the public, to academics, and to others. What if the top 10 banks were ranked on the basis of their per capita level of complaints? What if the 10 worst banks appeared on a Web site? This would be very interesting, to have the regulators posting this kind of information, which would help the market work. But, at a minimum, we really need to look at getting more information about these complaints out there without having to file FOIAs and receive data full of redactions months or years later, which is the current situation of dealing with the bank regulators. We need to address the toxic regulatory culture. As I indicated, the regulators just aren’t on the side of consumers. I do not have time to go into this today, but in our joint testimony, of all the consumer groups presented by Travis Plunkett of the CFA at your hearing this summer, we presented a number of the issues, a number of the problems. For example, the Federal Reserve, the only agency not to fully support your legislation today, has tremendous legal authority today to ban some of the most unfair bank practices, which it simply chooses not to use. Next, we really believe you need to reinstate State attorney general enforcement authority over Federal banks and other Federal institutions. Again, it is a long-standing concern of the consumer groups that the OCC’s preemption determinations, as upheld by the courts, are unfair. We need more consumer cops on the beat. We need the competition between State and Federal regulators to come up with the best public policies. And, finally, as I indicated earlier, the major response that the bank regulators make to consumers, according to GAO reports to the Congress is, ‘‘Go away, your complaint is contractual.’’ Well, the consumer can’t take that complaint to court, because mandatory arbitration provisions in their bank contracts prevent them from going to court. So, we support Representative Hank Johnson’s legislation, The Arbitration Fairness Act, that would eliminate binding mandatory arbitration as a requirement in all consumer contracts. Thank you very much. [The prepared statement of Mr. Mierzwinski can be found on page 61 of the appendix.] Chairwoman MALONEY. Well, I would like to thank both of you for your testimony. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 28 But as you heard from the first panel, the Federal Reserve says that this legislation is not necessary to encourage the banking agencies to develop a consumer response program such as hotlines. What is your view of this? Is the Fed doing enough on its own, or do we need this legislation? Ms. KENNEY. Well, I imagine that Ed and I are not in disagreement on this. Certainly, we are pleased that the interagency working group is moving forward on this. But, frankly, it is long overdue. And there is nothing duplicative about legislation that holds the regulators’ feet to the fire, and ensures that they do what they should have done a very long time ago. Mr. MIERZWINSKI. We would agree. I was pleased, when I looked on the Fed’s Web site, when I was preparing my testimony. They now have consumers on the homepage, and that is good. But they need to do more. They need to support this legislation. And, even if they don’t, go forward without them. Chairwoman MALONEY. I would like you to comment on the suggestions by Superintendent Neiman for additions to the bill. Do you agree that adding a requirement for tracking trends and case numbers could help with congressional oversight, and provide a factual basis for seeing if legislation on a particular issue is needed, for example? I would also like to respond to your testimony that we need to track whether or not consumers are satisfied with the answers. It is one thing to be able to lodge a complaint, but have they gotten an answer that allows them to correct the situation, or improve the situation? Ms. KENNEY. We would certainly agree, and I think indicate in our written testimony, that a really fundamental function of a complaint system is tracking consumer attitudes, not just formal violations of law. And that is an opportunity that the current system, because it is stovepiped, and because it discourages those types of comments, really misses out on. So, absolutely. I mean, it is a little bit shocking if tracking is not happening now, I think. And, certainly, all of these agencies need to do a better job in tracking consumer satisfaction with the resolution. We hear from consumers who are not just frustrated because they can’t figure out where to complain, but who are really unhappy with the outcome that simply says this outrageous practice was disclosed in a contract you saw 4 years ago, and so, take it up with your bank or go talk to a lawyer. Mr. MIERZWINSKI. We agree. Chairwoman MALONEY. Okay. And finally, to what extent are statistics currently available to you, as advocates for bank customers? You mentioned the overdraft challenge. Is there a way that you can track how many consumers are disturbed about this practice? To what extent are statistics there for you to track trends that are extremely burdensome to consumers? Ms. KENNEY. Well, Madam Chairwoman, we do have the data that is sort of reported in bulk by the agencies, which the OCC now reports in the Ombudsman Report, which gives you very broad cat- VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 29 egories of complaints by product, and then within each individual product. But frankly, it is very difficult for us to know without—as Ed mentioned, you know—doing a FOIA request, how