WASHINGTON - The Federal Reserve Board plans to revamp its credit advertising rules to ease compliance and boost consumer benefit.
But the central bank isn't quite sure how to accomplish these seemingly divergent goals. So, it issued a formal proposal late last month asking the public for help.
The Fed said it wants to review all of its advertising rules, which are contained in Regulation Z. These include rules governing closed-end loans, open-end loans, and home equity lines.
The central bank also proposed allowing financial institutions to replace mandatory disclosures in radio and television advertisements with a toll-free number through which consumers can learn all of a loan's details by listening to recorded information or speaking with a sales representative. The Fed currently allows this practice for leases.
The toll-free number could solve some disclosure problems, said Nessa Feddis, a senior federal counsel at the American Bankers Association. But bankers haven't expressed much enthusiasm for the option, she said.
"That isn't to say they won't use it once it is available," she said.
Not all bankers think that way. Debra M. Jacobs, retail executive officer at SunBank in Sarasota, Fla., said toll-free numbers reduce the burden on banks and increase the information available to consumers.
"Let's face it, not everyone reads every line in an ad," said Ms. Jacobs, whose bank is a unit of Atlanta-based SunTrust Banks Inc. "So that human element is always good for clarification."
Banking industry advocates agreed that the Fed must streamline the rules.
"Anybody who has seen a television ad or heard a radio spot knows the quantity of information doesn't increase the viewer's understanding," said Steve Zeisel, senior counsel at the Consumer Bankers Association. "It is a classic case of information overload."
"It has gotten too complicated and it doesn't mean a damn to consumers," agreed John P. LaWare, a former Fed governor who is now vice chairman at Secura Group.
Mr. LaWare, who left the Fed April 30, said the governors have been increasingly worried that bankers have stopped advertising interest rates out of fear they will violate the complex rules.
"Banks have simply thrown up their hands," Mr. LaWare said.
Rob Rowe, regulatory counsel at the Independent Bankers Association of America, said a number of his group's members have stopped advertising. That's made it harder for consumers in rural areas to comparison-shop, he said.
"Here in Washington you can go into First Union, NationsBank, and Riggs National Bank and get information," he said. "But, if you are in rural Iowa, you can go a number of miles without seeing another bank."
Any proposal must reduce the number of mandatory disclosures so bankers will start advertising rates again, he said.
Consumer advocates are less certain about reform. "The concern is that anytime they talk about streamlining, it ends up hurting the consumer," said Janice C. Shields, a project coordinator at the Center for the Study of Responsive Law.
The ABA's Ms. Feddis said bankers shouldn't expect much beyond the toll- free number proposal to emerge from the Fed.
"There are limitations to what the Fed can do," she said. "There are statutory requirements that say if you disclose the down payment, you have to include other terms."
Comments are due Aug. 11.
Congress passed credit advertising rules in 1968 as part of the Consumer Credit Protection Act. Lawmakers were concerned that consumers could not shop for the best loan rates because banks were disclosing their fees and costs in different manners.