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A Call for Credit-Card Disclosure

August 19, 2008

Proposed amendments to the federal Truth in Lending regulations would be a welcome change, Richard Thaler and Cass R. Sunstein argued on the Wall Street Journal opinion page last week.

Sunstein, who earned his A.B. at Harvard in 1975 and a law degree in 1978, has taught at the University of Chicago Law School since 1981, but returns to teach at Harvard Law School this fall. (He married Lindh professor of practice of global leadership and public policy Samantha Power in July.)

Thaler teaches at the University of Chicago Graduate School of Business. His work figured in The Marketplace of Perceptions, in the March-April 2006 issue of Harvard Magazine.

Even though the proposed rules would require credit-card companies to disclose the terms of agreements in a format more easily understandable for consumers, Sunstein and Thaler recommend taking the rules a step further: to require disclosure in a standardized format that could be aggregated and analyzed by a third party—for instance, a website allowing consumers to compare different card-issuers’ rates and fees side by side.

The authors also suggest expanding the disclosure mandate to the mortgage and cell-phone industries.  Those with access to wsj.com can read the piece in its entirety here.

Gottlieb professor of law Elizabeth Warren issued a similar call for requiring clearer disclosure in Making Credit Safer, in the May-June 2008 issue of Harvard Magazine.