The Federal Trade Commission (FTC) held a workshop last week on the effectiveness of consumer disclosures. Titled “Putting Disclosures to the Test”, the workshop featured a series of presentations on recent academic, professional, and government research. Given that the average reading level in the United States is between the 7th and 9th grade, financial institutions and others offering complex products have their work cut out for them. Here are our top 3 takeaways from the workshop:

  1. More disclosure doesn’t mean better disclosure. In one study of games that included advertisements, it was determined that disclosures delivered in two channels (e.g. audible and visual) were less effective than disclosures delivered in a single channel. Another study found that consumers spend about the same amount of time on any given disclosure (a few seconds), regardless of the length of the disclosure. As a result, the researcher suggested that brief disclosures could be more effective than lengthy disclosures by focusing the consumer on unexpected aspects of the disclosure or by targeting relevant disclosures based on specific contexts or personalization.
  2. Native ad recognition depends on the context. In one study, only 37% of consumers exposed to native ads (in this case, sponsored articles) were able to identify them as ads. That study concluded that changes to the context in which native ads were presented (e.g. placement) had a greater impact on recognition than the objective features of advertising disclosures (e.g. enhanced disclosure text). In another study on native ads in social media, consumers were generally able to identify native content as advertisements at a higher rate. The study found that native ad recognition in social media varied depending on placement of the ad, brand familiarity, and the quality of photographs presented.
  3. The FTC is focused on effective disclosures, and the CFPB is too. The FTC has led the way in providing guidance on effective online disclosures. The agency’s 2013 “.com Disclosures guidance serves as a primary resource for companies advertising and providing products online. The FTC indicated that, In the coming weeks, it will put together a read-out from this workshop and provide some additional commentary. As electronic interactions with consumers evolve, interested practitioners should keep track of these developments. We’ll be sure to post relevant updates here on PLA (the Payment Law Advisor).

Finally, it’s notable that a representative from the Consumer Financial Protection Bureau’s (CFPB) Office of Research participated in the workshop. She provided a summary of recent research on how the context in which disclosures are presented impacts comprehension. For example, the CFPB representative noted that 35% of consumers identified a fairly discreet aspect of a disclosure when they were allowed to review the disclosure alone, compared to only 5% when consumers reviewed the disclosure face to face with a researcher. The CFPB has spent a significant amount of time rooting out deceptive marketing practices through enforcement actions (see our UDAAP database) and the agency’s efforts to contribute to the growing body of research on effective disclosures appears to be a complimentary area of focus.

The FTC is accepting comments in connection with the workshop until November 2, 2016. Information on the agenda, videos of the workshop, and links to many of the studies discussed are available here.