Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-05T22:12:00.509Z Has data issue: false hasContentIssue false

Don't watch me read: how mere presence and mandatory waiting periods affect consumer attention to disclosures

Published online by Cambridge University Press:  28 January 2019

ALYCIA CHIN*
Affiliation:
Economic and Risk Analysis, Public Company Accounting Oversight Board, Washington, DC, USA
DUSTIN H. BECKETT
Affiliation:
Office of Research, Bureau of Consumer Financial Protection, Washington, DC, USA
*
*Correspondence to: Economic and Risk Analysis, Public Company Accounting Oversight Board, Washington, DC, USA. Email: [email protected]

Abstract

To help people make informed decisions, policy-makers often require entities to provide consumers with informational materials known as disclosures. However, it is unclear whether consumers pay attention to disclosures. In two experiments where we manipulate the delivery of disclosures, we find that the mere presence of an observer negatively affects attention to disclosures, while introducing a mandatory waiting period after receiving a disclosure increases attention. In a third study, we analyze more than 3000 surveys answered by recent mortgage borrowers. Borrowers who report receiving disclosures at mortgage closing meetings (which are often attended by multiple stakeholders) are less likely to have questions about their disclosures than those who receive disclosures beforehand, suggesting differential attention. Our findings demonstrate that both mandatory waiting periods and the presence of observers can affect consumers’ attention to disclosures. We discuss implications of our research for policies designed to promote informed consumer decision-making.

