Phoenix
22nd July 2010, 01:31 PM
http://www.creditcards.com/credit-card-news/credit-card-agreement-readability-1282.php
U.S. credit card agreements unreadable to 4 out of 5 adults
Contracts written at a reading level most can't understand
By Connie Prater
CreditCards.com Readability Study finds major card issuers' contracts unreadable by most Americans
Wonder why you can't seem to make it through your credit card agreement? It's heavy reading: A CreditCards.com analysis found that the average U.S. credit card agreement is written on a 12th grade reading level, three grades above the average American's reading level.
* MAIN STORY: Credit card agreements unreadable to 4 of 5 Americans
* 10 most unreadable credit card agreements
* 10 most readable credit card agreements
* 10 wordiest credit card agreements
* Readability of credit card agreements from biggest 20 banks
* How credit card agreements' readability compares to familiar documents
* Quotable: What lawmakers, consumer activists, bankers say
* 3 language experts try to make sense of a card agreement
* Federal database of credit card agreements not user friendly
* Video: Consumers try in vain to understand credit card agreements
Credit card agreements are written on average at a 12th grade reading level, making them not understandable to four out of five adults, according to a CreditCards.com analysis of all the agreements offered by major card issuers in the United States.
The average American adult reads at a ninth-grade level and readability experts recommend important information -- such as credit card agreements -- be written at that level. Only one in five adults read above a 12th-grade level.
"It is clear from your study that something must be done to make these agreements easier to read," says Lauren Z. Bowne, staff attorney for Consumers Union, the nonprofit owner of Consumer Reports magazine.
"Credit card contracts and other such documents are written in dense prose for a reason: So that the customer will NOT be able to understand it," notes Roy Peter Clark, a national expert on writing and a senior scholar at the Poynter Institute in St. Petersburg, Fla. "I may be cynical, but I don't think their writing strategies are accidental, the collateral damage of a bureaucratic mindset. I think those writers know exactly what they are doing."
Readability poses Catch-22
Bowne points out what has become a Catch-22 for many credit cardholders. Told to read their agreements, they can't. Credit counselors are urging card users to carefully read their mail and credit card agreements to stay on top of all the new card rules and recent changes in terms. In the new world of credit card use, they say, an informed consumer is better protected against "gotcha" fine print and surprise penalties.
However, as the CreditCards.com analysis shows, many adults may not be able to comprehend what they are reading.
"That's easy to say, but sometimes difficult to do," says Andrew Bernstein, a certified credit counselor for DebtHelper.com in West Palm Beach, Fla. He gives seminars on reading the small print of credit card terms. Clients often turn to credit counselors to help them decipher the fine print. Says Bernstein: "Credit counselors struggle reading it, too."
Something must be done to make these agreements easier to read.
-- Lauren Z. Bowne
consumer attorney
Researchers analyze more than 1,200 contracts
CreditCards.com hired a team of researchers who, using computer software, downloaded and analyzed every word of the majority of credit card agreements offered in America. More than 1,200 contracts were included in the analysis.
This became possible for the first time in May 2010, when the agreements were publicly posted in a new Federal Reserve database; large card issuers were required to give the Fed their agreements, and the Fed was required to post them online, by the Credit CARD Act of 2009.
CreditCards.com (see the study's methodology details) graded every statement using a standard common in the teaching and textbook industries: the FOG Index. Readability formulas have been widely used by textbook and novel publishers for decades to ensure they weren't writing above the reading levels of their target audiences.
FOG stands for "Frequency of Gobbledygook" -- and it gives a numeric grade for any document. The higher the grade level, the more difficult it is to read.
Gobbledygook? We encountered it frequently.
Can you read this?
The CreditCards.com analysis found:
Do you understand your credit card agreement(s)?
I have not tried to read it.
I tried, but gave up. Too confusing.
I read and understood it.
My card did not come with one.
Vote
Getting poll results. Please wait...
* The average U.S. credit card agreement is written at a 12.37 grade level. Note: Reading levels do not correspond to the number of years of school a person has received. Some people with high school diplomas read at the ninth grade level even though they received 12 years of education.
