Many years ago, one of the more celebrated Alabama plaintiff’s attorneys, Garve Ivey, Jr., took me to task for an article that I had written complaining about the free-for-all attack on consumer finance companies by the plaintiff’s bar. Garve suggested that the real problem in the debtor/creditor world was the failure of finance companies, banks, and insurance companies to do business honestly and forthrightly and not disclosing the true facts contained within the contractual obligations.
I think a lot about this line of reasoning. But, unlike the plaintiff’s attorneys and consumer advocates, I believe that what is problematic is not a failure to disclose the true facts of the contractual obligation, but the requirement that creditors disclose too much information. I mean really—how many of you read the boilerplate contractual language in consumer purchase contracts, or the credit card terms & conditions, or the website click-throughs? And, if anyone should be expected to read this stuff, it should be the readers of this blog.
Until the pause in very recent years, every new Congress and every federal consumer protection agency seemed to think that layering on of additional disclosures would assist in the transparency of the consumer finance transaction. Actually, the opposite has been the case. The more information that is packed into a contract’s terms and conditions, the less likely it is that a consumer will focus attention on the most meaningful and important terms. But, unlike Garve’s conclusion, the fact is that such language is not put in the contract by creditors to bury contract terms. Rather it is put in the contract because of legal and regulatory requirements.
Perhaps one day, we will have a meaningful discussion about the relevance of some of the required disclosure provisions. Oh, wait a tic—that was tried in the 1980s under a law known as the Truth-in-Lending Simplification and Reform Act. But, perhaps this time, it can be tried using statistically sound and empirically derived techniques that are proven to work. I am convinced that if we reduce the amount of information that must be disclosed as a part of a consumer credit transaction, the disclosures will be more meaningful.
Please note: This is the eighty-third blog in a series of Back to Basics blogs, in which relevant and resourceful information can boilerplate by clicking here.