Qualitative Testing of Proposed MasterCard Plain Language Application Form

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This report was commissioned by FCAC

Table of Contents

Background Context

Purpose and Methodology

Limitations of the study

Overview of Findings

• About the Respondents
• Overall Reaction to the Proposed Six-Page Document
• The Proposed Two-Page Application Form
  
  • Overall Appreciation
  • Main Difficulties
• The Proposed Four-Page Appendix
  
  • Overall Appreciation
  • Main Difficulties
• Reaction to the Current Application
• Did the Proposed Document Meet its Objectives?
• Additional Comments

Annex 1: Sample of Model Credit Card Application Form

Background Context

The Financial Consumer Agency of Canada (FCAC) and MasterCard Worldwide (MasterCard) have developed plain language documents in an effort to improve credit card disclosure for consumers ("Plain Language Project"). FCAC and MasterCard commissioned this study to help determine how well these proposed documents are understood by consumers with average literacy skills, i.e., who are at level 3 of the 5-level International Adult Literacy and Skills Survey (IALSS) scale¹ .

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Purpose and Methodology

The purpose of the study was to get direct feedback from consumers with an average level of financial literacy on the proposed plain language credit card application form, to help further develop the final document.

Overall, the document was to be assessed on four key criteria:

• Relevance: was the information was considered useful to the reader?
  
  
• Perceived ease of comprehension: did the document look easy to understand?
  
  
• Motivation to read the document: did the document encourage readership and inspire confidence?
  
  
• Comprehension: did participants feel they understood the document on the basis of language (literacy) or numbers (numeracy)?
  
  

From April 22-30, 2008, eight two-hour focus groups were conducted in four large urban centres across Canada, with two sessions each in Montreal (French), and in Toronto, Vancouver and Halifax (English). The 52 participants were randomly recruited by Créatec on the basis of: (1) household income under $60K, (2) high school education, with perhaps some college but no university (both of which correlate well with an average financial literacy level), (3) a bank account and a credit card (or store card), and (4) the usual work exclusions.

Limitations of the Study

This qualitative research study may best be used to provide insight and understanding as to why participants thought and/or reacted the way they did to the materials being tested. As such, the findings are not statistically viable and may or may not represent the target group as a whole. It is left to the judgement of the reader to evaluate the direction and guidance generated from such research.

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Overview of Findings

About the Respondents

Comments, reactions and observations from all groups strongly indicated that a significant majority of participants met the level-3 literacy criteria.

• Most participants felt they were moderately or somewhat familiar with managing their personal finances, understanding what influences a credit rating, and understanding general advertising related to bank accounts and credit cards.
  
  
• Some felt there were definite gaps in their knowledge, and others said they found choosing the right credit card a challenge, because of the different interest rates, plans and reward programs, as well as struggling through the "fine print".
  
  

Early on in the discussions, before viewing the test materials, most participants admitted they did not read the terms and conditions when filling out credit card application forms. Some said they relied on the help of a "financial advisor" or someone who worked at the bank, either in person, or on the phone.

Overall Reaction to the Proposed Six-Page Document

Overall, consistent positive response occurred in all eight groups, across language and region. There was a strong tendency to react quite favourably for ten main reasons:

Most negative response related to comprehension and a need for greater clarity with respect to the SIN, interest rates, and privacy concerns. Participants tended to question existing policies, i.e., content, rather than their presentation.

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The Proposed Two-Page Application Form

Overall Appreciation

Most participants in all groups were positively impressed with the spaciousness of the application, which offered lots of room in which to write. The layout and font size made it easy to read, and the left margin told them where to find more information. People also valued the phone number and Web site, easily found at the end of the second page.

Main Difficulties

In general, participants had difficulty either noticing that the SIN was optional, or understanding and/or believing it. As well, people were unclear about the differences between the two cards, as well as the extra features. Most worried about privacy, and that "any person" (who?) could be contacted for "other" information (what?). Overall, participants suggested the following seven main improvements:

The Proposed Four-Page Appendix

Overall Appreciation

In all eight groups, reaction to the proposed appendix was consistently quite positive. This affirmative pattern emerged not only during the discussion of the appendix itself, but also when comparing it to the current version. Even though all participants had credit cards, the focus group experience was the first time most had read all the way through the terms and conditions.