* The toughest read: GTE Federal Credit Union's agreement, which required an 18.5 reading level -- the equivalent of someone who has spent more than six years in college. (See video of how ordinary people fared in trying to read GTE's credit card agreement.)
* The wordiest agreement -- for MasterCard and Visa cards issued by Fifth Third Bancorp -- contained 20,799 words. It was written on a 14.5 reading level, according to the analysis. For comparison, the original U.S. Constitution contains only 4,018 words. William Shakespeare's shortest play, "The Comedy of Errors," has 17,858 words. (See the list of wordy credit card agreements.) The average agreement runs 3,771 words.
* The easiest reads, according to the analysis, required only sixth grade reading proficiency. They included credit card agreements from the University of Illinois Employees Credit Union, ESL Federal Credit Union and Affinity Federal Credit Union. (See list of the most readable credit card agreements.)
* The analysis found it's easier for the average American to read a California real estate purchase agreement or a chapter in the King James Bible than to plow through the average credit card agreement. (See how credit card agreements compare in readability to familiar documents.)
* Among the top 20 credit card issuers, those that issue more than 95 percent of all credit cards in the United States, two divisions of Wells Fargo & Company showed dramatically different results. The average agreement from Wells Fargo Financial National Bank required a 15.7 reading level. The larger and more well-known Wells Fargo Bank NA hit the readability mark: Its agreements had average reading levels of 9.3 -- exactly what readability experts recommend. Wells Fargo announced July 7 it was merging the smaller banks' operations into the larger one. Expect a rewrite on the more difficult contracts. "We anticipate that card products, terms and agreements will be further standardized in the near future. We want to help our customers succeed financially and we understand clear communications are fundamental to achieving that objective," a spokeswoman said in an e-mailed statement. First National Bank of Omaha's 15.8 average reading level makes it a virtual tie with Wells Fargo Financial for the most unreadable contracts among large issuers.
* Other large banks, on average, provide easy-to-read agreements: U.S. Bancorp (8.9), Bank of America (9.0), Barclays Bank Delaware (8.1) Citibank South Dakota, NA (8.2), American Express Bank, FSB (8.1) and Capital One Bank, NA (7.3). Consumer advocates say if these banks can produce more understandable agreements, other issuers can, too. (See how the large credit card issuers' agreements compared.)
Deliberate confusion?
Consumers and others accuse the banks of deliberately writing unintelligible agreements to confuse cardholders.
"I got lost in the first sentence," Ron DeLa Rosa, an attorney in Austin, Texas, says after reading GTE Federal Credit Union's agreement.
"I'm sure all those legal minds came up with all those words to make things as confusing as possible for whoever the credit cardholder is 'cause that way when they get sued they'll always have a way out," DeLa Rosa says, adding: "That's the way attorneys do it."
Bankers deny deliberate deception and defend the densely worded fine print, blaming all the federal and state laws that require disclosure of terms. "It's unfair to say that these are deliberately made complicated," countered Nessa Feddis, a spokeswoman for the American Bankers Association. "They try to make them simple, but there are legal requirements for disclosures."
It's unfair to say that these are deliberately made complicated ... They try to make them simple, but there are legal requirements for disclosures.
-- Nessa Feddis
American Bankers Association
A new Consumer Financial Protection Bureau -- signed into law by President Obama on July 21 as part of the 2010 Wall Street reform package -- may offer some relief. Among other things, the agency will have the power to mandate that credit card contracts be written in plain English so a majority of Americans can understand them.
"Americans need adequate information about the benefits and costs of complex consumer financial products such as credit cards to make the personal choices that are best for them," Michael Barr, assistant U.S. Treasury Secretary for financial institutions, said in a statement responding to written questions. "Improving basic financial awareness is also critical to helping consumers process information and avoid abusive products. These are just some of the reasons we need to establish a federal bureau of consumer financial protection."
Ohio Attorney General Richard Cordray, who has been an outspoken advocate for more credit card regulations to protect Ohio residents from abuse, said credit card lenders should make their agreements more consumer friendly.
"While it is true that much of the content for agreements is mandated by federal statute, it is clear from the breakdown here that some institutions meet the requirements at a reasonable reading level. All others should do the same," Cordray said in a statement.
