> Posted by Elisabeth Rhyne, Managing Director, CFI

We all hate fine print. On websites we click the “I agree” box without reading it. We want to get on with downloading our next app.

It may be surprising that many microfinance clients face similar fine print when they take out a loan. At the final moment, when their applications are completely approved and the loan is about to be disbursed, many microfinance clients are handed a sheaf of papers with tiny script and told to sign each one. The pages are covered with what looks like a magic incantation that makes everything possible but is understood only by the initiated.

Of course they sign. It’s the only thing standing between them and their money.

At the Smart Campaign, we believe plain language contracts are a pillar of transparency. The Campaign’s new certification standards require that clients be given an understandable explanation of what they are agreeing to. I decided to investigate what that means in practice.

I started with some fine print from a microfinance organization that will remain nameless. Covering a full page with half inch margins and a space for a client signature, it provides terms and conditions for opening a savings account. I had to zoom up the scale in order to read. The document began as a relentless explanation of the obvious. The first 900 words said: We operate under the laws of this country. You can open a savings account if you are a person (even if you are a kid, disabled or illiterate) or a company, but you have to give us valid current identification and tell us what you do and where you live. (50 words)

Who reads this stuff? Not the elderly client who can’t make out the size 4 or 5 font. Not the client with less than a primary school education who struggles with literacy or speaks a non-dominant language. Not even the client with a high school education. Probably not even the microfinance institution staff member overseeing the transaction. More to the point, why is this stuff necessary at all?

I have started asking around about this, and the main response I hear is that it is “required by law and regulation” and that the best solution is to add yet another piece of paper that explains in brief what the longer piece of paper says. A plain facts summary is some improvement and is the bar set by the Smart Campaign for certification.

But I am not satisfied.

One could argue that if the fine print is legally necessary (which I question), it doesn’t matter that clients have to sign one more document. But in my view, the fine print itself is a problem – even if its actual contents are innocuous (which may not be the case).

While the text of the fine print is unintelligible, the meta-messages are loud and clear. Here are four disturbing messages that institutions using fine print convey implicitly.

  • We expect you to lie. The client’s signature affirms that he or she has read, understood and agreed to all the fine print, but everyone recognizes that this is patently untrue. And if clients are expected to lie, why not providers?
  • We are cynical about transparency. The ostensible purpose of the fine print is to inform clients about terms and conditions. However, when information is presented in size 5 font and impenetrable legalese, it is clear that clients are not thereby informed. Everyone enters a charade that is a poor basis for launching a relationship based on trust and transparency.
  • We are pre-empting your complaints and questions. Clients fear that the institution will respond to their questions with a “Gotcha” – you signed this, you were informed, so you can’t complain.
  • We are more powerful than you are. When clients have no choice but to accept the fine print, they feel that the institution holds all the cards.

Institutions that value their clients do not want to send such messages. That’s why it is worthwhile for all those that do value their clients to put their fine print under the magnifying lens and do something about it.

Image Credit: Westminster Consulting

Have you read?

Straight Talk on Client Protection – The Proper Handling of Contracts

Straight Talk on Client Protection – Standards of Professional Conduct

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