Which would you rather read, the New York Times or your credit card agreement?

The new Consumer Financial Protection Bureau (and we encourage you to visit the CFPB’s website here) is tasked with, among other things, enforcing the new credit card laws that went into effect in July 2010. One of CFPB’s first priorities was to make credit card agreements easier to read (see Bloomberg article here). And indeed, many credit issuers have revised their credit agreements, but they are still far from easy to comprehend for the average American, and even for people familiar with the industry. And there are many who would say that drafting consumer credit card agreements with confusing “gotcha!” clauses is deliberate on the part of banks that seek to get every penny they can in fees and penalties.

CreditCards.com did an interesting analysis (more details here) of more than 1,200 contracts from major U.S. credit card issuers. The formula analyzed the number of sentences, number of syllables, and the number of words considered “difficult,” and computed a numeric grade level representing the number of years of education a person would need to understand the text. To make sense of the results, below is a comparison with other well-known writings.

Text Analyzed

Number of Words Analyzed

Difficult Words

Grade Level

Twinkle, Twinkle Little Star

41

1

3.3

National Anthem

134

5

5.6

Twilight (first book)

3,132

210

8.2

California real estate purchase agreement

1,909

313

10.7

Genesis 1, Bible (King James version)

747

38

11.1

Average credit card agreement

3,771

469

11.1

New York Times editorial

634

112

17.2

Declaration of Independence

1,159

174

18.9

Bill of Rights

681

95

22.6

Lawyers for banks say that simpler language in credit card agreements would make them longer. (See story at NPR.org). We’re not sure we buy that. They also say that if the agreements don’t “say you have to pay us back,” then borrowers will try to get out of paying their bills. We don’t really think anyone is unclear about that particular provision of their credit card agreement – usually that provision is written quite clearly.

Attention bankers, and lawyers! It can be done. Here is a nice example of a credit card agreement, plucked from the web. It’s not even two full pages, and while not very pretty, it’s pretty straightforward. Check it out.

-Sheril Stanford

Categories: Debt Defense
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