A comparison of the readability of privacy statements of banks, credit counseling companies, and check cashing companies.

Lewis, Stephen D. ; Colvard, Robert G. ; Adams, C. Nathan 等

INTRODUCTION

In 1999 the U.S. Congress enacted the Gramm-Leach-Bliley Act (GLBA), also known as the Gramm-Leach-Bliley Financial Services Modernization Act. GLBA repealed the Glass-Steagall Act, which greatly restricted the financial services banks or other financial institutions could offer. For example, with the ratification of GLBA, commercial and investment banks were permitted to consolidate (Gramm-Leach-Bliley Act, n.d.). Among the businesses included in the act were those involved with lending, brokering or servicing any type of consumer loan, transferring or safeguarding money, preparing individual tax returns, providing financial advice or credit counseling, providing residential real estate settlement services, and collecting consumer debts (Privacy Initiatives, n.d.). Although the GLBA addressed a wide array of topics, central to the act is the protection of personal information of customers and clients ("Fact Sheet 24," 2007). Title V of the act deals specifically with privacy.

Title V of GLBA focuses on requirements of financial institutions with regard to protecting consumer privacy. Among those requirements is a clear disclosure of their privacy policy regarding the sharing of non-public personal information with both affiliates and third parties. Notices of the privacy policy must be made available to consumers. An opportunity to opt out of sharing nonpublic personal information with nonaffiliated third parties must be offered to consumers. Title V also requires that financial institutions disclose their privacy policy at the time a customer relationship is established, and it further requires that the policy must be provided not less than annually during the continuation of the relationship (Financial Services Modernization Act, n.d.).

READABILITY ISSUES

Although "readability" per se is not addressed explicitly in the act, it is certainly implicit in the context of the act. Use of terms such as "clear disclosure" and "plain language" make it apparent that the intent was to ensure that privacy statements are easily understandable by the consuming public. Title V provides consumers with minimal privacy rights; however, the burden is on the consumer to assert those rights ("Fact Sheet 24," 2007). But are privacy policies of financial institutions easily read and comprehended by the typical customer? Would average bank patrons be able to grasp the impact of their bank's privacy policy on their rights? A report from the Oversight Hearing on Financial Privacy and the Gramm-Leach-Bliley Financial Services Modernization Act highlighted the fact that "the first year's privacy notices were unreadable; this year's no better" (Privacy Rights Clearinghouse, 2002). And are privacy policies comparable from one bank to another or between and among diverse organizations that offer financial services?

READABILITY DEFINED

Readability refers to the ease with which a document can be read. Several mathematical formulas have been developed to assist writers in measuring the readability of their writing. Most formulas (indexes) include sentence length and some measure of syllabic intensity as major components. Other factors, such as sentence structure, graphic presentation, and font faces may affect readability; however, these are very subjective in nature and extremely difficult to measure. Popular readability indexes include the Flesch Readability Formula, developed by Rudolf Flesch; the Fry Readability Graph, created by Edward Fry; and the Gunning Fog Index, conceived by Robert Gunning (Lewis & Adams, 2001).

PURPOSE

The purpose of this research was to determine the readability of privacy policies for financial institutions and to compare policies of companies offering a variety of financial services. In particular, the research sought to ascertain the readability of privacy policies of businesses whose services are known to be used by individuals who may not be well educated or possess adequate reading skills.

METHODOLOGY

Gramm-Leach-Bliley pertains to numerous business types offering an assortment of financially related services. This research included three specific business types: banks, credit counselors, and check cashing companies. Since printed privacy policies of multiple organizations could not be readily accessed, the decision was made to use policies available on company web sites. The first phase of the research was to conduct a web search to find lists of companies fitting the necessary criteria. Next, companies were randomly selected from the lists. Once a web site was found for the company, the site was searched for a privacy policy. The privacy policy was then copied and pasted into a Microsoft Word document for conducting a readability analysis. Privacy policies were analyzed for 25 banks, 25 credit counseling companies, and 25 check cashing companies.

