For the past couple years, I have had the privilege of working as a consumer attorney. I’ve occasionally written about some of the topics I’ve encountered as a consumer lawyer. In this post, I’ll address another issue that I commonly encounter in my practice: illegible forms full of fine print that deprive consumers of fundamental rights.
What provoked this topic is a lawsuit I am currently handling. My client sued a payday lender based on a payday loan that she alleges the defendant repeatedly processed and renewed in violation of the payday lending laws of Missouri. This is a big deal to my client and to all of the numerous potential class members of this class action. Why is it important? For starters, this particular payday lender (and many others) charged 469% interest. This is not a typo. I have often asked friends and acquaintances whether they’ve heard of payday loans. They usually say they have heard of those sorts of businesses. I then ask them how much interest they think payday lenders charge. Most people say something like this:
“Oh, I hear that it is an exorbitant rate of interest, perhaps 25%.”
They are shocked to hear that it is legal to charge consumers 400 or 500% interest on a small consumer loans. They are shocked to hear that some of these companies make it part of their business plan to repeatedly violate Missouri lending laws. They are also shocked at one other thing, the topic of this post. They are shocked to see how unreadable and one-sided many business forms have become.
I should mention that the above lawsuit is not about the exhorbitant rate of interest, which is entirely legal. How can that be? See here. The suit concerns allegations that the lender violated numerous laws concerning renewals and paydown of the loans.
Take a look at the actual form here: arbitration agreement.pdf If you make it all the way through the form, send me a comment and I’ll publish it so that you get full credit for your diligence.
The above form is an arbitration clause that is printed on the back side of every loan application by one of the businesses that I have sued. This arbitration form is very much like the forms used by numerous other payday lenders and numerous other providers of goods and services to consumers from coast to coast. The above form runs more than 1400 words. All of those words are jammed onto one page in tiny type (about eight point), with fully justified margins running the width of the page (this makes it difficult to find where the next line begins). The title of this all-important arbitration provision does not even mention “arbitration.” The lines of this form are less-than-single-spaced to the extent that the lower strokes of a line actually touch the upper strokes of the letters on the line beneath it.
This form is so badly congested that I scanned the form at 400 dpi, then ran OCR (optical character recognition) on it using two separate programs (OmniPage Pro 14 and Adobe Acrobat Standard). Both of these programs failed pathetically, because the words and sentences are jammed together too closely for a machine to distinguish between the words and lines. If a person were to reformat the above form to double-spacing with one-inch margins, the form would take almost 7 sheets of paper.
This printed information on the above form is so absolutely unreadable that the corporate representative of the company that implemented this form stumbled several times while trying to read it at a deposition. It is written so poorly that a lawyer who works for the company could not explain a key provision of this arbitration clause immediately after being asked to read it.
My client’s readability expert explained that this form was not readable, based upon an analysis he conducted. It could not comfortably be read by anyone with less than a first-year graduate school level of training, he testified. Further, the form was not legible, based upon the appearance of the words on the page. Only a tiny sliver of consumers in America could be expected to make any sense out of this form. If you’d like to know more about the sorts of things that readability experts consider, check out this article or this one, for starters.
My client has also presented several consumer attorneys for depositions in this case. Each of these expert attorneys stated that they had vast experience reviewing similar paperwork with their clients. Each of them stated emphatically that no consumers ever actually read anything like the above form. They described the form as “impenetrable.” Normal people simply don’t read forms written like this.
Despite all this evidence that no one will actually read forms like this, the above form purports to deprive consumers of the right to a jury trial. The above form also deprives consumers of a right to file a class-action against the business for widespread wrongdoing (this also deprives potential class members of the right to be a class member where the defendant corporation engages in widespread illegal activity). These are fundamental rights that are being taken away from consumers based upon forms that are neither legible nor readable. It would not matter what you put in the middle of this form, because no consumer is going to get to the middle of the form.
You could put in a sentence advising the consumer that all they have to do is stand up and say “give me $100” and the business would hand the consumer $100. But no one would ever notice that part of this contract, because no one would ever get through the first couple of sentences, much less the first paragraph (which, by the way, contains a single sentence of more than 250 words). This illegible form requires that consumers address their grievances with this company one by one, in individual arbitration. This, despite the fact that the case is based upon Missouri statutes so complicated that no consumer would ever realize that their rights have been violated (and therefore would never think of pursuing an arbitration).
In order to pursue this case individually (whether in arbitration or in a court), consumers would need attorneys. According to the attorney experts, however, there are only a handful of attorneys in Missouri who have shown any willingness to take consumer cases and none of them would be a will to make any profit at all on very small claims like these (typically less than $1000 of damages). In fact, the clear testimony is that an attorney handling these small risky claims would lose money every time, even if they prevailed in court.
What is fascinating, then, is that this form and thousands of other forms used in commerce are absolutely illegible and unreadable. The consumers do not read them and cannot read them. It does not matter what is put into the middle of these forms, because no one is ever going to get there. Not even the employees or the upper management of these companies read or understand these forms. These forms are typically written in a different language, legalese. In the case I am handling, the corporate representative could think of many rights to consumer gave up by signing the form, but couldn’t think of any rights the payday lending company gave up. The above form stripped the customers of valuable legal rights and left the business unscathed.
