IDEAS home Printed from https://ideas.repec.org/p/bdm/wpaper/2014-18.html
   My bibliography  Save this paper

Are Information Disclosure Mandates Effective? Evidence from the Credit Card Market

Author

Listed:
  • Elizondo Alan
  • Seira Enrique

Abstract

Consumer protection in financial markets in the form of information disclosure is high on governments agendas, despite the fact that the empirical evidence on its effectiveness is scarce. To measure the impact of Truth-in-Lending-Act-type disclosures on default and indebtedness, as well as of debiasing warning messages and social comparison information, we implement a randomized control trial in the credit card market for a large population of indebted cardholders. We find that providing salient interest rate disclosures has no effect, while social comparisons and debiasing messages have only a odest effect. Other types of disclosures discussed in the paper could have larger effects.

Suggested Citation

  • Elizondo Alan & Seira Enrique, 2014. "Are Information Disclosure Mandates Effective? Evidence from the Credit Card Market," Working Papers 2014-18, Banco de México.
    • Handle: RePEc:bdm:wpaper:2014-18
    as

    Download full text from publisher

    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7B8EF5674F-2632-DFD0-5EAA-23D80EE49E43%7D.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:mpr:mprres:7375 is not listed on IDEAS
    2. Lusardi, Annamaria & Tufano, Peter, 2015. "Debt literacy, financial experiences, and overindebtedness," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(4), pages 332-368, October.
    3. Laura O. Taylor & Ronald G. Cummings, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June.
    4. Bryan Bollinger & Phillip Leslie & Alan Sorensen, 2011. "Calorie Posting in Chain Restaurants," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 91-128, February.
    5. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
    6. Jeffrey R. Kling & Sendhil Mullainathan & Eldar Shafir & Lee C. Vermeulen & Marian V. Wrobel, 2012. "Comparison Friction: Experimental Evidence from Medicare Drug Plans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 199-235.
    7. Yan Chen & F. Maxwell Harper & Joseph Konstan & Sherry Xin Li, 2010. "Social Comparisons and Contributions to Online Communities: A Field Experiment on MovieLens," American Economic Review, American Economic Association, vol. 100(4), pages 1358-1398, September.
    8. Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, May.
    9. Michelle J. White, 2007. "Bankruptcy Reform and Credit Cards," NBER Working Papers 13265, National Bureau of Economic Research, Inc.
    10. Durkin, Thomas A, 1975. "Consumer Awareness of Credit Terms: Review and New Evidence," The Journal of Business, University of Chicago Press, vol. 48(2), pages 253-263, April.
    11. Michelle J. White, 2007. "Bankruptcy Reform and Credit Cards," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 175-200, Fall.
    12. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1082-1095, October.
    13. Pascaline Dupas, 2011. "Do Teenagers Respond to HIV Risk Information? Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 1-34, January.
    14. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
    15. Day, George S & Brandt, William K, 1974. "Consumer Research and the Evaluation of Information Disclosure Requirements: The Case of Truth in Lending," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 1(1), pages 21-32, June.
    16. Ginger Zhe Jin & Phillip Leslie, 2003. "The Effect of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 409-451.
    17. John A. List, 2001. "Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards," American Economic Review, American Economic Association, vol. 91(5), pages 1498-1507, December.
    18. Robert Jensen, 2010. "The (Perceived) Returns to Education and the Demand for Schooling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 515-548.
    19. Marianne Bertrand & Adair Morse, 2011. "Information Disclosure, Cognitive Biases, and Payday Borrowing," Journal of Finance, American Finance Association, vol. 66(6), pages 1865-1893, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sule, Alan & Cemalcilar, Mehmet & Karlan, Dean S. & Zinman, Jonathan, 2015. "Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey," Center Discussion Papers 198558, Yale University, Economic Growth Center.
    2. Wang, Jialan & Burke, Kathleen, 2022. "The effects of disclosure and enforcement on payday lending in Texas," Journal of Financial Economics, Elsevier, vol. 145(2), pages 489-507.
    3. Ulrike Malmendier, 2016. "The Bidder's Curse: Reply," American Economic Review, American Economic Association, vol. 106(4), pages 1195-1213, April.
    4. Bruno Ferman, 2016. "Reading the Fine Print: Information Disclosure in the Brazilian Credit Card Market," Management Science, INFORMS, vol. 62(12), pages 3534-3548, December.
