Using simulation techniques to predict the behavioral effects of new laws: The case of truth-in-lending legislation and the consumer

Abstract

Recently the United States Congress has considered bills which would require lenders to disclose to consumer borrowers the simple annual finance rate associated with personal loans and credit purchases. Since lenders have traditionally used several forms of finance rate, all of which present markedly lower values for a given transaction than the simple annual rate, critics of the legislative proposals, commonly known as Truth-in-Lending Bills, have argued that the nationwide adoption of such legislation might precipitate a sharp short-term decline in consumer credit utilization. This question was explored experimentally in a laboratory simulation of the lending environment of a small Midwestern city. 60 undergraduate and graduate students served as Ss. No evidence of a decline was found. Cognitive and motivational explanations for the finding are explored, and evidence for the predictive validity of the simulation technique is cited. (PsycInfo Database Record (c) 2025 APA, all rights reserved)