Type
Article
Copyright
Copyright © Cambridge University Press 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Avery, R. B., Bilinski, M. F., Clement, A., Critchfield, T., Frumkin, S., Keith, I. A. and Schultz, J. D. (2017), A profile of 2015 mortgage borrowers: Statistics from the National Survey of Mortgage Originations (Technical Report 5.0). Retrieved from https://www.fhfa.gov/PolicyProgramsResearch/Programs/Documents/NMDB-technical-report_5pt0_111717.pdfGoogle Scholar
Ayres, I. and Schwartz, A. (2014), ‘The no-reading problem in consumer contract law’, Stanford Law Review, 66, 545610.Google Scholar
Bakos, Y., Marotta-Wurgler, F., and Trossen, D. R. (2014), ‘Does anyone read the fine print? Consumer attention to standard form contracts’, The Journal of Legal Studies, 43(1): 135. doi: 10.1086/674424CrossRefGoogle Scholar
Beckett, D. H. and Chin, A. (2019a), Financial, educational, and experiential returns to shopping for a mortgage, working paper.Google Scholar
Beckett, D. H. and Chin, A. (2019b), Attribute overload: Examining the effects of price dimensionality on market outcomes, working paper.Google Scholar
Ben-Shahar, O. and Schneider, C. E. (2011), ‘The failure of mandated disclosure’, University of Pennsylvania Law Review, 159(3): 647749.Google Scholar
Ben-Shahar, O. and Schneider, C. E. (2014), The futility of cost benefit analysis in financial disclosure regulation. (Coase-Sandor Institute for Law & Economics Working Paper No. 680). Retrieved from the University of Chicago website: http://chicagounbound.uchicago.edu/law_and_economics/677Google Scholar
Bizer, G. Y., Krosnick, J. A., Petty, R. E., Rucker, D. D., and Wheeler, S. C. (2000), Need for cognition and need to evaluate in the 1998 national election survey pilot study. Working paper.Google Scholar
Boksem, M. A. S. and Tops, M. (2008), ‘Mental fatigue: Costs and benefits’, Brain Research Reviews, 59, 125139. doi: 10.1016/j.brainresrev.2008.07.001CrossRefGoogle ScholarPubMed
Bond, C. F. Jr. and Titus, L. J. (1983), ‘Social facilitation: A meta-analysis of 241 studies’, Psychological Bulletin, 94(2): 265292. doi: 10.1037/0033-2909.94.2.265CrossRefGoogle ScholarPubMed
Cacioppo, J. T., Petty, R. E., and Kao, C. F. (1984), ‘The efficient assessment of need for cognition’, Journal of Personality Assessment, 48(3): 306307. doi: 10.1207/s15327752jpa4803_13CrossRefGoogle ScholarPubMed
Chin, A. and Bruine de Bruin, W. (in press), ‘Helping consumers to evaluate annual percentage rates (APR) on credit cards’, Journal of Experimental Psychology: Applied. doi: 10.1037/xap0000197Google Scholar
Chin, A., Couper, M. P., and Beckett, D. H. (2019), Attrition in a longitudinal online study of mortgage shopping, working paper.Google Scholar
Chin, A. and Williams, A. (2018), ‘Prior knowledge and take-up of financial education’, Consumer Interests Annual, 64.Google Scholar
Choplin, J. M., Stark, D. P., and Ahmad, J. N. (2011), ‘A psychological investigation of consumer vulnerability to fraud: Legal and policy implications’, Law & Psychology Review, 35, 61108.Google Scholar
Consumer Financial Protection Bureau's Office of Research (2014), CFPB Data Point: Payday Lending, Washington, D.C.Google Scholar
Consumer Financial Protection Bureau (2017), What is a mortgage “closing”? What happens at the closing?. Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-is-a-mortgage-closing-what-happens-at-the-closing-en-176/Google Scholar
Cordray, R. (2015), Letter to David Stevens. Washington, DC. Retrieved from https://www.mba.org/Documents/CFPB%20reponse%20to%20MBA%20TRID%20letter.pdfGoogle Scholar
Fagerlin, A., Zikmund-Fisher, B. J., Ubel, P. A., Jankovic, A., Derry, H. A., and Smith, D. M. (2007), ‘Measuring numeracy without a math test: Development of the subjective numeracy scale’, Medical Decision Making, 27, 672680. doi: 10.1177/0272989X07304449CrossRefGoogle ScholarPubMed
Guerin, B. (1989), ‘Social inhibition of behavior’, The Journal of Social Psychology, 129(2): 225233. doi: 10.1080/00224545.1989.9711723CrossRefGoogle Scholar
Hill, R. P. and Kozup, J. C. (2007), ‘Consumer experiences with predatory lending practices’, The Journal of Consumer Affairs, 41(1): 2946. doi: 10.1111/j.1745-6606.2006.00067.xCrossRefGoogle Scholar
Hogarth, J. M. and Merry, E. M. (2011), ‘Designing disclosures to inform consumer financial decisionmaking: Lessons learned from consumer testing’, Federal Reserve Bulletin, 97(3): 127.CrossRefGoogle Scholar
Hopstaken, J. F., van der Linden, D., Bakker, A. B., Kompier, M. A. J., and Leung, Y. K. (2016), ‘Shifts in attention during mental fatigue: Evidence from subjective, behavioral, physiological, and eye-tracking data’, Journal of Experimental Psychology: Human Perception and Performance, 42(6): 878889. doi: 10.1037/xhp0000300Google ScholarPubMed
Inbar, Y., Botti, S., and Hanko, K. (2011), ‘Decision speed and choice regret: When haste feels like waste’, Journal of Experimental Social Psychology, 47, 533540. doi: 10.1016/j.jesp.2011.01.011CrossRefGoogle Scholar
Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z). 78 Fed. Reg. 80225 (2013).Google Scholar