many people, for example, are complaining about overdrafts. And, even within the overdraft category, what specifically they are annoyed about. The size of the fees? The number of fees? The order of processing? Check hold times? And so forth. Mr. MIERZWINSKI. Yes. We would certainly agree that it is very difficult to obtain information, other than the summary data that they provide, unless you file a very specific FOIA request. I would also take this opportunity to say that the other place that the consumer groups find inadequate data availability is in the call reports. When we want to compare different banks, and figure out how much money they are making on all their new fees, the call reports are extremely inadequate. I know there are some government GAO studies of call reports going on now, but it would greatly aid us if we could get all of this information without having to file FOIAs, without having to jump through hoops. Chairwoman MALONEY. Well, my time has expired. I now recognize Congressman Green for 5 minutes. Thank you. Mr. GREEN. Thank you, Madam Chairwoman. Madam Chairwoman, if I had any doubt prior to hearing these two witnesses, it has been completely eliminated. I again commend you for the simplicity of the idea that will deal with what appears to be a very complex set of circumstances. As indicated, the system appears to be Byzantine. In a polyglot society, that makes for an unusual set of circumstances. So, Ms. Kenney, let me ask you the question, given that we are a polyglot society, should we have multiple languages available to persons who call in? Ms. KENNEY. Absolutely. And certainly starting with the most frequently spoken non-English languages on the Web site, as well as on the hotline. I know that does create some resource issues, but we certainly need to be responsive to all types of consumers who are aggrieved by their bank, and particularly those who have fewer resources available to them. Mr. GREEN. Thank you. And because I have really enjoyed hearing your testimony, not because you have a melodious voice—although you do sound good—but because of the substance that you presented. It was overwhelming, to a certain extent. So, permit me to ask this, so as to enhance your level of acceptance among a diverse group of folk who will have to pass judgement on what we are doing. How are you funded? Let us start with Ms. Kenney. How is your organization funded? What I am trying to get to is this: Do you have an axe to grind? Is there some reason for you to come to Congress and present the kind of testimony that you presented? And I think you spoke well. Is there some reason that you would have to do this, other than that you want to see the right thing done? So, tell us, how are you funded, if you do not mind? Ms. KENNEY. Thank you, Congressman Green, for your kind words. Consumers Union is a nonprofit organization fully funded VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 30 by consumer subscriptions to our print magazine, to our online Web site, as well as to some of our other print products, such as our health and financial newsletters. And we receive some charitable contributions from foundations. But we receive no corporate support, and accept no advertising, whatsoever. Our goal is to protect consumers and to inform them. Mr. GREEN. And when you arrive at the positions that you espouse, do you—how do you synthesize these positions? You do not just wake up one morning and say, ‘‘You know what? I think this is a good idea.’’ Is there some process that you go through to arrive at the position that you have arrived at? Ms. KENNEY. Yes. Certainly one of the advantages that we have is we work across a wide range of substantive areas, and we can see difficulties facing consumers across those areas in some of the same categories. And, certainly, the banking agencies are not alone in the difficulties of the complaint procedures and the unsatisfactory results that they yield. So, certainly, we look at a wide range of issues and analyze them. We have been looking at the banking complaint procedure for some time now, and we will be writing about it in an upcoming issue of our magazine, Consumer Reports, as well. Mr. GREEN. All right. Let me pass to—and sir, I will not embarrass myself by— Mr. MIERZWINSKI. That is okay. It is ‘‘Mierzwinski.’’ Simple. Mr. GREEN. Thank you. Mr. MIERZWINSKI. Congressman Green, we are an independent, nonprofit organization. We serve as the federation of State public interest research groups, and we are funded solely by individual donations. About half of the State PIRGs have college chapters, and all of the State PIRGs have individual citizen members. We knocked on doors—over four million, five million doors—this summer, asking people to join our organizations. And we also accept some charitable contributions from independent foundations. We accept no corporate money, whatsoever, and we accept no government grants, either. We come upon our positions based on taking a hard look at what is the right public policy solution to a problem. We conduct our own research, we do our own surveys. We have done a number of studies, for example, of bank fees called The Big Banks Big Fees studies, and we have done this in a number of other areas that we participate in, as well as banking. Mr. GREEN. Thank you. I yield back the balance of my time. Chairwoman MALONEY. Thank you so much. Congressman Hodes, for 5 minutes. Mr. HODES. Thank you, Madam Chairwoman. Thank you both for your testimony. I am struck, as a new Member of