Assessing the Usability of Credit Card Disclosures

Using multiple methods to assess the usability of credit card disclosures Angela Colter [email_address]

What are disclosures? Using Multiple Methods | Angela Colter card member agreements solicitation letters

Why was the U.S. Congress interested?
Assess the need to revise disclosures so they better inform consumers of now-common penalty rates and fees
Find out how effectively pricing practices are disclosed to cardholders
Determine whether penalty charges contribute to cardholder bankruptcies
Using Multiple Methods | Angela Colter

Three evaluation methods
Readability analysis using formulas
Expert review using plain language guidelines
Usability test

Why those methods? Using Multiple Methods | Angela Colter Strengths Weaknesses Readability formulas Quantitative data Quick & cheap Only counts what can be counted Doesn’t tell you what to do about it Plain language review Predicts problems and gives guidelines for improvement Also relatively cheap Doesn’t mean users will have problems Usability test Shows how people actually use an interface Provides quantitative and qualitative data Not quick and not cheap Small sample size can be a hard sell

Readability analysis
Used FOG, SMOG, and Flesch Grade Level
Took multiple samples
Carefully prepped the text (removed URLs, trailing periods and hard returns)
Used Readability Analyzer software
Explained strengths and weaknesses of readability formulas in the final report

Readability analysis findings Using Multiple Methods | Angela Colter Flesch Grade Level SMOG FOG Average grade level of cardmember agreements 12

Readability analysis findings Using Multiple Methods | Angela Colter Flesch Grade Level SMOG FOG Average grade level of cardmember agreements 12 Average grade level of annual percentage rate info 17

Readability analysis findings Using Multiple Methods | Angela Colter Flesch Grade Level SMOG FOG Average grade level of cardmember agreements 12 Median reading level of U.S. adults 8 Average grade level of annual percentage rate info 17

Expert review
Used a plain language guidelines document developed by the U.S. Securities and Exchange Commission in 1998
Deals with organization, content and design
Using Multiple Methods | Angela Colter http://www.sec.gov/news/extra/ handbook.htm

Expert review findings Using Multiple Methods | Angela Colter The disclosures violated many of the guidelines. The report listed each guideline and gave examples where disclosures followed or violated them. Expressing a complicated, multistep process in paragraph form makes it difficult to understand the relationships between steps. By using bullet points, it’s much easier to see what the steps are and when they are applied. Guideline : Use bullet points

Expert review findings Using Multiple Methods | Angela Colter At times, gave suggestions for improvements Original (101 words) Rewrite (48 words) If at any time during any rolling consecutive twelve billing cycle period you fail to make two Minimum Payments on a timely basis or exceed your Credit Limit twice we may elect to increase your Purchase, Cash Advance and/or Balance Transfer APRs to the Penalty APRs. All Penalty APRs will remain in effect until, in a subsequent rolling consecutive six billing cycle period, you do not exceed your Credit Limit at any time and you make all of your required Minimum Payments on a timely basis when, in your next billing cycle, all Penalty APRs will no longer apply. If you pay late or go over your credit limit twice in a year, the interest rate you pay on most things goes up to the default rate. It will go back down when you pay on time and don’t go over your credit limit for six months. Guidelines : Eliminate jargon Use short words Use short sentences

Usability test
Tested the material with 12 users
Gave them two sets of tasks using two different documents: one solicitation letter, one card member agreement
Topics covered:
Annual percentage rates
Grace period
Minimum payment
Late fee
Over limit fee
Cash advance fee/APR
Balance transfer fee/APR
Finance charges/balance computation method
Changes to terms
Payment allocation

Usability test plan
Can they use disclosures to locate information?
Do they interpret the info correctly once found?
Using Multiple Methods | Angela Colter Question Correct answer

Usability test findings
Gave an overview citing task success rate
Followed with a full explanation of outcome, observations and participant quotes
Using Multiple Methods | Angela Colter Task 8: Finance Charges / Balance Computation Method Solicitation Letters: Only 1 of 12 located the information and seemed to know the significance of the term average daily balance. No one knew what two-cycle ADB meant. Cardmember Agreements: All were able to locate the information, but only one was able to correctly interpret the information she read. This was, by far, the task with the lowest success rate. Only one out of the 12 participants located the name of the balance computation method used by the credit card in the solicitation letter. Two participants said things like “I know it’s based on the average daily balance, but that's not what it’s called.” Part of the problem may have been the label used on the Schumer box: Balance Calculation Method for Purchases didn’t seem to convey “this is how we calculate the interest you owe.” Only one person gave a plausible explanation for the definition of what Average Daily Balance Computation Method means. No one who was asked what Two-Cycle Average Daily Balance Computation Method means even tried to guess.

Usability test findings Using Multiple Methods | Angela Colter Detailed information and performance metrics were included in the report’s appendix. Question P# Doc Time Correct? P’s Answer Analysis This card uses the “two-cycle average daily balance” method to figure out how much interest you owe. What does it mean? P6 SL #1 0:15 N -- You pay interest on this month’s and last month’s balance. It means if you made a partial payment last month, you are paying interest on principle you have already paid off. No one got it right. P8 SL #1 0:50 N “ I can’t understand it” P7 SL #2 1:35 N “ I really don’t know” P9 SL #2 -- N “ You got me” P1 SL #3 1:10 N Described averaging P3 SL #4 0:16 N “ No clue”

Complimentary approach Using Multiple Methods | Angela Colter Findings Weakness Readability formulas 12 th grade reading level Doesn’t tell you what to do (but P.L. guidelines do) Plain language review Docs don’t provide hierarchy, group related information, use markers (TOC, meaningful headings), or use simple words and sentences Doesn’t mean users will have problems (but usability testing shows where they do) Usability test Users had trouble locating info and often didn’t understand it once they had located it. Disincentives for reading terms. Small sample size can be a hard sell (but video puts a face on problems; findings from formulas and P.L. review found some of the same issues identified in testing)

Outcomes Using Multiple Methods | Angela Colter
Communicating concepts wasn’t the main problem, unfair practices were.
The U.S. Congress and Federal Reserve passed laws and regulations that:
ban universal default and “two-cycle” billing
require high interest balances be paid first
require opt-in to over limit fees
disclose consequences of making only the minimum payment on monthly bills , not just in disclosures.

Further reading Using Multiple Methods | Angela Colter GAO Report: CREDIT CARDS Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers http://www.gao.gov/new.items/d06929.pdf A Plain English Handbook: How to create clear SEC disclosure documents http://www.sec.gov/news/extra/handbook.htm

Questions? Angela Colter Email: acolter@gmail.com Twitter: @angelacolter

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Assessing the Usability of Credit Card Disclosures

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