Disclosure has long been one of the principal tools of consumer protection. The basic premise seems straightforward: if consumers are given better information about the terms of a transaction, they should be able to make better-informed decisions.
But what if better disclosure works differently for different consumers? And what if a disclosure that improves decision-making overall can, in some circumstances, actually worsen outcomes for financially vulnerable consumers?
Those are among the important and provocative questions explored in the latest episode released today of the Consumer Finance Monitor Podcast, hosted by Alan Kaplinsky (founder and former chair for 25 years and now Senior Counsel of the Consumer Financial Services Group at our firm) Alan's guest is Professor Florencia Marotta-Wurgler of NYU School of Law, a leading scholar of consumer law, behavioral law and economics. We discuss her new article, "The Distributional Costs of Effective Consumer Regulation," co-authored with Tamar Kricheli-Katz. The article is available for free on SSRN.
The article challenges the conventional way regulators and academics have evaluated consumer disclosures. Rather than simply asking whether disclosure "works," the authors ask a more nuanced question: for whom does it work, under what circumstances, and at what cost?
Key Topics Discussed Include:
· Better disclosure can reduce mistakes, but not necessarily for everyone in the same way
· When salience changes the trade-off
· The implications for regulators
· What does this mean for behavioral regulation?
· A broader lesson about disclosure
Professor Marotta-Wurgler's research is particularly compelling because it challenges the assumption that making information more effective is necessarily an unqualified good. Sometimes, a disclosure may not merely inform consumers. It may change what they focus on, how they perceive trade-offs and ultimately what choices they make.
That is a lesson regulators, policymakers and industry participants should keep in mind as they design the next generation of consumer protection disclosure rules.
Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.
