Food and financial services share one problem: that it is very difficult to set up any regulatory system which will allow consumers to understand and measure the risks they are undertaking in making decisions about what foods to eat and what financial products to buy. The Acting Comptroller of the Currency, Julie Williams, has been suggesting that, at least in the context of disclosures about credit card terms it would be a good idea if financial regulators could follow the same sort of approach to disclosure that the FDA uses to disclosure of information about food products:
Why should consumers today get more effective disclosure when they buy a bag of potato chips than when they make substantial financial commitments for financial products and services?
This idea is based in part on what the UK's Financial Services Authority has been saying about consumer disclosures recently:
the OCC also took the unusual step several months ago of submitting a comment letter to the Federal Reserve Board on its Advance Notice of Proposed Rulemaking related to credit card disclosures, discussing both the development of the FDA’s “Nutrition Facts” label and the efforts of the Financial Services Authority (FSA) in the United Kingdom to develop revised disclosures for a variety of financial products.
Simplified disclosure of this sort works better for standardised products than for others. The Financial Services Authority publishes comparative tables which allow consumers to compare some of the basic terms on which some financial products are offered. But the FSA is also working on developing a system for risk ratings or risk warnings for managed investment products (referred to, for example in last week's paper on Wider Range Retail Investment Products ). I'm not convinced that this sort of simplified disclosure really works very well even for potato chips, but I do like the idea of thinking hard about improving disclosures for consumers of financial products.
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