Study: Most State CU Regulations Are Very Difficult to Read

A paper appearing in the Journal of Accounting - Business & Management found that majority of state credit union regulations are very difficult to read.

The paper, 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 are Arkansas, Delaware, Idaho, Iowa, New York, North Dakota, South Dakota, and Wyoming; because the state does not have credit union regulations or state level pawnshop regulations.

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.

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 -- higher the score, the easier to read. The following table shows FRE score by reading level.

The paper found that 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.

The state with the most readable credit union regulation was Maine, while California had the most difficult to read credit union regulation. The following table shows the reading level of each states' credit union regulation with FRE score in parenthesis. Click on the image to enlarge.

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.