informed customers will try to avoid. Thus, advertising will be deceptive rather than informative and in fact, firms will have no incentive to de-bias customers.<sup>3</sup> Consistent with these predictions we find that the staff provided enough information to allow auditors to apply for the loan or to open the savings account, but that very little voluntary information about avoidable fees and commissions was provided to unsophisticated auditors. In addition, the printed materials given to auditors of all profile types contained too little information to be useful for comparisons across products.

Related, while savings auditors were offered products that matched their preference for maturity, they were rarely offered the cheapest product. The mandated basic account was only offered in 2 of the 54 visits in which the auditor expressed a preference for a checking account. By contrast, when faced with credit auditors requesting large amounts, financial institutions demonstrated ability to assess the capacity to pay of borrowers by both being more likely to reject their loan application and by reducing the amount granted if the application was finally approved.

Thus, firms seem to behave rationally by following their own self-interest which may explain why the recent policy initiatives around product transparency and basic savings accounts have been met with little success.<sup>4</sup> The limited impact of policies to promote transparency and mandated products is not new, and in this sense the paper contributes to the recent literature that uses audit studies to assess advice for financial investment (Mullainathan et al, 2012) and life insurance (Anagol et al, 2012) and access to savings products (Mowl and Boudot, 2014).<sup>5</sup> The remainder of the paper is organized as follows. Section 2 describes the financial market for low-income households in Mexico. Section 3 reviews the predictions of Gabaix and Laibson (2006). Section 4 describes the experimental design while Section 5 describes the data and empirical strategy. Section 6 reports the results and Section 7 concludes.

# **2. Context**

Financial markets in Mexico have recently been transformed by the appearance of new providers like the consumer goods chains Elektra, Wal-Mart and Coppel, and new intermediation channels such as agent

> 3 We note that if consumers were rational, then shrouding would actually hurt the financial institution, as consumers faced with impartial disclosure of fees and commissions would assume they are high and purchase from banks that disclose more information. Shrouding behavior by banks would thus unravel, forcing banks to disclose all the information (Grossman, 1981; Jovanovic, 1982; Milgrom, 1981). There is evidence however suggesting that consumers tend to ignore not only information that is not disclosed (see Nisbett and Ross, 1980 for an early review), but also disclosed information that is not made salient (Finkelstein, 2009 and Chetty, Looney and Kroft, 2009).

> 4 According to Banco de México (SISPAGOS), only 5 percent of the checking accounts to the general public in Mexico are mandated basic accounts.

> 5 Audit studies have been used elsewhere to study for example police performance (Banerjee et al. (2012), drug quality (Bennett and Yin, 2013) and hold-up in contracting (Iyer and Schoar, 2012).

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