Johnson, H. and Leary, J. (2017), ‘Policy watch: Research priorities on disclosure at the Consumer Financial Protection Bureau’, Journal of Public Policy & Marketing, 36(1): 184191. doi: 10.1509/jppm.17.025CrossRefGoogle Scholar
Johnson, E. J. and Russo, J. E. (1984), ‘Product familiarity and learning new information’, Journal of Consumer Research, 11, 542550.CrossRefGoogle Scholar
Kozup, J., Taylor, C. R., Capella, M. L., and Kees, J. (2012), ‘Sound disclosures: Assessing when a disclosure is worthwhile’, Journal of Public Policy & Marketing, 31(2): 313322.CrossRefGoogle Scholar
Krishnamurti, T. and Argo, N. (2016), ‘A patient-centered approach to informed consent: Results from a survey and randomized trial’, Medical Decision Making, 36(6): pp. 726740. doi: 10.1177/0272989X16636844CrossRefGoogle ScholarPubMed
Lacko, J. M. and Pappalardo, J. K. (2007), Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms. Washinton, DC, USA: Federal Trade Commission's Bureau of Economics.Google Scholar
Lacko, J. M. and Pappalardo, J. K. (2010), ‘The failure and promise of mandated consumer mortgage disclosures: Evidence from qualitative interviews and a controlled experiment with mortgage borrowers’, The American Economic Review: Papers and Proceedings, 100(2): 516521. doi: 10.1257/aer.100.2.516CrossRefGoogle Scholar
LeBoeuf, M. A., Choplin, J. M., and Stark, D. P. (2016), ‘Eye see what you are saying: Testing conversational influences on the information gleaned from home loan disclosure forms’, Journal of Behavioral Decision Making, 29, 307321.CrossRefGoogle Scholar
Loewenstein, G., Sunstein, C. R., and Golman, R. (2014), ‘Disclosure: Psychology changes everything’, Annual Review of Economics, 6(1): 391419. doi: 10.1146/annureveconomics-080213-041341CrossRefGoogle Scholar
Lusardi, A. (2008), Financial literacy: An essential tool for informed consumer choice? NBER Working paper #14084. http://www.nber.org/papers/w14084Google Scholar
Miyazaki, Y. (2013), ‘Increasing visual search accuracy by being watched’, PLoS ONE, 8(1): e53500. doi: 10.1371/journal.pone.0053500CrossRefGoogle ScholarPubMed
Miyazaki, Y. (2015), ‘Influence of being videotaped on the prevalence effect during visual search’, Frontiers in Psychology, 6, 17. doi: 10.3389/fpsyg.2015.00583CrossRefGoogle ScholarPubMed
Murin, J. J. (2016), Is TRID really helping the consumer? National Mortgage Professional Magazine. Retrieved from https://nationalmortgageprofessional.com/news/57410/trid-really-helping-consumerGoogle Scholar
Perry, V. G. and Blumenthal, P. M. (2012), ‘Understanding the fine print: The need for effective testing of mandatory mortgage loan disclosures’, Journal of Public Policy & Marketing, 31(2): 305312.CrossRefGoogle Scholar
Petersen, M. A. (2009), ‘Estimating standard errors in finance panel data sets: Comparing approaches’, Review of Financial Studies, 22(1): 435480. doi: 10.1093/rfs/hhn053CrossRefGoogle Scholar
Plaut, V. C. and Bartlett, R. P., III. (2012), ‘Blind consent?: A social psychological investigation of non-readership of click-through agreements’, Law and Human Behavior, 36(4): 293311. doi: 10.1007/s10979-011-9288-yCrossRefGoogle ScholarPubMed
Rai, M. K., Loschky, L. C., and Harris, R. J. (2015), ‘The effects of stress on reading: A comparison of first-language versus intermediate second-language reading comprehension’, Journal of Educational Psychology, 107(2): 348363. doi: 10.1037/a0037591CrossRefGoogle Scholar
Risko, E. F. and Kingstone, A. (2011), ‘Eyes wide shut: Implied social presence, eye tracking and attention’, Attention, Perception & Psychophysics, 73(2): 291296. doi: 10.3758/s13414-010-0042-1CrossRefGoogle ScholarPubMed
Schmidt, J. B. and Spreng, R. A. (1996), ‘A proposed model of external consumer information search’, Journal of the Academy of Marketing Science, 24(3): 246256.CrossRefGoogle Scholar
Scholl, B., Hung, A., Chin, A., Anderson, D. M., Bongard, M., Carman, K., Clancy, N., Dominitz, J., Kelly, T., McKenna, S., Smith, B., Tankard, M. and Steinberg, P. (2018), The Retail Market for Investment Advice, Washington, DC, USA: Securities and Exchange Commission's Office of the Investor Advocate.Google Scholar
Shu, L. L., Mazar, N., Gino, F., Ariely, D., and Bazerman, M. H. (2012), ‘Signing at the beginning makes ethics salient and decreases dishonest self-reports in comparison to signing at the end’, PNAS, 109(38): 1519715200. doi: 10.1073/pnas.1209746109CrossRefGoogle Scholar
Stark, D. P. and Choplin, J. M. (2009), ‘A license to deceive: Enforcing contractual myths despite consumer psychological realities’, NYU Journal of Law & Business, 5, 617744.Google Scholar
Stigler, G. J. (1961), ‘The economics of information’, The Journal of Political Economy, 69(3): 213225. doi: 10.1086/258464CrossRefGoogle Scholar
Triplett, N. (1898), ‘The dynamogenic factors in pacemaking and competition’, The American Journal of Psychology, 9(4): 507533. doi: 10.2307/1412188CrossRefGoogle Scholar
Zajonc, R. B. (1965), ‘Social facilitation’, Science, 149(3681): 269274. doi: 10.1126/science.149.3681.269CrossRefGoogle ScholarPubMed