WASHINGTON—A new report has found what many in credit unions will say they already know: the majority of state credit union regulations are difficult to read.
The report in the Journal of Accounting - Business & Management—Pawnshops Regulatory Environment: A Readability Analysis (April 2018)—compared the readability of pawnshop regulations to credit union regulations in 42 states.
States excluded from the analysis were Arkansas, Delaware, Idaho, Iowa, New York, North Dakota, South Dakota, and Wyoming, as those states do not have credit union regulations or state-level pawnshop regulations, reported Keith Leggett, the former senior vice president and senior economist at the ABA, in his analysis.
The paper contends that the readability of regulations could be a barrier to a small business' success, as the ability to navigate regulations are a function of human capital, Leggett explained.
The FRE Score
The paper used FRE score to calculate the readability of the state regulation, which looks at the average number of syllables per word and the average number of words per sentence.
The FRE score will range from 0 to 100 – the higher the score the easier to read.
The paper found most state credit union regulations were at a college graduate reading level. Twenty-five states had a reading level of college graduate. The mean FRE score was 28.78. All state credit union regulations required a minimum reading level of college, Leggett said.
The state found to have the most readable credit union regulation was Maine, while California had the most difficult to read.
“The findings from this study suggest that state credit union regulators should look at improving the readability of their regulations, especially for small credit unions with limited financial and human capital resources,” Leggett said.