Microsoft Word 2007 uses the Flesch-Kincaid Grade Level test, which provides the grade level at which someone must read in order to comprehend the material. The primary factors considered in determining the reading grade level are sentence length and syllable intensity, with long sentences and multi-syllable words resulting in greater reading difficulty. The Flesch-Kincaid formula is:

(L x 0.39) + (N x 11.8) - 15.59

where L = average sentence length and N = average number of syllables per word (Readability, 2007)

In addition to the Flesch-Kincaid Grade Level test, Microsoft Word also provides the Flesch Reading Ease scale, which gives a score from 0-100 with higher scores indicating easier comprehension.

FINDINGS

Table 1 presents the reading grade level scores, sorted in ascending order, for all three business types. The lowest grade level reading scores for banks, check cashing companies, and credit counseling companies, 10.4, 10.6, and 10.7, respectively, indicate that the reader should be able to read minimally at between tenth and eleventh grade level to understand the privacy policies.

The data were first tested for normality and equal variances. Acceptance of these attributes indicated an appropriate statistical technique would be one-way analysis of variance. The ANOVA test results yielded a p value of 0.437. Thus, the hypothesis that the population means are all equal could not be rejected. There was no significant difference between these sample means. Grade level means, standard deviations, and medians were calculated for the privacy policies for each of the three business types. Those data are shown in Table 2.

Although not presented in Table 2, of equal interest is the range of scores for each business type. Scores for banks ranged from 10.4 to 18.3; check cashing companies, 10.6 to 19.4; and credit counseling companies, 10.7 to 20.0. One might expect that scores would be more closely aligned within the same business class.

Finishing grade 12 is an important milestone for most individuals. Sadly, not everyone who finishes grade 12 can read at grade level 12. For each sample the hypothesis that the population mean was at most 12 was tested using the t test. In every case the hypothesis was rejected at the .01 level of significance, indicating with 99 percent confidence that the population mean was greater than 12. Therefore, the portion of the population reading at the twelfth grade level or below would have difficulty understanding the typical privacy policy. Coincidentally, in 2002 the national high school graduation rate for public school students was 71 percent (Greene & Winters, n.d.). Table 3 shows the percent of privacy policies for each company type that have reading grade levels below 12, between 12 and 16, and greater than 16.

An interesting fact shown in Table 3 is the high percentage of privacy policies that require reading abilities beyond grade level 12. Fully 88 percent of the banks, 84 percent of the check cashing companies, and 92 percent of the credit counseling companies have privacy policies written at grade levels 12 and beyond.

DISCUSSION AND CONCLUSION

The findings clearly indicate that the mean reading grade levels are significantly above 12 for privacy policies of the banks, check cashing companies, and credit counseling companies researched. This does not bode well for many consumers since recent figures show less than 75 percent of U.S. students attending public schools finish grade 12. Only 12 percent of the privacy policies had reading grade levels below grade 12. Conversely, 12 percent of the companies studied had privacy policies that would require reading skills beyond a college degree. As a point of comparison, the New York Times and Washington Post are written at the twelfth grade level. Time and Reader's Digest are written at the ninth grade level ("Plain Language," 2005).

The magnitude of the problem may be smaller, at least on a group basis, for consumers of banking services than it is for those using check cashing and credit counseling services. To illustrate, banks provide services for individuals with little or no education as well as for well-educated professionals. On the other hand, check cashing companies deal primarily with less-educated people who may not grasp the nature or the content of the company's privacy policy. To a lesser extent, those individuals who seek the services of credit counseling companies may not have the educational capacity to understand the specific privacy rights available to them.

CLOSING OBSERVATION

This paper is written at a reading grade level of 12.7. Interestingly, 70 percent of the privacy policies of companies studied were written at a higher reading grade level than this paper. If academic research papers can be written at approximately twelfth-grade level, then company privacy policies can be as well. Customers would be better served if businesses made a deliberate effort to simplify their privacy policies.