Main Difficulties

Major concerns related mainly to the Privacy Statement. Participants generally disliked the idea that their personal information would be shared with bank affiliates, agents and service providers, and wondered who these people were, and what they would be allowed to do with the information. People also said they preferred to opt in instead of the current need to opt-out of marketing and promotional activities, and found the long paragraph describing this confusing. Overall, participants said they wanted information added to the appendix on the following seven elements:

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Reaction to the Current Application

Most participants in all locations agreed that the example of a current application form was not really accessible to them because: (1) the print was too small to read; (2) the language required a "lawyer" or legal dictionary; and (3) essentially the terms and conditions looked too difficult to even try to read.

Overall, the current document had four features that participants appreciated: (1) the word "optional" was in parenthesis beside the SIN; (2) the small table on the second page showed the interest rate for difference balances; (3) the Service Charges heading was more familiar than Other Fees (as on the proposed appendix); and (4) the easy-to-read Service Charges list was all on one page, and included ATM fees.

Did the Proposed Document Meet its Objectives?

The results of this study show that in large part, the proposed six-page document was successful in satisfying and meeting each of the following objectives.

• Relevance: was the information useful to the reader?
  
  
  • The proposed six-page document was deemed highly relevant and extremely useful to participants in this study. Most said they learned things previously not known or understood, even though many had used credit cards for years.
    
    
• Perceived Ease of Comprehension: did the document look easy to understand?
  
  
  • Virtually all participants highly praised this aspect of the proposed document, and cited four reasons why it looked so easy to understand: (1) the simple layout, and all the white spacing, (2), the large typeface, (3) the headings and sub-headings, and (4) the user-friendly colours.
    
    
• Motivation to read: did the proposed document encourage readership and inspire confidence?
  
  
  • Participants described how they had some trepidation when they first saw the proposed legal-sized document, as they anticipated the all-too-familiar difficult legal terminology, financial jargon and small typeface. However, once they began reading, they reported feeling confident enough to continue and that they would understand. In fact, people said their concerns disappeared as they went along because the document was so different from their usual experience.
    
    
  • Participants did suggest that paper could be saved by using both sides of the paper, and by perhaps cutting back—just a little—on the white space.
    
    
• Comprehension: did participants feel they understood the document on the basis of language (literacy) or numbers (numeracy)?
  
  
  • On the basis of language, virtually all participants indicated they had no difficulty understanding the proposed document. People commented or wrote that this was actually the first time they understood such issues, and emphasized that they did not need a dictionary or someone else to translate for them. There was some worry about the word "optional" with regard to the SIN, and what this meant (i.e., would they be denied a card if they did not provide their SIN; was the SIN part of the personal information shared with bank affiliates, etc., and would any of these organizations pass it on to others?).
    
    
  • In contrast, numeracy issues were thought to need some clarity, especially with respect to interest rates, as evidenced by: (1) frequent and consistent requests for monthly rates; (2) questions about why rates change and how interest accrues; (3) curiosity about the benefits of paying the extra fee and getting a lower rate; and (4) frequent and consistent requests for more financial examples wherever possible including a table format to show how interest accrues for different balances—people highly valued examples whenever used.

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Additional Comments

The proposed application form and appendix would seem to have largely met the overall objective of making it much more accessible to the target group.

In fact, the simplified document exposed participants to what many felt was new financial information. This, in turn, seemed to whet their appetite for even more. People indicated a willingness and in some cases, even an eagerness, to seek out additional information. For example, participants wanted to understand why certain fees were charged, why the bank had certain policies and what these policies meant in terms of their privacy rights and the bank's promotional and marketing activities.

• Participants suggested such additional information could be on a Web site.
  
  
• Could the FCAC site and phone number be included on the final document, along with the bank's much-appreciated contact information, as a place to find out more about financial issues?
  
  

In sum: having successfully addressed concerns related to layout and language, and with the inclusion of some fine-tuning adjustments related to numeracy, the next challenge would seem to be managing the informational balance—what to include on the form, and what to provide in a supplemental form, whether on a Web site or in a separate paper format.

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Annex 1: Sample of Model Credit Card Application Form

1. The IALSS, released November 30, 2005, tested Canadians' literacy skills on a 1-5 point spectrum (1=least skilled, 5=highly skilled), with level 3 as the minimum skill level necessary to meet the today's challenges. The survey showed that more than half of Canadians (55%) lack the minimum numeracy skills to be able to function well in today's society, such as putting numbers in order, writing numbers as words and figures, adding, subtracting, multiplying and dividing whole numbers, checking numbers and solving simple problems.

This report was commissioned by FCAC