disclosures plain language symposium susan kleimann—kleimann communication group, inc

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(confused)clarityKLEIMANN COMMUNICATION GROUP, INC. | 1321 Rhode Island Avenue, NW | Washington, DC 20005

DisclosuresPlain Language SymposiumSusan Kleimann—Kleimann Communication Group, Inc.

October 2008

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-BBC News, 10.31.08

"I am not in the office at the moment. Please send any work to be translated".

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Public Policy—What is a disclosure document?

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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.

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HUD GFE Form (after)Added single-page summary of terms

Clearly summarized loan components

Added at-a-glance settlement costs

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HUD GFE Form (after)Added text to display YSP

Added summary lines to link back to page 1

Clarified other charges

Identified reference to interest rate

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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

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Higher interest rate

Lower settlement costsLower interest rate

Higher settlement costs

Determining clarity of options for consumers

• One problem persisted: explaining credits or charges on page 2.

• So how did we get here?

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Our methodology

• Quantitative:Identify what the problem is.

• Qualitative:Identify why the problem exists.

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Round 4 Version (with two options)

X

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

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

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

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

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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.

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Round 5 Version (with two options)

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

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

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

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

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• Due to the addition of the third option, participants’ bias about YSP disappeared.

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Time goes on…

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Round 7 Version

Added escrow box

Consolidated settlement costs

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Round 7 Version

Added tolerance tabs for navigation to page 3

Added tolerance language throughout

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Round 7 VersionIntroduced a reduced, prose versionof tolerance table

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Round 7 Different Cost Loan Comparisons— Broker Less (in percent)

Q: Which loan costs less? Q: Which loan would you prefer?

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Round 7 Different Cost Loan Comparisons— Lender Less (in percent)

Q: Which loan costs less? Q: Which loan would you prefer?

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• 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.

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HUD GFE Form (after)

Returned to detailed settlement costs

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Deleted all tolerance navigation (text and tabs)

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Restored detailed tolerance table

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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*

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Confusing is easy.

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Unclear is easy. CP2000(Before)

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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

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

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

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Short is easy.Credit Card(Before)

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Layout is easy. Good Faith Estimate(Before)

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Clarity is hard…but possible.

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Kleimann Communication Group, Inc.1321 Rhode Island Ave. NW Washington, DC202-737-5733

disclosures plain language symposium susan kleimann—kleimann communication group, inc

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