You know what they say: What the large print giveth, the small print taketh away.
This is a problem that definitely plagues contracts, with all their legalese.The Federal Trade Commission points out the importance of understanding all the fine print in contracts by providing some typical standard credit contract provisions--and what they really mean:
- The confession of judgment clause:
What it says: To secure payment hereof, the Undersigned jointly and severally irrevocably authorize any attorney of any court of record to appear for any one or more of them in such court in term or vacation, after default in payment hereof and confess a judgment without process in favor of the creditor hereof for such amount as may then appear unpaid hereon, to release all errors which may intervene in any such proceedings, and to consent to immediate execution upon such judgment, hereby ratifying every act of such attorney hereunder.
What it means: If you ever sue me because I haven't paid, I agree, in advance, that you should win--even if I have a good reason for not paying. In fact, your lawyer can represent me.
- The acceleration clause:
What it says: Default in the payment of any installment of the principal balance or charges hereof or any part of either shall, at the option of the holder hereof, render the entire unpaid balance hereof and accrued charges thereon, at once due and payable.
What it means: If I miss a payment, you can make me repay the whole loan immediately.
- The insecurity clause:
What it says: If the Debtor(s) fails to pay any installment of any advance secured hereby or part thereof or if there is a breach of any of the covenants, agreements or warranties contained herein or in the Credit Agreement of if the Secured Party shall feel insecure, all sums then owing under said Credit Agreement shall immediately become due and payable without demand or notice.
What is means: If you start to feel insecure about getting paid back, you can demand that I pay the entire amount at anytime.
Any time you sign a contract, be sure you understand just what it says--including all of the fine print. If it doesn't make sense, ask questions or ask to have the contract checked by your lawyer.
But contracts are not the only place where fine print is a problem.
Editors at Consumer Reports have noticed in recent months what they term an "ominous buildup of hostile asterisks in various areas of the marketplace." The magazine cites a few examples:
- An ad from a North Carolina car dealer promising a new Yugo for "only $42.40* a month, no money down!"
But the fine print has a few extra twists: the deal means in essence taking out a home equity loan--for up to 15 years. What's more, the $42.40 monthly payments cover only the interest on the loan. So 15 years and $7632 in payment later, you still would owe the full amount of the car.
This is the kind of creative financing consumers can do without.
Other examples are not as extreme, perhaps, but equally interesting:
- An ERA realty ad proclaims: "If we don't sell your house, we'll but it."*
But the asterisk sends you to the fine print that notes: "conditions apply, including a program participation fee, house must meet specific qualifications, a second home must be purchased through ERA, and purchase price will be determined solely by ERA." Might not be quite the good deal it sounds.
- A Sears flier advertises a wooden sewing cabinet "plus over 500 accessories"* for $29.99. The asterisk leads to a detailing of the accessories: 25 hooks and eyes, 90 buttons, 50 safety pins, 50 spools of thread, 12 needles, a thimble, a tape measure, scissors--and 450 straight pins.
- A "centennial season" ad for a hotel in Mackinac Island, Mich., asks you to "celebrate a century in grand style for just $87.*" And the little asterisk surprise? Does not include baggage handling or taxes. Plus, there is an 18 percent "added charge."
- A local travel ad promises great round-trip prices from Salt Lake City to some 15 Western cities, prices ranging from $98 to Las Vegas to $208 to Orange County. But the fine print notes: "Fares subject to change and may not be available on all flights. Seats are limited. The following restrictions may apply to one or more of these fares: Fares require a 7-day round-trip advance purchase. Travel must be completed by May 20, 1988. Fares slighty higher after May 20, 1988. Fares are non-refundable and tickets must be purchased within 24 hours of making reservations. QN fares available on specified Nite Flite departures only. For lowest fares, travel between noon Monday and noon Thursday, or noon Saturday and noon Sunday. A minimum stayover is required."
The chances of actually getting one of the bargain fares seems slim, indeed.
- But as restrictive as that fine print is, at least it spells out the details so you know exacdtly what to expect. Worse is another ad promising such round-trip fares as "Mazatlan, from $199*" and "Alaska from $329*" All the type the asterisk leads you to tells you is "some restrictions apply."
- A local educator received an offer for "educators-only, a special credit card account." The flier promises "a personal line of credit up to $15,000 and many other, educator-only privileges with NO ANNUAL FEE."
And what does the fine print say? "You pay a modest, monthly usage fee of just $1.50"--but only in those months when you actually use your account or carry a balance. However, if you use the card year-round, in most people's book, that is the equivalent of an annual fee of $18.
There is nothing illegal about any of these ads. Use of fine print is a carefully calculated marketing tool. The advertiser is counting on the big print to catch your attention. And the restrictions are carefully spelled out in smaller type--where they could be easily overlooked.
But these asterisk adventures are a reminder that consumers need to read and understand everything on the ad. You can't get by with a quick look at the main claims. Whenever you see an asterisk, let it be a signal that things are not exactly as they seem.