When something goes wrong
Credit card agreements contain the fine print of the credit card terms and dictate how millions of credit cards issued in the United States may be used. Banks and credit unions mail them when card users first open their accounts or when customers request copies. They are often put away in a drawer or tossed with the junk mail. Credit counselors and consumer advocates say the truth is that very few cardholders ever read their agreements -- until something goes wrong.
"If people don't read these things when they open the account, they sure as hell need to read them if they have a problem," says John Cogan Jr., executive assistant for policy and program review and executive counsel to the Rhode Island Health Insurance Commissioner. Rhode Island is one of a handful of states (including Colorado and Minnesota) that have adopted laws or rules requiring health insurance policies to be written at seventh, eighth or 10th grade reading levels.
"If you have a problem with your credit card company or your health insurance company, even if you don't take the time to read it at the outset, you really do need to read it if something happens. So, if you can't read it then, then you're really in a tough spot."
Erica K. Jackson, director of the Center for Financial & Consumer Outreach at Penn State Erie, recommends consumers call their card issuers' customer service representative and ask for explanations of confusing terms or provisions. She acknowledged, however, that customer service representatives may give conflicting or inaccurate information at times.
"Consumers need to ask questions," Jackson says. "If you don't understand what is included in your documentation, be proactive, make sure that they call and get the answers that they need."
Content more important than readability?
Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group (PIRG), is all for readability, but is more concerned about what the contracts say and any "tricks and traps" contained in them than how they say it.
"What good does being able to read a contract mean if the contract says, 'We win, you lose'?" Mierzwinski points out.
What good does being able to read a contract mean if the contract says, 'We win, you lose'?
-- Ed Mierzwinski
U.S. PIRG
Linda Sherry, national priorities director for Consumer Action, a San Francisco-based consumer group, says credit card agreements should be written at the ninth grade level.
She added: "The agreements tell you little about your so-called 'rights' and focus solely on your responsibilities under the one-sided agreement. Since these are contracts of adhesion, and consumers can't amend the terms, they are useless in that regard, no matter how simply they are written.
"If they can still -- mostly with notice but sometimes without -- change the terms at any time for any reason, consumers have no power except to vote with their feet, and given the similarity across the six largest companies, that is not much of a choice."
(continued in next post)
U.S. credit card agreements unreadable to 4 out of 5 adults
Contracts written at a reading level most can't understand
By Connie Prater
CreditCards.com Readability Study finds major card issuers' contracts unreadable by most Americans
Wonder why you can't seem to make it through your credit card agreement? It's heavy reading: A CreditCards.com analysis found that the average U.S. credit card agreement is written on a 12th grade reading level, three grades above the average American's reading level.
* MAIN STORY: Credit card agreements unreadable to 4 of 5 Americans
* 10 most unreadable credit card agreements
* 10 most readable credit card agreements
* 10 wordiest credit card agreements
* Readability of credit card agreements from biggest 20 banks
* How credit card agreements' readability compares to familiar documents
* Quotable: What lawmakers, consumer activists, bankers say
* 3 language experts try to make sense of a card agreement
* Federal database of credit card agreements not user friendly
* Video: Consumers try in vain to understand credit card agreements
Credit card agreements are written on average at a 12th grade reading level, making them not understandable to four out of five adults, according to a CreditCards.com analysis of all the agreements offered by major card issuers in the United States.
The average American adult reads at a ninth-grade level and readability experts recommend important information -- such as credit card agreements -- be written at that level. Only one in five adults read above a 12th-grade level.
"It is clear from your study that something must be done to make these agreements easier to read," says Lauren Z. Bowne, staff attorney for Consumers Union, the nonprofit owner of Consumer Reports magazine.
"Credit card contracts and other such documents are written in dense prose for a reason: So that the customer will NOT be able to understand it," notes Roy Peter Clark, a national expert on writing and a senior scholar at the Poynter Institute in St. Petersburg, Fla. "I may be cynical, but I don't think their writing strategies are accidental, the collateral damage of a bureaucratic mindset. I think those writers know exactly what they are doing."
Readability poses Catch-22
Bowne points out what has become a Catch-22 for many credit cardholders. Told to read their agreements, they can't. Credit counselors are urging card users to carefully read their mail and credit card agreements to stay on top of all the new card rules and recent changes in terms. In the new world of credit card use, they say, an informed consumer is better protected against "gotcha" fine print and surprise penalties.
