RECAP

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It goes by the name “Smart Disclosure,” in an announcement to the heads of federal departments and agencies.

The term “smart disclosure” refers to the timely release of complex information and data in standardized, machine readable formats in ways that enable consumers to make informed decisions. Smart disclosure will typically take the form of providing individual consumers of goods and services with direct access to relevant information and data sets. Such information might involve, for example, the range of costs associated with various products and services, including costs that might not otherwise be transparent. In some cases, agencies or third-party intermediaries may also create tools that use these data sets to provide services that support consumer decision-making. Such decision-making might be improved, for example, by informing consumers about the nature and effects of their own past decisions (including, for example, the costs and fees they have already incurred).

Pdf of announcement is here.

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Assorted links

1) Nudging rules for charities.
2) Exercise meets commerce.
3) Just buy this one – a site that radically simplifies shopping (and requires a lot of trust in its consumer ratings). Hat tip: Rory Sutherland.
4) Washington State posts surgical infection rates at all state hospitals online. Hat tip: Maria Kovell.
5) Electronic prescriptions lead to higher non-adherence? Strange. Hat tip: Gilad Buchman.
6) A version of RECAP for bank loan fees in India. Hat tip: Mostly Economics.
7) What’s the secret to marketing the McRib? Artificial scarcity.

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Italian RECAP?

Bank of Italy Governor Mario Draghi says “the variety of new (bank) fees makes it difficult for customers to compare the different offers.” He then seems to propose a RECAP-style system of simplification and disclosure.

Within days we will submit to the Government a comprehensive regulatory proposal that can lead to clearly stated charges, so that all customers can compare different banks and competition can operate freely, without the impediment of opacity.

A pdf of the full speech is here. Hat tip: Amol Agrawal.

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Barbara Kiviat, at The Curious Capitalist, suggests using Nudge’s RECAP (Record, Evaluate, and Compare Alternative Prices) idea as a way to help customers understand complex mortgage agreements. RECAP would not allow the government to set the price for service charges; it would only require their disclosure. It’s goal is to increase information availability and awareness among consumers.

For mortgages, lenders would be required to provide a spreadsheet, too. It would break down the cost of a mortgage into two categories—fees and interest—and it would also, importantly, provide a digital interface for third party vendors to come along and sell comparison services. Similar to what Morningstar does for mutual funds. With downloadable data, third parties could create systems to flex the assumptions behind a mortgage (how much interest rates will go up; the year you go to sell your house), and then help you make a better decision about which sort of loan to pick. There could also be some sort of worst-case scenario feature. That would have been handy.

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