Different members of the Credit.com news team spent time at Finovate this week, a convention for companies introducing new tech products for the financial services industry. But probably the coolest thing we saw at the convention had no technology at all, no product, and no business plan.
It’s called Transparency Labs, and it’s a startup aimed at translating into English all the fine print buried in credit card, cell phone, mortgage and investment contracts. Eventually, the company hopes to have a slick web site where people can find a copy of their financial contract, get a quick summary of what it actually says, including any hidden costs that might be buried in all the 6-point font.
But first, the company has to know what’s actually in all those contracts. That’ll take more than a little bit of work.
“What’s out high-tech solution? It’s a big secret. We read the contracts,” David Hirsch, founder of the company, told us. “I’m happy to tell you, because no one else is crazy enough to do it.”
He’s right, of course. I just dug into my file cabinet and fished out the agreement for one of my investment accounts. Somewhere in the application process I had to check off a box certifying that I had read it—all 116 pages.
The actual number of pages of that document that I will ever read? Zero. And of course I’m not alone.
“One problem with all this fine print is that it’s turning us all into liars,” says Benjamin Texter, vice president of Transparency Labs. “Everybody’s checking off those little boxes saying they’ve read these contracts, and of course nobody does. Because you can’t.”
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What’s in the Fine Print?
There are reasons both good and nefarious for the growing length and complication of all that fine print. On the good side, banking is complicated, and a well-written contract is needed to clearly lay out each side’s rights and responsibilities in the event that something goes wrong.
On the nefarious side, lenders have figured out zillions of ways to manipulate otherwise simple agreements for their short-term advantage. One example: Buried deep in most credit card contracts is language stating that if a billing date lands on a weekend, the issuer has the right to mail out bills on a Friday instead of a Monday.
That one little clause reaps issuers millions of dollars in extra late payment fees. And it’s one of the simplest examples. The folks behind Transparency Labs hope that their project can help consumers spot these things, which will help people figure out the true costs of their financial products, and hopefully to make better decisions about which products to buy and which to avoid.
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Image: Okko Pyykkö, via Flickr.com