Lawmakers Aim at Fine Print in Financial Agreements

Two rules issued late last year, one on mortgages and one on credit cards, show that Washington is shifting from the idea that disclosure alone is enough to protect consumers, said Ellen Seidman, a fellow at the New America Foundation and a former head of the Office of Thrift Supervision.

The 1968 Truth in Lending Act and the 1974 Real Estate Settlement Procedures Act require lenders to clearly define all terms and costs when consumers obtain a credit-card or buy a house.

‘Schumer Box’

One of the most familiar financial disclosures dates back to 1998, when credit-card issuers such as Citigroup Inc. and Bank of America Corp. were required to put basic rate information in a separate box, known as the “Schumer Box” after the law’s author, now-Senator Charles Schumer of New York.

At a Senate Banking Committee hearing on credit cards Feb. 12, Schumer said the law successfully created competition on rates, which are lower now than the average of 19.8 percent 20 years ago. The average rate was 14.9 percent in 2007, according to Federal Reserve data. Schumer said he no longer believes disclosure is enough to police financial products.

“Over the past few years we’ve seen explosion in debt, and the card industry began using many of the same tactics as mortgage brokers,” the Democrat said. “Below-market teaser rates that shoot up with the most minor of infractions. Fine print that contains dozens of fees a consumer has to pay. When the fees go from 7 percent to 19 percent for some minor infraction on all the debt, something is very wrong.”