Jeanne M. Hogarth and Ellen A. Merry, from the Federal Reserve Board’s Division of Consumer and Community Affairs, presented this paper at the Family Financial Security Symposium in April, 2010.
Disclosure is a longstanding and important component of consumer protection in financial services markets. Research findings show the potential for improvements in consumer comprehension and usability of disclosures, while revealing some of their limitations.
Hogarth and Merry explore findings from consumer testing of disclosures and what these can tell us about how and how much well-designed disclosures may improve consumer understanding of financial products. Consumer testing conducted as a part of the Federal Reserve Board’s regulatory development process has used qualitative and quantitative methods in controlled environments to formulate and test new disclosures.
The goal has been to develop disclosures that consumers can comprehend and use in decision making; implicitly, better disclosures should lead to better decisions. This paper provides some background on the Board’s testing projects; highlights findings from this research and what they imply about the ways and the extent to which design may improve the function of disclosures; and discusses the challenges of applying the results from testing to the decisions consumers would make in real-world transactions.