However, as the CreditCards.com analysis shows, many adults may not be able to comprehend what they are reading.
"That's easy to say, but sometimes difficult to do," says Andrew Bernstein, a certified credit counselor for DebtHelper.com in West Palm Beach, Fla. He gives seminars on reading the small print of credit card terms. Clients often turn to credit counselors to help them decipher the fine print. Says Bernstein: "Credit counselors struggle reading it, too."
Something must be done to make these agreements easier to read.
-- Lauren Z. Bowne
consumer attorney
Researchers analyze more than 1,200 contracts
CreditCards.com hired a team of researchers who, using computer software, downloaded and analyzed every word of the majority of credit card agreements offered in America. More than 1,200 contracts were included in the analysis.
This became possible for the first time in May 2010, when the agreements were publicly posted in a new Federal Reserve database; large card issuers were required to give the Fed their agreements, and the Fed was required to post them online, by the Credit CARD Act of 2009.
CreditCards.com (see the study's methodology details) graded every statement using a standard common in the teaching and textbook industries: the FOG Index. Readability formulas have been widely used by textbook and novel publishers for decades to ensure they weren't writing above the reading levels of their target audiences.
FOG stands for "Frequency of Gobbledygook" -- and it gives a numeric grade for any document. The higher the grade level, the more difficult it is to read.
Gobbledygook? We encountered it frequently.
Can you read this?
The CreditCards.com analysis found:
Do you understand your credit card agreement(s)?
I have not tried to read it.
I tried, but gave up. Too confusing.
I read and understood it.
My card did not come with one.
Vote
Getting poll results. Please wait...
* The average U.S. credit card agreement is written at a 12.37 grade level. Note: Reading levels do not correspond to the number of years of school a person has received. Some people with high school diplomas read at the ninth grade level even though they received 12 years of education.
* The toughest read: GTE Federal Credit Union's agreement, which required an 18.5 reading level -- the equivalent of someone who has spent more than six years in college. (See video of how ordinary people fared in trying to read GTE's credit card agreement.)
* The wordiest agreement -- for MasterCard and Visa cards issued by Fifth Third Bancorp -- contained 20,799 words. It was written on a 14.5 reading level, according to the analysis. For comparison, the original U.S. Constitution contains only 4,018 words. William Shakespeare's shortest play, "The Comedy of Errors," has 17,858 words. (See the list of wordy credit card agreements.) The average agreement runs 3,771 words.
* The easiest reads, according to the analysis, required only sixth grade reading proficiency. They included credit card agreements from the University of Illinois Employees Credit Union, ESL Federal Credit Union and Affinity Federal Credit Union. (See list of the most readable credit card agreements.)
* The analysis found it's easier for the average American to read a California real estate purchase agreement or a chapter in the King James Bible than to plow through the average credit card agreement. (See how credit card agreements compare in readability to familiar documents.)
* Among the top 20 credit card issuers, those that issue more than 95 percent of all credit cards in the United States, two divisions of Wells Fargo & Company showed dramatically different results. The average agreement from Wells Fargo Financial National Bank required a 15.7 reading level. The larger and more well-known Wells Fargo Bank NA hit the readability mark: Its agreements had average reading levels of 9.3 -- exactly what readability experts recommend. Wells Fargo announced July 7 it was merging the smaller banks' operations into the larger one. Expect a rewrite on the more difficult contracts. "We anticipate that card products, terms and agreements will be further standardized in the near future. We want to help our customers succeed financially and we understand clear communications are fundamental to achieving that objective," a spokeswoman said in an e-mailed statement. First National Bank of Omaha's 15.8 average reading level makes it a virtual tie with Wells Fargo Financial for the most unreadable contracts among large issuers.
* Other large banks, on average, provide easy-to-read agreements: U.S. Bancorp (8.9), Bank of America (9.0), Barclays Bank Delaware (8.1) Citibank South Dakota, NA (8.2), American Express Bank, FSB (8.1) and Capital One Bank, NA (7.3). Consumer advocates say if these banks can produce more understandable agreements, other issuers can, too. (See how the large credit card issuers' agreements compared.)