Congress, now having been here a year, by the complexity of the regulatory schemes facing consumers, and the clear testimony that comes across that the regulators are not attuned to protecting consumers, that the culture that we are faced with is one that has, in fact, set up barriers to consumers, and in which consumers are given short shrift. According to Mr. Mierzwinski, what you saw on the Web site with the Federal Reserve was, for the first time, you said you saw VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 31 the word ‘‘consumer’’ on there. But it does not sound like it is very prominently displayed. Now, some of your suggestions, Mr. Mierzwinski, for amendments or additions or considerations in the bill, sound like you are advocating that there be a consumer ombudsman office associated with this 800 number. Am I getting that right? Mr. MIERZWINSKI. I think that is absolutely the case. And the situation we have today is that the bank regulators have a dual responsibility. They supervise the banks and they also promote the banks. They are required to do a job that makes them too cozy with the banks. Consumers do not have an ombudsman. I realize there is an ombudsman at the OCC, but the legal responsibility of that ombudsman is not to protect consumers. There are 40 State officials known as utility councils, or people’s council, who bring cases on behalf of consumers in the State utility arenas. There could be a model like that here. Why don’t we make the centralized source, the centralized complaint handling system, an advocate for consumers, rather than simply a pipeline to the existing agencies, which, again, in our view, have a culture that is probank, not even unbiased, but literally pro-bank. Mr. HODES. And whether or not this legislation is the right vehicle for that idea, and whether or not—it certainly sounds like it is important for this committee to address the kind of cultural disconnect that you have raised in your testimony between the regulators’ obligation to their institutions and the need for help for consumers. So I appreciate your thinking on that. I also take it that it sounds like you share my thought about the prominence with which the 800 number and communication about it needs to happen in today’s talk show/deficit disorder culture, in order to reach consumers in as clear and simple a way as we would like it to happen with this 800 number. Mr. MIERZWINSKI. I think, without a doubt, if you don’t do that, then the system will fail. And I would strongly recommend you don’t call it the FFIEC hotline, for example. Mr. HODES. All right. All right. Follow the KISS principle? Mr. MIERZWINSKI. Right, exactly. Mr. HODES. Do you also think that Congress needs to go so far as—let us assume that we have this legislation about the 800 number—requiring the regulatory agencies to display information about it on their Web sites and in their information in a particular way, with particular prominence, in a particular style, or is that something that we simply leave up to them? Mr. MIERZWINSKI. Well, that is exactly my view, is it should be something like ‘‘Ghost Busters’’ or ‘‘Mr. Yuck.’’ It should be something that they all have that is the same, so that people know that, hey, it is easier to go here. And that, ideally, would go into a bank. So, if I walk into a national bank, I see Mr. Yuck or Ghost Busters. If I walk into a State bank or an operating subsidiary, no matter where I go, I see the same logo. Right now, the only logo that goes across all the depository institutions is the FDIC logo, because they insure them all, except for the credit unions, which are insured by the credit union share fund. VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE 32 So, that is the only non-confusing logo that is out there. And we need something like that, so people understand that when they really want help with their bank, there is a one-stop shopping central source, complaint-busters site. Mr. HODES. Thank you very much. I appreciate it. I yield back with great appreciation, Madam Chairwoman. Chairwoman MALONEY. Thank you. And thank you for your attendance and questions. I would like to note that without objection, your written testimony, in its entirety, will be made a part of the record, and that the record will remain open for 30 days, so that members will have an opportunity to submit written questions to you, and to place your responses in the record. I thank you very much for your time and your testimony today, and for all of your hard work. Thank you. The hearing is now adjourned. [Whereupon, at 11:43 a.m., the hearing was adjourned.] VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\40436.TXT HFIN PsN: TERRIE APPENDIX December 12, 2007 (33) VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00039 Fmt 6601 Sfmt 6601 K:\DOCS\40436.TXT HFIN PsN: TERRIE VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00040 Fmt 6601 Sfmt 6601 K:\DOCS\40436.TXT HFIN PsN: TERRIE 40436.001 34 VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00041 Fmt 6601 Sfmt 6601 K:\DOCS\40436.TXT HFIN PsN: TERRIE 40436.002 35 VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00042 Fmt 6601 Sfmt 6601 K:\DOCS\40436.TXT HFIN PsN: TERRIE 40436.003 36 VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00043 Fmt 6601 Sfmt 6601 K:\DOCS\40436.TXT HFIN PsN: TERRIE 40436.004 37 VerDate 0ct 09 2002 13:02 Feb 06, 2008 Jkt 040436 PO 00000 Frm 00044 Fmt 6601 Sfmt 6601 K:\DOCS\40436.TXT HFIN PsN: TERRIE 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@FedFRASER