randall s kroszner : the role of federal banking agencies in strengthening federal financial consumer protection testimony of mr randall s kroszner, member of the board of governors of the us federal reserve system, before the committee on financial services, us house of representatives, washington dc, 13 june 2007. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * chairman frank, ranking member bachus, and members of the committee, i appreciate the opportunity to appear today to discuss the federal reserve board's role in protecting consumers in financial services transactions. introduction an important part of the federal reserve's statutory mandate is promoting the availability of credit throughout the banking system. in the case of consumer credit, equally important with promoting its availability is the federal reserve's responsibility for implementing the laws designed to protect consumers in financial services transactions. many of these laws are based on ensuring that consumers receive adequate information in the form of disclosures about the features and risks of a particular product. information is critical to the effective functioning of markets. a core principle of economics is that markets are more competitive, and therefore more efficient, when accurate information is available to both consumers and suppliers. when information on alternatives is readily available, product offerings have to meet customers'demands and offering prices have to reflect those of market competitors. if consumers are well informed, they are in a better position to make decisions that are in their best interest. information helps and empowers individual consumers by improving their ability to compare products and to choose those that will help them meet their personal goals. with the aid of technological advances, financial institutions have been able to offer innovative products that are increasingly diverse but also increasingly complex. while this has expanded consumers'access to credit and their options, it also presents a challenge in ensuring that consumer disclosures about these more complex products are effective. to be effective, disclosures must give consumers information at a time when it is relevant, and in language they can easily understand. the information must also be in a format that allows consumers to identify and use the information that is most important to them. in a nutshell, because effective disclosure gives consumers information they notice, understand, and can use, it empowers consumers and enhances competition. the board is committed to developing more effective disclosures, but even well - designed disclosures can only be useful if they can be understood by consumers who have the necessary financial knowledge

of the consumer complaints we received against state member banks and their subsidiaries were promptly acknowledged. we understand that consumers may face challenges in sorting out where to go for help with questions about financial transactions and in determining where to send complaints. as indicated, we facilitate the process for consumers by ensuring that the complaints we receive are routed quickly and accurately to the right agency for handling. to further enhance our consumer complaint handling process, we recently launched a new online consumer complaint system that creates a single internet web site for submitting complaints and inquiries to the federal reserve. complaints submitted through the web site are routed automatically to the appropriate reserve bank or other supervisory agency. one feature of the new online system that we plan to activate in the near future is a customer satisfaction questionnaire that will provide us with feedback about consumers'experiences with the federal reserve's processing of their complaints. this questionnaire will be an improved version of the one we used for many years. the board is also establishing a central location for the administrative handling of complaints, which will establish a single mailing address and toll - free telephone number that the public can use. these enhancements underscore our commitment to ensuring the public has an effective and efficient means for resolving complaints. our goal is to make a consumer's submission of a complaint as easy and seamless as possible regardless of the entity involved. to enhance interagency cooperation and coordination in processing consumer complaints, the federal banking agencies held a conference in april 2006 to share information about complaint trends and issues, and learn about best practices in investigating and analyzing complaints. the agency staffs also discussed ways to improve customer service and the potential ways complaint data might be used to aid in the development of consumer education materials. another interagency conference is scheduled for later this year. in addition to these conferences, the agencies'staffs meet periodically to share complaint data and to discuss emerging issues identified through the complaint process. consumer education and research the federal reserve is actively engaged in educating consumers about financial transactions so they can better understand their options when shopping for various products. the education materials we produce are based on surveys, consumer testing, and other research about consumer behavior. for example, the board has published brochures to assist consumers when they are shopping for credit cards, mortgages or leasing a vehicle. we have also issued brochures to help consumers understand their checking accounts and overdraft protection programs, and to educate consumers about the effects of having their payments processed electronically. these publications are also