What do a super-simple mortgage disclosure form, from Bank of America Corp., and a no-frills annuity product, from MetLife, have in common?
They're both early examples of what experts expect to be a trend toward easy-to-understand, consumer-friendly financial products. More are likely to start popping up because consumers are sick of fine print and hidden costs - and because tougher rules from Washington are looming.
Bank of America is leading the way. In April, it introduced a one-page mortgage loan summary listing interest rate, terms and other details of the loan in plain language. In September, it expanded to program to its fixed-rate reverse mortgages.
The same month, the bank also introduced a "Basic Visa" card with simplified terms and a rate pegged at the prime rate plus 14 percent, which applies to all transactions, including purchases and cash advances. Users won't face over-the-limit fees. And in October it unveiled a checking account that does not charge overdraft fees when overdrawn by less than $10 for one day or charge overdraft fees on more than four items daily. The credit card and checking account, like the mortgage products, come with short, clear explanatory documents.
Offering easy-to-understand products is good public relations - and a good way to appease regulators. Consumer lending products will be more scrutinized, either by a new Consumer Financial Protection Agency or traditional bank regulators.
Perhaps more importantly, it's what consumers want, says Mary Beth Sullivan, managing partner, Capital Performance Group, in Washington, D.C.
Consumers are focusing on saving money and managing it more intelligently and they want greater clarity about products' real prices. "Banks are just going to have to get better at it because consumers are demanding it," she says.
It's not just banks. MetLife in July rolled out its "Simple Solutions Variable Annuity," touting its simplicity, lower costs and "solid basic benefits." The product, with its three-page application, is designed to appeal to retirement-minded customers and also to banks, which can distribute them cheaply through licensed platform bankers.
The annuity, which comes with a guarantee that investors will not outlive their monthly payments, is a departure from pre-crash variable annuities, which typically were a bewildering maze of choices pertaining to investment options and riders.
Looking abroad could provide banks with fresh ideas. Royal Bank of Canada's "No-Limit Banking" checking account offers unlimited debits for a flat monthly fee. And Royal Bank of Scotland touts the "mortgage shrinker" feature of its "One" account: It sweeps excess funds daily to let customers pay ahead on their home mortgages.
