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Credit Card Agreements Explain a Lot About How We Get Into Debt.


While credit card debt may not always be the reason a person files bankruptcy, it is a significant factor in many cases. There are myriad reasons why those balances become so unruly. Impulse purchases, for example. However, a lot of that debt can also be attributed to deliberately confusing contract agreements.

Any graphic designer or communications professional would agree that if you don't want your audience to get the message, present it in multiple pages of minuscule, light-grey type on a white background and scramble it with a liberal dose of intimidating legal context. Talk about a page turner! Or more realistically, a page shredder.

It isn't like we don't understand the concept of hidden messages in "fine print." We scrutinize the heck out of car salesman, don't we? They never get the benefit of the doubt. Yet, we agree to credit card agreements like we would to, well, free money. And that's what Visa, MasterCard and American Express love about us.

A brief study by CNN asked 13 credit card holders to review a standard, five-page credit card agreement. A total of four people were able to find the annual percentage rate.

The argument on behalf of the credit card industry is that it needs such extensive language to remain protected. That argument alone should tell us a lot.

However, we would be remiss to not credit Bank of America with taking a step in the right direction. They will soon be sending credit card agreements with a simple, one-page breakdown of fees and rates. They will continue to fold up the longer-version into their approval mailings but the new approach should enable the customer to understand the most critical components of their agreement. This is a good thing.

The U.S. Government is already underway with devising legislature to limit the length and complexity of credit card documentation. The effort will be one of many, to be sure, to emanate from a proposed "consumer protection agency," which would be a conglomerate of the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee.

Many of the credit card issuers cite banking laws as the reason for so much superfluous content, referring all questions from the CNN article to the American Bankers Association (ABA). The ABA promptly pushed blame on to government regulation and corporate pencil-pushers.

The ABA, in conjunction with the U.S. Chamber of Commerce has made it known it will debate any serious legislative effort to alter their methods on the grounds that it will limit consumer choice. It even went so far as to say that "vulnerable groups" should be protected but those who manage money well should be afforded the respect of free choice.

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