[Federal Register Volume 68, Number 77 (Tuesday, April 22, 2003)]
[Notices]
[Pages 19825-19826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9852]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The FTC intends to conduct consumer research to examine: (1) 
How consumers search for and choose mortgages; (2) how consumers use 
and understand information about mortgages, including required 
disclosures; and (3) whether more effective disclosures are feasible. 
This research will be conducted to further the FTC's mission of 
protecting consumers and competition in the mortgage market. Before 
gathering this information, the FTC is seeking public comments on its 
proposed consumer research. Comments will be considered before the FTC 
submits a request for Office of Management and Budget (OMB) review 
under the Paperwork Reduction Act (PRA).

DATES: Comments must be submitted on or before June 23, 2003.

ADDRESSES: Send written comments to Secretary, Federal Trade 
Commission, Room H-159, 1600 Pennsylvania Avenue, NW., Washington, DC 
20580, or by e-mail to; [email protected] as; prescribed below. The 
submissions should include the submitter's name, address, telephone 
number and, if available, FAX number and e-mail address. All 
submissions should be captioned ``Mortgage Disclosure Study--FTC File 
No. P025505.''

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to Janis K. Pappalardo, Economist, Bureau of 
Economics, Federal Trade Commission, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Telephone: (202) 326-3387; e-mail 
[email protected].

SUPPLEMENTARY INFORMATION: Recent deceptive lending cases at the FTC 
and elsewhere suggests that consumers who do not understand the terms 
of their mortgages can be subject to deception, that deception can 
occur even when consumers receive the disclosures required by the 
Truth-in-Lending Act, 15 U.S.C. 1601 et seq. (TILA), and that deception 
about mortgage terms can result in substantial consumer injury.
    Despite a long history of mortgage disclosure requirements and many 
new legislative and regulatory proposals regarding disclosures, little 
empirical evidence exists to document the effect of current disclosures 
on consumer understanding of mortgage terms, consumer mortgage shopping 
behavior, or consumer mortgage choice.
    The FTC proposes a research program designed to learn more about 
how consumers search for mortgages, what consumers understand or 
misunderstand about mortgage agreements, and how changes in the 
disclosure process might improve consumer understanding, consumer 
mortgage shopping, and consumers' ability to avoid deception. The 
research also may assist the targeting of the FTC's enforcement actions 
by identifying areas most prone to consumer misunderstanding and lender 
deception and may help refine disclosure remedies imposed on deceptive 
lenders.
    The FTC invites comments on: (1) Whether the proposed collections 
of information are necessary for the proper performance of the 
functions of the FTC, including whether the information will have 
practical utility; (2) the accuracy of the FTC's estimate of the burden 
of the proposed collections of information; (3) ways to enhance the 
quality, utility, and clarity of the information to be collected; and 
(4) ways to minimize the burden of collecting information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses. The FTC will submit the proposed information 
collection requirements to OMB for review, as required by the PRA (44 
U.S.C. chapter 35, as amended).
    If a comment contains nonpublic information, it must be filed in 
paper form, and the first page of the document must be clearly labeled 
``confidential.'' Comments that do not contain any nonpublic 
information may instead be filed in electronic form (in ASCII format, 
WordPerfect, or Microsoft Word) as part of or as an attachment to e-
mail messages directed to the following e-mail box: [email protected]. 
Such comments will be considered by the Commission and will be 
available for inspection and copying at its principal office in 
accordance with section 4.9(b)(6)(ii) of the Commission's rules of 
practice, 16 CFR section 4.9(b)(6)(ii).

1. Description of the Collection of Information and Proposed Use

    The FTC proposes to conduct this study in two phases: (1) A 
qualitative research phase; and (2) a quantitative research phase. The 
qualitative research phase will include focus groups and in-depth 
interviews. The quantitative research will include copy tests of 
current and alternative disclosures. Results from the first phase will 
be used to refine the design of the second phase.
    The project will begin with 2 focus groups. Each group will include 
8-10 consumers who completed a mortgage transaction within the previous 
year. One group will be comprised of subprime borrowers. The second 
group will be comprised of prime borrowers. The purpose of the focus 
groups is to examine how well consumers understand mortgage terms, how 
consumers shop for mortgages, if consumers recognize features of a 
mortgage offer that may significantly increase the cost of the loan, 
and whether consumers use and understand required disclosures. Subprime 
and prime borrowers will be examined separately to examine possible 
differences between these groups of consumers.
    The focus group research will be followed by a series of 
approximately 36 individual, in-depth interviews with a different group 
of borrowers. Respondents will have completed a mortgage transaction 
within the previous two months and will be asked to bring their loan 
documents to the interview. The purpose of the interviews is to gain 
in-depth knowledge of the extent to which consumers use, search for, 
and understand mortgage information--including information about their 
own recent loans.
    The last phase of the study will consist of copy test interviews of 
800 consumers who entered into a mortgage transaction within the 
previous year. If possible, approximately half of the respondents will 
be subprime borrowers and half will be prime borrowers. The

[[Page 19826]]

purpose of the copy tests will be to examine whether alternative 
disclosures can improve consumer understanding of mortgage terms and 
help to reduce potential deception about mortgage offers. The findings 
from the focus groups and interviews will be used in developing the 
alternative disclosures used in the copy tests.
    All information will be collected on a voluntary basis and 
consumers will receive usual and customary compensation for their 
participation. For the qualitative research the FTC has contracted with 
a consumer research firm to locate eligible borrowers, recruit 
respondents, moderate the focus groups, conduct the interviews, and 
write a report of the findings. For the quantitative research the FTC 
has also contracted with a consumer research firm to locate eligible 
borrowers and recruit respondents as well as to conduct the copy tests 
and write a brief methodological report. The results will assist the 
FTC in determining how required disclosures and other information 
affects consumers' ability to understand the cost and features of 
mortgages. This understanding will further the FTC's mission of 
protecting consumers and competition in this important market.

2. Estimated Hours Burden

Qualitative Research

    The contractor will recruit 12 consumers for each focus group, with 
the expectation that each group will be comprised of 8-10 participants. 
Each focus group will take two hours. Thus, the focus group research 
will impose a burden of up to 40 hours (2 groups x 10 participants per 
group x 2 hours per participant). Approximately 36-one-hour long, in-
depth interviews will be conducted. If all respondents are single 
decision makers, this would amount to a 36-hour burden. However, some 
of the interviews may include couples. Assuming that half of the 
interviews include couples (the upper bound offered by the contractor), 
the hours burden for the in-depth interviews would increase to 54 hours 
((18 x 2 hours) + (18 x 1 hour)). The cumulative burden for the 
qualitative research will range from 76 hours to 94 hours.

Quantitative Research

    Approximately 800 consumers who engaged in a mortgage transaction 
during the previous year will participate in the quantitative phase of 
the research. Each copy test interview will take roughly 20-30 minutes. 
The estimated hours burden for the quantitative research ranges from 
267 hours (800 respondents x \1/3\ hour per respondent) to 400 hours 
(800 respondents x \1/2\ hour per respondent).

Total

    The total estimated hours burden for both phases of the study 
ranges from 343 hours (76 hours + 267 hours) to 494 hours (94 hours + 
400 hours).

3. Estimated Cost Burden

    Participants will be compensated financially for their 
participation, as recommended and budgeted for by the contractor. 
Participation is voluntary and will not require start-up, capital, or 
labor expenditures by respondents.

    By direction of the Commission.

C. Landis Plummer,
Acting Secretary.
[FR Doc. 03-9852 Filed 4-21-03; 8:45 am]
BILLING CODE 0750-01-M