Ineffective in Any Form : How Confirmation Bias and Distractions Undermine Improved Home-Loan Disclosures

This article examines three experiments that tracked eye fixations as participants review home-loan disclosure forms. The experiments revealed confirmation biases in which participants read to confirm what they were told (e.g., "Your loan is at 4%") and then failed to look for contradictory evidence such as rate adjustments. Improved forms reduced confirmation biases, but that improvement was undermined when the experimenter engaged participants in distracting conversation. These results demonstrate that improving disclosure forms cannot sufficiently protect consumers. The authors propose a new federal law that would require consumers applying for a home loan to take out a "financial literacy" and if they fail that test that they should be required to receive mortgage counseling at the time that they receive an offered home loan