REFERENCES

Fact Sheet 24: Protecting Financial Privacy. (2007). Retrieved September 9, 2007, from http://www.ecs.org/html/offsite.asp?document=http%3A%2F%2Fwww%2Emanhattan %2Dinstitute%2Eorg%2Fhtml%2Fewp%5F08%2Ehtm

Financial Services Modernization Act. (n.d.) Retrieved September 7, 2007, from http://banking.senate.gov/conf/grmleach.htm

Gramm-Leach-Bliley Act. (n.d.). Retrieved September 9, 2007, from http://en.wikipedia.org/wiki/Gramm-LeachBliley_Act Greene, J. P. & Marcus A. Winters. (n.d.). Public high school graduation and college-readiness rates: 1991-2002.

Retrieved Septemberg, 2007, from http://www.ecs.org/html/offsite.asp?document=http%3A%2F%2Fwww%2Emanhattan %2Dinstitute%2Eorg%2Fhtml%2Fewp%5F08%2Ehtm

Lewis, Stephen D. & C. Nathan Adams. (2001). Readability of business columns versus other columns in major U.S. newspapers. Journal of Organizational Culture, Communications and Conflict, 6(1), 29-36.

Plain Language at Work Newsletter. (May 2, 2005). Retrieved September 10, 2007, from http://www.impactinformation. com/impactinfo/newsletter/plwork15.htm

Privacy Initiatives. (n.d.). The Gramm-Leach-Bliley Act: the financial privacy rule. Retrieved September 10, 2007, from http://www.ftc.gov/privacy/privacyinitiatives/financial_rule.html

Privacy Rights Clearinghouse. (2002). Oversight hearing on financial privacy and the Gramm-Leach-Bliley Financial Services Modernization Act. Retrieved July 25, 2007, from http://www.privacyrights.org/ar/USPirgGLB0902.htm Readability. (n.d.). Retrieved September 8, 2007, from http://www.timetabler.com/reading.html

Stephen D. Lewis, Middle Tennessee State University

Robert G. Colvard, Middle Tennessee State University

C. Nathan Adams, Middle Tennessee State University

Table 1: Reading Grade Level for Privacy Policies
(sorted in ascending order)

Rank No. Banks Check Cashing Cos. Credit Counseling Cos.

 1 10.4 10.6 10.7
 2 11.2 11.1 11.6
 3 11.6 11.5 12.1
 4 12.0 11.9 12.1
 5 12.3 12.2 12.2
 6 12.3 13.1 12.4
 7 12.6 13.2 12.6
 8 12.7 13.4 12.7
 9 13.1 13.5 12.8
 10 13.2 13.7 13.0
 11 13.6 14.0 13.1
 12 13.7 14.2 13.3
 13 14.0 14.4 13.5
 14 14.1 14.4 13.7
 15 14.2 14.5 13.7
 16 14.5 14.5 13.8
 17 14.7 14.9 13.8
 18 14.9 15.0 14.0
 19 15.2 15.1 14.1
 20 15.7 15.2 14.1
 21 16.0 16.0 14.7
 22 17.5 16.6 14.9
 23 17.5 16.8 14.9
 24 18.2 16.9 15.5
 25 18.3 19.4 20.0

Table 2: Means, Standard Deviations, and Medians for Privacy Policies

 Banks Check Credit
 Cashing Cos. Counseling Cos.
Flesch-Kincaid
 Grade Level Mean 14.14 14.24 13.57
Standard Deviation 2.16 2.00 1.75
Median 14.00 14.40 13.50

Table 3: Percentage of Privacy Policies < 12, Between 12 and
16, and >16

 Check Credit
 Banks Cashing Cos. Counseling Cos.

Percent < 12 Grade Level 12 16 8
Percent Between Grade
 Level 12 & 16 72 68 88
Percent > 16 16 16 4