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Disclosures Plain Language Symposium Susan Kleimann—Kleimann Communication Group, Inc.

October 2008. Disclosures Plain Language Symposium Susan Kleimann—Kleimann Communication Group, Inc. and people meet. Where policy…. "I am not in the office at the moment. Please send any work to be translated". -BBC News, 10.31.08. Public Policy— What is a disclosure document?.

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Disclosures Plain Language Symposium Susan Kleimann—Kleimann Communication Group, Inc.

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  1. October 2008 DisclosuresPlain Language SymposiumSusan Kleimann—Kleimann Communication Group, Inc.

  2. and people meet Where policy…

  3. "I am not in the office at the moment. Please send any work to be translated". -BBC News, 10.31.08

  4. Public Policy—What is a disclosure document?

  5. HUD GFE Form (before) • Problems • Consumers were not shopping for the best loan. • Brokers were not passing on YSP information. • Consumers were surprised by unexpected settlement costs.

  6. HUD GFE Form (after) Added single-page summary of terms Clearly summarized loan components Added at-a-glance settlement costs

  7. HUD GFE Form (after) Added text to display YSP Identified reference to interest rate Clarified other charges Added summary lines to link back to page 1

  8. HUD GFE Form (after) Added tolerance table to explainpossible variations in settlement charges Added tradeoff table to explain loan options Added shopping chart to promote shopping and considering other factors

  9. Determining clarity of options for consumers • One problem persisted: explaining credits or charges on page 2. Higher interest rate Higher settlement costs Lower interest rate Lower settlement costs • So how did we get here?

  10. Our methodology • Quantitative:Identify what the problem is. • Qualitative:Identify why the problem exists.

  11. Round 4 Version (with two options) X

  12. Round 4—Different Cost Loan Results(in percent)Q: Which loan is cheaper?

  13. Round 4—Different Cost Loan Results(in percent)Q: Which loan would you choose?

  14. Round 4—Same Cost Loan Results(in percent)Q: Which loan is cheaper?

  15. Round 4—Same Cost Loan Results(in percent)Q: Which loan would you choose?

  16. Round 4 Qualitative Results • Participants said they chose a particular offer because they did not want the “higher interest rate” indicated on page two. • Participants said that the broker YSP disclosure was not straightforward and perhaps manipulative. • Participants thought that only brokers made tradeoffs.

  17. Round 5 Version (with two options)

  18. Round 5 Different Cost Loan Comparisons—Broker Less (in percent)Q: Which offer costs less?

  19. Round 5 Different Cost Loan Comparisons—Broker Less (in percent)Q: Which loan would you prefer?

  20. Round 5 Different Cost Loan Comparisons—Lender Less (in percent)Q: Which offer costs less?

  21. Round 5 Different Cost Loan Comparisons— Lender Less (in percent)Q: Which loan would you prefer?

  22. Round 5 Qualitative Results • Due to the addition of the third option, participants’ bias about YSP disappeared.

  23. Time goes on…

  24. Round 7 Version Added escrow box Consolidated settlement costs

  25. Round 7 Version Added tolerance language throughout Added tolerance tabs for navigation to page 3

  26. Round 7 Version Introduced a reduced, prose versionof tolerance table

  27. Round 7 Different Cost Loan Comparisons—Broker Less (in percent) Q: Which loan costs less? Q: Which loan would you prefer?

  28. Round 7 Different Cost Loan Comparisons—Lender Less (in percent) Q: Which loan costs less? Q: Which loan would you prefer?

  29. Round 7 Qualitative Results • Participants ignored the new tolerance references on pages 2 and 3. • To identify lowest costs, participants looked at the origination charge, not the adjusted origination charge.

  30. HUD GFE Form (after) Returned to detailed settlement costs

  31. HUD GFE Form (after) Deleted all tolerance navigation (text and tabs)

  32. HUD GFE Form (after) Restored detailed tolerance table

  33. Estimated savings for consumers • HUD estimates that the new GFE will save each consumer $700 at settlement • RESPA covers 12.5 million settlements annually • Total savings from the new GFE: • [almost three Donald Trumps (according to Forbes)] $700 * x 12.5 million = $8.75 BILLION

  34. Confusing is easy.

  35. Unclear is easy. CP2000 (Before)

  36. Dense is easy. NHTSA Sample (Before) This is a multipurpose passenger vehicle which will handle and maneuver differently from an ordinary passenger car, in driving conditions which may occur on streets and highways and off road. As with other vehicles of this type, if you make sharp turns or abrupt maneuvers. The vehicle may roll over or may go out of control and crash. You should read driving guidelines and instructions in the Owner’s Manual, and WEAR YOUR SEAT BELTS AT ALL TIMES. National Highway Traffic Safety Administration

  37. Garbled is easy. Request for Cash, Medical, and Food Stamp Assistance (Before)

  38. Neat and tidy but unclear is easy. Privacy Notice (Before)

  39. Short is easy. Credit Card (Before)

  40. Layout is easy. Good Faith Estimate (Before)

  41. Clarity is hard… but possible.

  42. / obscure / balderdash confusion do not want frustrating nonsense? clarity cloudy difficult not working fail gobbledygook ambiguous! impossible vague argh! unintelligible nebulous Kleimann Communication Group, Inc. 1321 Rhode Island Ave. NW Washington, DC202-737-5733

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