sale?
An interim report by the government’s Better Regulation Executive
and the National Consumer Council has found that consumers may be
overwhelmed by information at the point of sale, thanks in no small
part to the information businesses are required to pass on before
they can sell certain products – such as consumer credit
agreements.The report, Warning: Too much information can
harm, found that the importance of informing consumers of
the risks of a particular product had to be balanced against the
fact that in the context of a discussion at the point of sale,
consumers are not inclined to read thoroughly material which is
often lengthy and complicated.
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“Like other regulatory tools, information has costs as well as
benefits. Crucially, consumer attention is a finite resource.
“Each piece of information added by government diminishes the
attention consumers will pay to this and other pieces of advice
they receive. As with other regulatory requirements, information
requires careful cost-benefit analysis to check that it is the
right tool for the job,” the report found.
Edward
Simpson, head of public affairs at the Finance
& Leasing Association said on behalf of the UK credit
industry Cross Industry Group: “This report is very timely, as the
European Parliament begins to discuss the Consumer Credit
Directive.
“Many of the Directive’s provisions would produce information
overload of the worst kind. We hope MEPs will take a commonsense
approach and recognise that consumers need concise and relevant
information.”
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By GlobalDataReport case study: Consumer credit
agreements
Focus group research found that there was considerable confusion
about consumer credit agreements and that few consumers read
them.
A snapshot review of a handful of consumer credit agreements
taken at random found that they often required between 30 and 55
minutes. One consumer credit provider who provided relatively short
agreements suggested that approximately one third of the
information would be provided anyway, whatever the regulations.
Consumer credit agreements contain, in addition to marketing data,
at least four main types of regulated information:
- contractual information about the product – required as a basic
part of contract law and growing in volume as a result of
increasing complexity of these products - information that aims to encourage choice – this consists of
“key facts” data provided in a succinct and comparable format and
includes the rate of APR - information that tells consumers about the possible risks of
consumer credit – messages that include things like “your house may
be repossessed if you do not keep up payments” - a guide for consumers on their rights and how to access
possible redress mechanisms
For consumers it can be difficult to separate out the different
parts of the text and to understand the purpose of each piece of
information. It is to be expected that these four different types
of information have four different styles of presentation.
For example, information on choice could potentially be written
in a simple, readable and actionable format which contrasts with a
legal style for the main contractual clauses.
However consumers often do not have the patience or the ability
to filter out the information which they can not understand to
focus in on the essential elements that they require.
