27 Jun The cost of fine print
An AARP survey, The Cost of Financial Jargon, put some numbers on the cost to consumers of investment instruments larded with technical terms. Thirty percent of those surveyed said they’d made an investment they regretted because they didn’t understand it; 29% failed to invest or waited too long because the information provided was too confusing.
Sixteen percent paid a penalty because they didn’t understand the rules for withdrawal and another 16% paid more tax because they didn’t understand the tax implications of their investment.
These numbers seem conservative when I look at the number of consumers I meet who don’t understand the workings of their day-to-day finances: billing cycles on credit cards; terms on car loans; costs and escrows on home loans (hell, I’m not sure I yet understand home mortgage escrows, and I have a professional interest in doing so).
Several fellow attorneys have told stories about the outrage they provoke at real estate closings when they insist on actually reading all the documents put in front of them for signature. The truth is simply that our financial lives have become more complicated than any of us can really master and have a life left after doing so.
Yet, your signature at the bottom generally binds you to the terms in the document, whether you read it or not. Understanding is not required: just assent.
There are at least two problems here: one is the “plain English” issue. Can business lawyers learn to put complicated arrangements in words comprehensible to the average (English speaking) consumer? Even if we master it in English, that doesn’t address the segment of our society for whom English isn’t a first language.
The second problem is more intractable: the complexity of the deal itself. Even if the language is accessible, the structure of the rights of the parties may simply be beyond the grasp of the layman.
I don’t have a solution to the problem, but it is a question worth considering. Without some checks, the profit motive and superior bargaining power will strip consumers of any meaningful rights in the financial world absent a countervailing force in our body politic.
Cathy Moran, Esq.
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