randall s kroszner : federal reserve initiatives to support minorityowned institutions and expand consumer protection remarks by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the interagency minority depository institutions national conference, miami, florida, 1 august 2007. * * * it is a pleasure to be here today to talk about issues and programs of mutual interest, with a focus on the federal reserve ’ s work to strengthen our support of minority - owned depository institutions. the federal reserve recognizes the important role that minority - owned banks play in the financial services market through the services they provide to their communities. i have chaired the oversight committee on consumer and community affairs at the board since march and am especially excited to be involved with a number of new and ongoing initiatives. in particular, this morning i am delighted to announce a new program that formalizes the federal reserve ’ s long - standing commitment to minority - owned depository institutions. in addition, i will discuss several ongoing supervisory and regulatory initiatives that aim to improve consumer information and expand consumer protection. federal reserve system ’ s minority - owned institutions ( moi ) program nationally, there about 200 minority - owned depository institutions serving a broad range of communities and populations. these banks have long played a unique and important role in our banking system by providing access to credit and financial services in markets that have historically been underserved. the federal reserve, which supervises just under twenty of these institutions, is committed to promoting the success of the minority - owned depository institutions we oversee. supporting these institutions is fundamental to our overall supervisory responsibilities for ensuring a safe, sound, and competitive banking system that also protects consumers. we have consistently provided ongoing assistance, through our regulatory, supervisory, and community development functions, to address the unique challenges and needs of minority - owned banks, while at the same time holding them to the high standards of supervisory performance. the federal reserve has tapped the expertise at the federal reserve bank of philadelphia to spearhead development of a proactive training and technical assistance program for minority - owned depository institutions. the new minority - owned institutions ( moi ) program i will discuss today reflects our experience in addressing the needs of these institutions as well as the insights offered in a recent report issued by the government accountability office. in developing the program, federal reserve staff met with a number of minority - owned and de novo banking organizations across the country, as well as trade groups, bank consultants, and

industry and consumer groups, input from our consumer advisory council, and other sources. the amendments we have proposed would better protect consumers from a range of unfair or deceptive mortgage lending and advertising practices that have been the source of considerable concern and criticism. our proposal includes key protections for higher - priced mortgage loans secured by a consumer's principal dwelling. specifically, the proposal addresses concerns about underwriting and lenders'consideration of the borrower's ability to make the scheduled payments, including verifying the income and assets that lenders rely upon in making the loan. the proposal also addresses concerns about prepayment penalties and the impact on consumers when lenders fail to establish escrow accounts for taxes and insurance. we are working toward issuing final regulations in july. for credit cards, the federal reserve has employed a two - step strategy toward improving consumer protection. our first step was the board's proposal to substantially revise and improve credit card disclosures under the truth in lending act. we have done extensive consumer testing to determine the type of information and its format that consumers find most useful in shopping for and choosing a credit card. we issued this proposal last year, and we are still carefully considering the public comment letters received on that proposal, many of which contain suggestions for how we might further improve the disclosures. we believe that this proposal will result in credit card disclosures that are significantly more effective for today's complex products. testing disclosure forms and formats with credit card users is crucial to ensuring that the disclosures are understandable and useful to consumers. effective disclosures can help to empower consumers and enhance the competition because consumers find it easier to comparison shop. we are continuing to use consumer testing as we work toward issuing final rules by year - end. this extensive consumer testing – and the thousands of public comments generated by our 2007 credit card proposal – suggested that disclosures might not provide sufficient consumer protection with regard to certain practices. therefore, in may we took the next step in our ongoing effort to enhance protections for consumers who use credit cards by proposing rules under the federal trade commission act to prevent financial harm to consumers from specific practices. we proposed rules that go beyond disclosure and could require financial institutions to make changes to their business models and to alter some practices. the board has worked jointly with the office of thrift supervision and the national credit union administration in drafting and issuing a proposal intended to prevent financial harm to consumers from specific practices that the agencies find to be potentially abusive. among other things