Eye See What You Are Saying: Testing Conversational Influences on the Information Gleaned from Home-Loan Disclosure Forms MARK A. LEBOEUF 1 *, JESSICA M. CHOPLIN 1 and DEBRA POGRUND STARK 2 1 DePaul University, Chicago, IL, USA 2 The John Marshall Law School, Chicago, IL, USA ABSTRACT The federal government mandates the use of home-loan disclosure forms to facilitate understanding of offered loans, enable comparison shopping, and prevent predatory lending. Predatory lending persists, however, and scant research has examined how salespeople might under- mine the effectiveness of these forms. Three eye-tracking studies (a laboratory simulation and two controlled experiments) investigated how conversational norms affect the information consumers can glean from these forms. Study 1 was a laboratory simulation that recreated in the laboratory; the effects that previous literature suggested is likely happening in the field, namely, that following or violating conversational norms affects the information that consumers can glean from home-loan disclosure forms and the home-loan decisions they make. Studies 2 and 3 were controlled experiments that isolated the possible factors responsible for the observed biases in the information gleaned from these forms. The results suggest that attentional biases are largely responsible for the effects of conversation on the information consumers get and that perceived importance plays little to no role. Policy implications and how eye-tracking technology can be employed to improve decision- making are considered. Copyright © 2015 John Wiley & Sons, Ltd. key words predatory lending; consumer protection; conversational norms; visual search; home-loan disclosures INTRODUCTION The federal government’s primary regulatory approach to protecting home-loan consumers from predatory lending and poor decision-making is to communicate the terms of of- fered loans via mandated disclosure forms. These forms would potentially allow consumers to evaluate whether of- fered loans are overpriced, unaffordable, or otherwise con- tain risky terms that could lead to default (Stark & Choplin, 2010). However, home loans have become increasingly com- plex (Carrozzo, 2005). The 30-year amortized fixed-rate mortgage of previous generations are now offered along with risky options such as “interest only” loans, adjustable-rate loans, prepayment premiums, and a variety of difficult to un- derstand fees and charges (some that can be negotiated, others are regulated). The sheer amount of information that consumers need to determine, which loans suit their needs, often supersedes their abilities to process it (Willis, 2006). Furthermore, disclosure forms often fail to communicate essential costs (Lacko & Pappalard, 2007) and information processing biases can undermine the effectiveness of these disclosures (Bertrand & Adair, 2009; Stark & Choplin, 2010). Prior testing of the effectiveness and usability of these forms has utilized focus groups, individual qualitative inter- views, think-aloud protocols, and participants’ abilities to an- swer questions correctly when assessing the effectiveness of disclosure forms (Kleinmann Communications Group, Inc., 2012; US Department of Housing and Urban Development Office of Policy Development and Research, 2008). How- ever, previous research largely ignored the influence of con- textual factors—such as conversations that occur when these forms are presented to consumers—on their effectiveness (Stark, Choplin, & LeBoeuf, 2013). One reason might have been methodological. Prior approaches could not be used to study these factors. The studies reported in this article, by contrast, used eye-tracking technology to investigate how conversations affect the decisions that home-loan consumers make (Study 1) and the information they glean from these forms (Studies 1–3). Testing these influences is critical as some mortgage bro- kers and lenders engage consumers in conversation and pro- vide guidance at the outset of the lending process. Though at times intended to facilitate understanding, these conversa- tions can nevertheless mislead consumers (Hill & Kozup, 2007; Pacelle, 2004). For instance, employees of one lending company required its loan officers to follow a standardized sales pitch that geared the consumer’s attention towards fa- vorable loan-attributes and diverted attention away from problematic attributes. After reviewing this script, the US Court of Appeals concluded that “The loan sales presentation was conducted in such a way as to lead a consumer to disregard the high annual percentage rate (APR) when it was ultimately disclosed on the federally required Truth in Lending Statement” (In re First Alliance Mortgage Com- pany, 471 F. 3d 977, 985 (9 th Cir. 2005)). There are numerous conversational strategies that preda- tory lenders and mortgage brokers might utilize to mislead consumers, which could bias visual search processes that support loan-related judgment and decision-making (Hill & Kozup, 2007). Research in our laboratory, for example, has used eye-tracking technology to investigate how confir- mation biases (under which consumers review disclosure forms to confirm what they are told and fail to look for disconfirmatory evidence; Stark et al., 2013) and part-set cuing effects (under which reminding consumers to check a subset of the attributes that they previously knew to check *Correspondence to: Mark A. LeBoeuf, Department of Psychology, DePaul University, 2219 North Kenmore Avenue, Chicago, IL 60614-3504, USA. E-mail: markleboeuf2015@u.northwestern.edu Copyright © 2015 John Wiley & Sons, Ltd. Journal of Behavioral Decision Making, J. Behav. Dec. Making, 29: 307–321 (2016) Published online 17 May 2015 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/bdm.1881