    5. Cañón, Carlos & Cortés, Edgar & Guerrero, Rodolfo, 2022. "Bank competition and the price of credit: Evidence using Mexican loan-level data," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 56-74.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:cie:wpaper:1408 is not listed on IDEAS
    2. Peters, Jörg & Langbein, Jörg & Roberts, Gareth, 2016. "Policy evaluation, randomized controlled trials, and external validity—A systematic review," Economics Letters, Elsevier, vol. 147(C), pages 51-54.
    3. Lin, Wen & Nayga, Rodolfo M., 2022. "Green identity labeling, environmental information, and pro-environmental food choices," Food Policy, Elsevier, vol. 106(C).
    4. 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.
    5. Hunt Allcott & Richard L. Sweeney, 2017. "The Role of Sales Agents in Information Disclosure: Evidence from a Field Experiment," Management Science, INFORMS, vol. 63(1), pages 21-39, January.
    6. Paul Adams & Benedict Guttman‐Kenney & Lucy Hayes & Stefan Hunt & David Laibson & Neil Stewart, 2022. "Do Nudges Reduce Borrowing and Consumer Confusion in the Credit Card Market?," Economica, London School of Economics and Political Science, vol. 89(S1), pages 178-199, June.
    7. Ingar Haaland & Christopher Roth & Johannes Wohlfart, 2023. "Designing Information Provision Experiments," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 3-40, March.
    8. Alejandro Ponce & Enrique Seira & Guillermo Zamarripa, 2017. "Borrowing on the Wrong Credit Card? Evidence from Mexico," American Economic Review, American Economic Association, vol. 107(4), pages 1335-1361, April.
    9. Viktar Fedaseyeu, 2012. "Debt Collection Agencies and the Supply of Consumer Credit," Working Papers 442, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    10. Altmann, Steffen & Falk, Armin & Jäger, Simon & Zimmermann, Florian, 2018. "Learning about job search: A field experiment with job seekers in Germany," Journal of Public Economics, Elsevier, vol. 164(C), pages 33-49.
    11. Hallsworth, Michael & List, John A. & Metcalfe, Robert D. & Vlaev, Ivo, 2017. "The behavioralist as tax collector: Using natural field experiments to enhance tax compliance," Journal of Public Economics, Elsevier, vol. 148(C), pages 14-31.
    12. Fedaseyeu, Viktar, 2020. "Debt collection agencies and the supply of consumer credit," Journal of Financial Economics, Elsevier, vol. 138(1), pages 193-221.
    13. Hunt Allcott & Daniel Cohen & William Morrison & Dmitry Taubinsky, 2022. "When do "Nudges" Increase Welfare?," NBER Working Papers 30740, National Bureau of Economic Research, Inc.
    14. John List & Michael Price, 2013. "Using Field Experiments in Environmental and Resource Economics," Artefactual Field Experiments 00447, The Field Experiments Website.
    15. Tatiana Homonoff & Rourke O'Brien & Abigail B. Sussman, 2021. "Does Knowing Your FICO Score Change Financial Behavior? Evidence from a Field Experiment with Student Loan Borrowers," The Review of Economics and Statistics, MIT Press, vol. 103(2), pages 236-250, May.
    16. Barboni, Giorgia & Cardenas, Juan Camilo & de Roux, Nicolas, 2022. "Behavioral Messages and Debt Repayment," CAGE Online Working Paper Series 633, Competitive Advantage in the Global Economy (CAGE).
    17. Lucas Coffman & Clayton R. Featherstone & Judd B. Kessler, 2024. "A Model of Information Nudges," Boston College Working Papers in Economics 1077, Boston College Department of Economics.
    18. Rita Abdel Sater, 2021. "Essays on the application of behavioural insights to environmental policy [Essais sur l’application des connaissances comportementales aux politiques environnementales]," SciencePo Working papers tel-03450909, HAL.
    19. Lucas W. Davis & Gilbert E. Metcalf, 2016. "Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 589-625.
    20. Andreas Gerster & Mark A. Andor & Lorenz Götte, 2020. "Disaggregate Consumption Feedback," CRC TR 224 Discussion Paper Series crctr224_2020_182v2, University of Bonn and University of Mannheim, Germany, revised May 2025.
    21. Rita Abdel Sater, 2021. "Essays on the application of behavioural insights to environmental policy [Essais sur l’application des connaissances comportementales aux politiques environnementales]," SciencePo Working papers Main tel-03450909, HAL.

    More about this item

    Keywords

    Credit cards; information disclosure; truth in lending; Mexico;
    All these keywords.

    JEL classification:

    • G4 - Financial Economics - - Behavioral Finance
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdm:wpaper:2014-18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Subgerencia de desarrollo de sistemas (email available below). General contact details of provider: https://edirc.repec.org/data/bangvmx.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.