Superintendent Neiman Testifies Before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit on the Scope of the Financial Consumer Hotline Act
December 12 , 2007
RICHARD H. NEIMAN
SUPERINTENDENT OF BANKS
On behalf of
THE NEW YORK STATE BANKING DEPARTMENT
““THE FINANCIAL CONSUMER HOTLINE ACT OF 2007: PROVIDING CONSUMERS WITH EASY ACCESS TO THE APPROPRIATE BANKING REGULATOR”
FINANCIAL SERVICES COMMITTEE,
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT
THE U.S. HOUSE OF REPRESENTATIVES
December 12, 2007, 10:00 a.m.
Good morning. Madam Chair, Ranking Member Biggert, and distinguished members of the Subcommittee: on behalf of the Conference of State Bank Supervisors and the New York State Banking Department, I appreciate this opportunity to speak with you today.
I’m pleased to share our perspective on the proposal to establish a national call number and centralized intake process for consumer inquiries directed to financial regulators.
We believe that such a system, one that also routes calls to the respective state agencies when appropriate, is much needed.
It would expedite the process of matching consumers with the form of public or private assistance that best meets their needs.
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 as Superintendent, Diana Taylor, also promoted this 311 concept before I joined the Department and I concur that the time is right to put the idea into practice.
Consumers with a variety of concerns, whether related to credit cards, payment billing, funds availability or other issues, would benefit from enhanced inter-agency 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 system, however, borrowers who want to be proactive may be confused- and understandably so- when trying to identify the correct government agency to contact.
A consumer shouldn’t need to know whether their financial institution is a subsidiary of national bank, a state-chartered bank, or a holding company affiliate in order to receive assistance.
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. Troubled consumers tend to look locally first when seeking help. The statistics bear this out.
In 2006, we referred more than 1,300 complaints to the federal regulators, well over half of our total volume of approximately 2,200 complaints. The figures for the year to date are virtually the same.
It is critical, however, that any national hotline number linking the federal regulatory agencies includes the capability to refer consumer inquiries 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’m 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 time remaining, I would like to offer a few suggestions to further enhance the current proposal:
- Referral from the states to the federal regulators. First, while the federal-to-state 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 two-way process more explicit, as there could be a 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.
- Trend and case monitoring. Second, the database connected to a centralized intake system would be a source for vital statistics about trends in consumer complaints. This information could also be used to identify institutions generating a high volume of complaints that might warrant a target examination or other form of enhanced supervision. 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.
- Model forms and intake processes. 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. The Conference of State Bank Supervisors 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 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 found effective. The New York State Banking Department has been one of the first state regulators 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 would be glad to address any questions.