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Public Policy & Consumer Testing

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At the 2012 Face of Finance Conference, at Bentley University, in Waltham, MA, Susan Kleimann (Center for Plain Language) and Richard Horn (Consumer Financial Protection Bureau) presented "Public Policy & Consumer Testing".

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Public Policy & Consumer Testing

  1. 1. PUBLIC POLICY & CONSUMER TESTINGFACE OF FINANCE OCTOBER 24, 2012 1 Face of Finance October 24, 2012
  2. 2. PRESENTERS• Richard Horn • Susan Kleimann,• Senior Counsel, Ph.D. Consumer Financial • President, Kleimann Protection Bureau, Communication Office of Group Regulations Face of Finance October 24, 2012 2
  3. 3. WHAT WE’LL COVER• Where we started • Current disclosures • Mandate • Purpose • Beginning policy• Examples • Policy informs design & consumer testing • Consumer testing informs design & policy development• Importance of consumer testing Face of Finance October 24, 2012 3
  4. 4. WHERE WE STARTED• Current disclosures • 2 statutes • 2 different disclosures • 1 transaction • Truth in Lending Act • Real Estate Settlement Procedures Act Face of Finance October 24, 2012 4
  5. 5. CURRENT TRUTH IN LENDING Face of Finance October 24, 2012 5
  6. 6. CURRENT GOOD FAITH ESTIMATE Face of Finance October 24, 2012 6
  7. 7. WHERE WE STARTED• Mandate • The Bureau shall propose…model disclosures that combine the disclosures required under [TILA] and [RESPA] into a single, integrated disclosure for mortgage loan transactions covered by those laws. • Dodd Frank Act §1032(f) Face of Finance October 24, 2012 7
  8. 8. WHERE WE STARTED• Purpose • 2 goals for combined forms: 1. To improve consumer understanding of mortgage loan transactions; and 2. To facilitate industry compliance with TILA and RESPA Dodd-Frank Act §§1098, 1100A Face of Finance October 24, 2012 8
  9. 9. WHERE WE STARTED• Purpose• “consumers are provided with timely and understandable information to make responsible decisions about financial transactions.” Dodd-Frank Act § 1021(b)• “prescribe rules to ensure [consumer financial products are]…disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks ….” Dodd-Frank Act § 1032(a Face of Finance October 24, 2012 9
  10. 10. SO WHAT?Face of Finance October 24, 2012 10
  11. 11. WHERE POLICY  DESIGN & TESTING• A graphic design • Use as few words as possible • Reduce Information overload • Show relationships • Highlight key information • Use plain language Face of Finance October 24, 2012 11
  12. 12. WHERE POLICY  DESIGN & TESTING• Information, not education • Mortgage shopping sheet • Summary & detail • System of other sources Face of Finance October 24, 2012 12
  13. 13. POLICY  DESIGN & TESTING• Content requirements • RESPA • TILA • Dodd-Frank Act Face of Finance October 24, 2012 13
  14. 14. WHERE POLICY  DESIGN & TESTING• Chose to test with consumers• Ensure disclosures work• Hire specialists - Kleimann Communication Group Face of Finance October 24, 2012 14
  15. 15. WHAT WE DID• User-centered design Context• Usability/cognitive test - think alouds Formative• Performance, not preference Usability• 10 testing rounds• Posted designs for Validation public comment Face of Finance October 24, 2012 15
  16. 16. THE RESULT• Page 1 – summary shopping sheet• 2 types of information→ Loan details→ Affordability Face of Finance October 24, 2012 16
  17. 17. THE RESULT• Page 2 – details• 4 types of details • Specific loan fees • Specific closing fees • Calculating cash to close • Rate & payment details Face of Finance October 24, 2012 17
  18. 18. WHERE TESTING  DESIGN & POLICY #1• What level of detail helps consumers? Face of Finance October 24, 2012 18
  19. 19. WHERE TESTING  DESIGN & POLICY #2• Can consumers identify changes between the Loan Estimate and Closing Disclosure ? Face of Finance October 24, 2012 19
  20. 20. WHERE TESTING  DESIGN & POLICY #2• Round 6 (IA) results • “Honestly this is so much writing. I’m • Trouble tracking skimming over it and • See changes at high not really reading this level thing. I don’t know • Relatively passive what to look for, to tell you the truth. I guess I could look at the very bottom and see what that says. I don’t know. This is a bit much.” (IA-002) Face of Finance October 24, 2012 20
  21. 21. WHERE TESTING  DESIGN & POLICY #2 Face of Finance October 24, 2012 21
  22. 22. WHERE TESTING  DESIGN & POLICY #2• Rounds 7-10 results • “Because they did it on the [Loan Estimate], • Improved tracking keep the order the • Noticed differences same here [Closing • Actively asked Disclosure], it makes it a questions lot easier, just the • Go back to lender comparison to try to match up, so just keep • Consider not closing the order same.” (PA-005 NE) Face of Finance October 24, 2012 22
  23. 23. WHERE TESTING  DESIGN & POLICY #3• TILA §128(b)(2)(C)(ii) • “…are they saying definitely cannot • You may not be able or are you saying to refinance your you may or may loan to lower your not?” interest rate and (AL-005) payments in the future with us or with another lender. Face of Finance October 24, 2012 23
  24. 24. WHERE TESTING  DESIGN & POLICY #3• Refinancing this • Yeah, you can try loan will depend on to refinance the loan. That doesn’t your future financial mean youre going situation, the to get it, but you property value, and can try.” market conditions. (PA-006-NE) You may not be able to refinance this loan. Face of Finance October 24, 2012 24
  25. 25. WHY TEST?• Sort statutory • Move from requirements vs. preference to the information performance consumers need • Team• Sort what we • Consumers want to say from what they need• Focus on task, not information Face of Finance October 24, 2012 25
  26. 26. WHY TEST?Face of Finance October 24, 2012 26
  27. 27. WHY TEST?Consumers say . . . • Everything is there.• The strong points are laid They’re not really hiding right out in front of you. anything. So it’s pretty You know how much your straightforward. monthly payments are (TX-003- NE) going to be…how much you need to bring at • I can actually say 5; it’s closing…your interest rate the best form I’ve ever right up here. seen. (TX-006- NE) (TX-009-E) Face of Finance October 24, 2012 27
  28. 28. WHY TEST?Industry says . . . • I’m seeing everything I• It’s very easy to follow, need to know. My very easy to read and payments, how much I’m friendly to the eye escrowing, and how instead of having to flip much I’m bringing to the through many different table for closing contracts and purposes…. So yes, as far paperwork. as a summary sheet, I (TX-Lender-001) think this is superior to• It is the best mortgage what we’ve got. related form I have ever (TX-Settlement Agent-004) seen. (TX-Lender-006) Face of Finance October 24, 2012 28
  29. 29. FACE OF FINANCE Face of Finance October 24, 2012 29

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