Simplified Credit Card Application Proposed in Canada - Will It Help Consumers?
Back in May when Ben Bernanke and the Federal Reserve proposed changes to rules related to credit cards, they did so under the theory that “improved disclosures alone cannot solve all of the problems consumers face in trying to manage their credit card accounts.” Others in favor of credit card reform argued in support that financial education doesn’t help. And because many consumers were already in trouble with their credit card debt, improved disclosure about their situation seemed insufficient.
Well, it seems that the debate will be put to the test in Canada.
The Financial Consumer Agency of Canada and MasterCard Canada are attempting to improve disclosure to consumers in Canada through a new model credit card application form that substitutes the contract legalese for plain language that a consumer might understand (here’s the press release). The Model Credit Card Application (pdf) boasts a larger font, more white space, and plain legal language.
The new language was tested with consumers and received good reviews according to The Toronto Star. After focus group testing, they believe that consumers are more likely to read and understand the plain language application. It reminds me of the type of simplified disclosures seen in the Creative Commons licenses - though I wouldn’t say that it goes that far.
While I’ve always supported the use of plain legal language, I have my doubts as to whether it will be effective in educating consumers and helping to prevent consumers from getting trapped in the cycle of credit card debt.
So what do you think? Will consumers read the full contract when they aren’t in a focus group? Will consumers presented with similar credit card applications make better financial decisions? Or is it simply a first step in reforming the methods of credit card companies?
