What do you think about when you think about a legal form? Well, from a consumer’s viewpoint, there are basically two types of legal forms.
- There are forms that get completed – ones full of checkboxes and blank lines, and
- There are forms that only show applicable information – where it looks like someone drafted or compiled it for a specific transaction or product.
Think of the first as standard (or static) content and the second as tailored (or dynamic) content.
Standard content displays all possible output options to the consumer. Use of a checkbox, or some other indicator, identifies which options apply to the transaction. The blank lines fill in the details of any terms that do not have predefined options.
Tailored content, on the other hand, only includes the specific language and options that apply to a specific product or transaction.
The Consumer Financial Protection Bureau (CFPB) provides a good summary of the difference between these two types of content in its 2013 proposed rule for the Integrated Mortgage Disclosures required under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z).[1] In fact, as a direct result of their outreach and consumer testing, the CFPB chose a path in favor of tailored content. For example, the Regulation X and Regulation Z mortgage disclosures include requirements that certain tables be completed dynamically or, alternatively, not appear if the table is not relevant to the transaction.[2] The CFPB took a similar approach when it designed the Regulation P privacy disclosures, only permitting certain information to appear when it was relevant to disclosing the institution’s privacy policy.
Any way you look at it, the CFPB clearly believes that consumers better understand tailored documents and, additionally, that tailored documents reduce the likelihood of information being miscommunicated. Others have taken notice. See, for example, the re-designed Uniform Residential Loan Agreement that was jointly proposed by Fannie Mae and Freddie Mac.[3]
While standard content facilitates compliance with the letter of the law, it doesn’t always facilitate consumer understanding. Thinking about the end-customer experience, when a consumer receives a static legal document, they must first find and read individual sections of document that apply to their transaction. And then, they need to re-read the entire document to comprehend how these individual sections fit together with respect to their transaction.
Meanwhile, tailored content facilitates both compliance and consumer understanding. Because the consumer knows that all the content in front of them is relevant, they can immediately begin reading for comprehension, rather than sorting through what text applies and what text does not apply to their product transaction.
Tailored content has other advantages over standard content as well. From a data standpoint, the same data is needed to generate standard content versus tailored content. However, tailored content has a seamless appearance, again immediately allowing the reader to begin the comprehension process.
Tailored content can also help reduce compliance risks. On the one hand, failure to select an appropriate indicator in standard content creates a similar risk as omitting text in tailored content. An omission is an omission, after all. On the other hand, the inclusion of unchecked boxes or blank lines, even when intentional, can create confusion, misunderstanding, and – if the form is poorly laid out – could even mislead the consumer as to which terms are actually part of the product or transaction
As a result, take advantage of tailored content whenever you can. Using tailored content can provide a number of benefits over standard content, including better consumer understanding and a reduced compliance risk.
Considering tailored or standard content for the recent Regulation CC changes, learn more at our Regulation CC Resource Center.
[1] See https://files.consumerfinance.gov/f/201207_cfpb_proposed-rule_integrated-mortgage-disclosures.pdf on pages 38 to 51.
[2] Ibid. pg. 382
[3] See https://www.fanniemae.com/singlefamily/uniform-residential-loan-application and https://sf.freddiemac.com/tools-learning/uniform-mortgage-data-program/ulad for more information.
