When is Consumer Understanding Necessary to Make Wise Home Loan Decisions? Testing Enhanced APR Disclosure And General Financial Literacy

18 Pages Posted: 17 Jul 2013

See all articles by Debra Pogrund Stark

Debra Pogrund Stark

The John Marshall Law School

Jessica M. Choplin

DePaul University

Mark LeBoeuf

DePaul University

Andrew Pizor

National Consumer Law Center

Date Written: July 16, 2013

Abstract

Two experiments demonstrated that consumers were much better able to use an enhanced APR disclosure proposed by the authors to identify the lower cost of two home loans then when using the currently proposed disclosure form of the CFPB and that consumers failed to focus on APR in the CFPB form where the APR is disclosed in an inconspicuous fashion on page 3 of the Loan Estimate. Participants were also asked a series of questions relating to their "financial literacy" with the vast majority failing to correctly answer questions and identify problematic terms, risks, and lender remedies upon default. Policy implications are discussed.

Keywords: home loan disclosure, eye tracking, APR, financial literacy, cognitive and social psychological phenomena, mortgage counseling

Suggested Citation

Stark, Debra Pogrund and Choplin, Jessica M. and LeBoeuf, Mark and Pizor, Andrew, When is Consumer Understanding Necessary to Make Wise Home Loan Decisions? Testing Enhanced APR Disclosure And General Financial Literacy (July 16, 2013). Available at SSRN: https://ssrn.com/abstract=2294590 or http://dx.doi.org/10.2139/ssrn.2294590

Debra Pogrund Stark (Contact Author)

The John Marshall Law School ( email )

315 South Plymouth Court
Chicago, IL 60604
United States

Jessica M. Choplin

DePaul University ( email )

United States
773-325-2052 (Phone)

HOME PAGE: http://condor.depaul.edu/~jchoplin

Mark LeBoeuf

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

Andrew Pizor

National Consumer Law Center ( email )

7 Winthrop Square
Boston, MA 02110
United States

HOME PAGE: http://www.nclc.org

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