Deliberate confusion?
Consumers and others accuse the banks of deliberately writing unintelligible agreements to confuse cardholders.
"I got lost in the first sentence," Ron DeLa Rosa, an attorney in Austin, Texas, says after reading GTE Federal Credit Union's agreement.
"I'm sure all those legal minds came up with all those words to make things as confusing as possible for whoever the credit cardholder is 'cause that way when they get sued they'll always have a way out," DeLa Rosa says, adding: "That's the way attorneys do it."
Bankers deny deliberate deception and defend the densely worded fine print, blaming all the federal and state laws that require disclosure of terms. "It's unfair to say that these are deliberately made complicated," countered Nessa Feddis, a spokeswoman for the American Bankers Association. "They try to make them simple, but there are legal requirements for disclosures."
It's unfair to say that these are deliberately made complicated ... They try to make them simple, but there are legal requirements for disclosures.
-- Nessa Feddis
American Bankers Association
A new Consumer Financial Protection Bureau -- signed into law by President Obama on July 21 as part of the 2010 Wall Street reform package -- may offer some relief. Among other things, the agency will have the power to mandate that credit card contracts be written in plain English so a majority of Americans can understand them.
"Americans need adequate information about the benefits and costs of complex consumer financial products such as credit cards to make the personal choices that are best for them," Michael Barr, assistant U.S. Treasury Secretary for financial institutions, said in a statement responding to written questions. "Improving basic financial awareness is also critical to helping consumers process information and avoid abusive products. These are just some of the reasons we need to establish a federal bureau of consumer financial protection."
Ohio Attorney General Richard Cordray, who has been an outspoken advocate for more credit card regulations to protect Ohio residents from abuse, said credit card lenders should make their agreements more consumer friendly.
"While it is true that much of the content for agreements is mandated by federal statute, it is clear from the breakdown here that some institutions meet the requirements at a reasonable reading level. All others should do the same," Cordray said in a statement.
When something goes wrong
Credit card agreements contain the fine print of the credit card terms and dictate how millions of credit cards issued in the United States may be used. Banks and credit unions mail them when card users first open their accounts or when customers request copies. They are often put away in a drawer or tossed with the junk mail. Credit counselors and consumer advocates say the truth is that very few cardholders ever read their agreements -- until something goes wrong.
"If people don't read these things when they open the account, they sure as hell need to read them if they have a problem," says John Cogan Jr., executive assistant for policy and program review and executive counsel to the Rhode Island Health Insurance Commissioner. Rhode Island is one of a handful of states (including Colorado and Minnesota) that have adopted laws or rules requiring health insurance policies to be written at seventh, eighth or 10th grade reading levels.
"If you have a problem with your credit card company or your health insurance company, even if you don't take the time to read it at the outset, you really do need to read it if something happens. So, if you can't read it then, then you're really in a tough spot."
Erica K. Jackson, director of the Center for Financial & Consumer Outreach at Penn State Erie, recommends consumers call their card issuers' customer service representative and ask for explanations of confusing terms or provisions. She acknowledged, however, that customer service representatives may give conflicting or inaccurate information at times.
"Consumers need to ask questions," Jackson says. "If you don't understand what is included in your documentation, be proactive, make sure that they call and get the answers that they need."
Content more important than readability?
Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group (PIRG), is all for readability, but is more concerned about what the contracts say and any "tricks and traps" contained in them than how they say it.
"What good does being able to read a contract mean if the contract says, 'We win, you lose'?" Mierzwinski points out.
What good does being able to read a contract mean if the contract says, 'We win, you lose'?
-- Ed Mierzwinski
U.S. PIRG
Linda Sherry, national priorities director for Consumer Action, a San Francisco-based consumer group, says credit card agreements should be written at the ninth grade level.
She added: "The agreements tell you little about your so-called 'rights' and focus solely on your responsibilities under the one-sided agreement. Since these are contracts of adhesion, and consumers can't amend the terms, they are useless in that regard, no matter how simply they are written.
"If they can still -- mostly with notice but sometimes without -- change the terms at any time for any reason, consumers have no power except to vote with their feet, and given the similarity across the six largest companies, that is not much of a choice."
(continued in next post)