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Are Information Disclosures Effective? Evidence from the Credit Card Market

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  • Enrique Seira
  • Alan Elizondo
  • Eduardo Laguna-Müggenburg

Abstract

Consumer protection in financial markets in the form of information disclosure is high on government agendas, even though there is little evidence of its effectiveness. We implement a randomized control trial in the credit card market for a large population of indebted cardholders and measure the impact of Truth-in-Lending-Act-type disclosures, de-biasing warning messages and social comparison information on default, indebtedness, account closings, and credit scores. We conduct extensive external validity exercises in several banks, with different disclosures, and with actual policy mandates. We find that providing salient interest rate disclosures had no effects, while comparisons and de-biasing messages had only modest effects at best.

Suggested Citation

  • Enrique Seira & Alan Elizondo & Eduardo Laguna-Müggenburg, 2017. "Are Information Disclosures Effective? Evidence from the Credit Card Market," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 277-307, February.
    • Handle: RePEc:aea:aejpol:v:9:y:2017:i:1:p:277-307
    Note: DOI: 10.1257/pol.20140404
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    2. Giorgia Barboni & Juan Camilo Cárdenas & Nicolás de Roux, 2022. "Behavioral Messages and Debt Repayment," Documentos CEDE 20257, Universidad de los Andes, Facultad de Economía, CEDE.
    3. Laura W. Perna & James Kvaal & Roman Ruiz, 2017. "Understanding Student Debt: Implications for Federal Policy and Future Research," The ANNALS of the American Academy of Political and Social Science, , vol. 671(1), pages 270-286, May.
    4. John A. List & James J. Murphy & Michael K. Price & Alexander G. James, 2019. "Do Appeals to Donor Benefits Raise More Money than Appeals to Recipient Benefits? Evidence from a Natural Field Experiment with Pick.Click.Give," NBER Working Papers 26559, National Bureau of Economic Research, Inc.
    5. Cesar Leandro, Julio & Botelho, Delane, 2022. "Consumer over-indebtedness: A review and future research agenda," Journal of Business Research, Elsevier, vol. 145(C), pages 535-551.
    6. Bianchi, Milo & Bouvard, Matthieu & Gomes, Renato & Rhodes, Andrew & Shreeti, Vatsala, 2023. "Mobile payments and interoperability: Insights from the academic literature," Information Economics and Policy, Elsevier, vol. 65(C).
    7. Lunn, Pete & McGowan, Féidhlim & Howard, Noel, 2018. "Do some financial product features negatively affect consumer decisions? a review of evidence," Research Series, Economic and Social Research Institute (ESRI), number RS78, June.
    8. Giné, Xavier & Mazer, Rafael Keenan, 2022. "Financial (dis-)information: Evidence from a multi-country audit study," Journal of Public Economics, Elsevier, vol. 208(C).
    9. Saulı̄tis, Andris, 2023. "Nudging debtors with non-performing loans: Evidence from three field experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    10. O. Seizov & A. J. Wulf & J. Luzak, 2019. "The Transparent Trap: A Multidisciplinary Perspective on the Design of Transparent Online Disclosures in the EU," Journal of Consumer Policy, Springer, vol. 42(1), pages 149-173, March.
    11. Paolina C. Medina & Jose L. Negrin, 2022. "The Hidden Role of Contract Terms: The Case of Credit Card Minimum Payments in Mexico," Management Science, INFORMS, vol. 68(5), pages 3856-3877, May.
    12. Belay, Dagim G. & Jensen, Jørgen D., 2020. "‘The scarlet letters’: Information disclosure and self-regulation: Evidence from antibiotic use in Denmark," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    13. Inge van den Bijgaart & Davide Cerruti, 2020. "The effect of information on market activity; evidence from vehicle recalls," CER-ETH Economics working paper series 20/343, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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    15. Adams, Paul & Hunt, Stefan & Palmer, Christopher & Zaliauskas, Redis, 2021. "Testing the effectiveness of consumer financial disclosure: Experimental evidence from savings accounts," Journal of Financial Economics, Elsevier, vol. 141(1), pages 122-147.
    16. Paul D. Adams & Stefan Hunt & Christopher Palmer & Redis Zaliauskas, 2019. "Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts," NBER Working Papers 25718, National Bureau of Economic Research, Inc.
    17. Seth Garz & Xavier Gine & Dean Karlan & Rafe Mazer & Caitlin Sanford & Jonathan Zinman, 2021. "Consumer Protection for Financial Inclusion in Low- and Middle-Income Countries: Bridging Regulator and Academic Perspectives," Annual Review of Financial Economics, Annual Reviews, vol. 13(1), pages 219-246, November.
    18. Erica Myers & Steven L. Puller & Jeremy D. West, 2019. "Effects of Mandatory Energy Efficiency Disclosure in Housing Markets," NBER Working Papers 26436, National Bureau of Economic Research, Inc.
    19. Pretto, Madeline, 2021. "Tail-risk Comprehension and Protection in Real-time Electricity Pricing : Experimental Evidence," Warwick-Monash Economics Student Papers 25, Warwick Monash Economics Student Papers.
    20. Zucco, Cesar & Lenz, Anna-Katharina & Goldszmidt, Rafael & Valdivia, Martin, 2020. "Face-to-face vs. virtual assistance to entrepreneurs: Evidence from a field experiment in Brazil," Economics Letters, Elsevier, vol. 188(C).

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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