Consumer czar Warren says wants banks' help on rules

WASHINGTON (Reuters) - Elizabeth Warren, the Obama administration's new consumer financial czar, offered an olive branch to the largest U.S. banks on Wednesday, saying she wanted their help in developing a principles-based approach to rulemaking.

Warren told the Financial Services Roundtable that the new Consumer Financial Protection Bureau she is setting up does not intend to layer on complex new rules that add compliance costs and encourage avoidance by banks.

"Instead of creating a regulatory thicket of 'thou shalt nots,' and instead of using ever more complex disclosures that drive up costs for lenders and provide little help for consumers, let's measure our success with simple questions," Warren said in remarks prepared for delivery to the banking trade group.

She said these should include whether customers can understand financial products, figure out their costs and risks and compare products in the marketplace.

Among her first tasks in launching the new agency is to develop a new, simplified disclosure form for credit cards. She said an average consumer should be able to read the form in about four minutes, with 90 percent comprehension and "understand the deal."

Created by landmark financial reform legislation enacted in July, the new agency will take over consumer protection functions from several existing regulatory agencies.

Warren reiterated that she's not interested in dictating costs, terms or product features -- that's up to the marketplace, but for the market to function properly, information needs to be transparent.

"I come to Washington as a genuine believer in markets and a genuine believer that the purpose of regulating the consumer credit market is to make that market work for buyers and sellers alike: a level playing field where the best products at the best prices win," she told the group, which represents the 150 largest U.S. integrated financial institutions..

Warren, a Harvard Law School professor and consumer advocate, was named a special adviser to President Barack Obama and Treasury Secretary Timothy Geithner on September 17 to set up the agency, much to the chagrin of Wall Street.

Long a fierce critic of deceptive mortgage and credit card lending practices, she has been criticized by many financial executives for what they see as a lack of practical banking experience and a predisposition that banks are guilty parties.

Since shifting from her previous role as bailout watchdog chairing the Congressional Oversight Panel, Warren has spent time mending fences with the financial industry.

Earlier on Wednesday, she told reporters that the traditional rulemaking approach would put smaller banks at a disadvantage because it would raise compliance costs and "locks in an adversarial relationship" between banks and their customers, letting the rules shape the products.

She said she wants credit cards and mortgages to be more like toasters or cell phones, where customers can easily compare the costs and benefits.

To do this, she said she wants to set goals and work with the industry to meet them through clear, simple rules that do not require much "fine print" or pages of legal disclaimers.

"Layering 10,000 rules is not going to turn this into a working relationship," she told reporters. "Maybe that's the way we have to go. This is the invitation to another approach, and I hope they will work with me."

(Reporting by David Lawder; Editing by Bernard Orr)