Nonetheless, millions of consumers are being deprived of their rights every day based upon legal forms like these, forms that simply cannot be read. The consumers sign them simply because they are told to sign them by smiling workers employed by corporate behemoths. People sign these forms because they are tricked into trusting the people who tell them to sign these forms. Ironically, the signature line at the bottom of most of these fine print forms requires consumers to declare that they have “read and understood” forms that they have neither read nor understood. Those sign them, of course, because they’re told to sign them and they make the mistake of trusting businesses that are often unscrupulous.
Thus, business as usual is based upon a huge fiction. Businesses and courts often assume that corporations have somehow communicated with their customers using unreadable forms. The evidence is clear, however, that only one out of a thousand people will ever try to work his or her way through this sort of form. Even fewer will succeed in understanding the form. Before you scoff at all those people who don’t fully read in their payday loan contracts, think of this. This same sort of trusting ignorance is the same thing that happens when you install new software. You are asked to check a box that you have read and understood the software disclaimers. It is highly likely that you (like most people) simply checked the box and get on with the installation without ever attempting to read or understand any of those disclaimers.
When it comes to fine print, expediency trumps truth. It is expedient to believe (at least in courtrooms) that everyone can read and does read such gibberish.
But this common legal finding has no basis in fact. Unless you have a dedicated lawyer willing to put up a huge fight, a court in which you might someday find yourself might tell you that you were supposed to have read and understood legal boilerplate which was neither readable nor understandable. Case closed.
One really needs to read fast if the 469% interest is accruing during the time the borrower spends "reading and understanding" the form. Otherwise, if you read too slowly during the loan application process – which you might be inclined to do because you are reading for the purpose of becoming contractually bound to read slowly enough to "understand" – you could accrue more interest just while "reading and understanding" the form than the amount of "payday loan" you are borrowing, so that by the time you "read and understand" the form they wouldn't even have to give you the loan because the interest would already exceed the principle you are trying to borrow, so that you would just wind up owing them that difference (between the accrued 469% and the principle they would never have to give you, discounted to the present value using the Federal Reserve discount rate in place and effective as of and at the time of the loan origination, whichever is the greater sum) so that merely in order to walk out of their office empty handed you would have to pay them that difference without ever receiving the loan principle in the first place. On top of that, if you take the time to "read and understand" the form, which the form purports to require you to do before executing it, you will have to take so much time off work such that there won't even be much of a "payday" for you in the first place, so that there will be no revenue with which to meet the obligations of the loan instrument which presumably appears on the reverse side of the form, thus potentially placing you in breach for inability to repay either the interest, principal, or both, as the case may be, as of the loan origination date or at any time thereafter, whichever may first occur. This comment does not constitute legal advice, legal opinion, fact, accuracy or a legal interpretation, is not based upon an "understanding" of any of the relevant documents, and should not be "read or understood" or relied upon for any purpose whatsoever by any borrower, lender, potential borrower, potential lender, past borrower, past lender, future borrow, future lender, or anyone else for any purpose whatsoever including but not limited to understanding the meaning or purpose of Erich's posted blog or any portion thereof, whether read or understood in its entirety, taken as a whole, or in a piecemeal fashion, as the case may be.
I skimmed it. Does that count? Basically, once you sign the form, if you are unhappy with the bills you start receiving you can't do anything about it, even if you take them to court.
My dad did some consumer work for a while. He had a case against a pie manufacturer (and won). Their cherry pies did not contain nearly as many cherries as the picture on the box. Anybody who has had a (frozen) cherry pie knows that the cherries don't look anything like what is on the box, and the pie is filled mostly with goo instead of cherries. For the cherry pie makers, it must still be worth risking (and losing) lawsuits in order to put a picture of fresh cherries on the front of the box.
No one reads the Software Agreements before checking the boxes, either. There was a Dilbert strip in which our protagonist found that he'd agreed to be Bill Gates' towel boy just by opening the seal on a software package.
Excessive legalese has become so prevalent because of the 20th Century Principle of evenhandedness. That is, laws and contracts should cover all contingencies to eliminate the abuse of judicial discretion. The result is that now no contract can be understood without a law degree.
All sets of rules and laws are now so complex that judicial abuse is available at all levels: Building inspectors, DMV clerks, IRS seasonal phone bank employees, money lenders, etc. This is because only a long, expensive, and often futile process is the only recourse for someone trying to apply reason in spite of rule.
The book "The Death of Common Sense" is a very readable diatribe against this malignant growth of rule in the name of fairness.
Example: One building on the corner of my block has been empty for over a decade. Every once in a while, it changes hands. The new owner then finds out that it is impossible to get permits to make necessary, city-required repairs because general zoning laws conflict with historical preservation rules. So the building (first floor commercial bays with once-elegant 2 story town homes above) continues to rot. Why?
Because no one can get through all the paperwork to find out what they are signing on to.
They could put it in clear layman terms, but then no-one but the most desperate would agree. The rediculous garbage in the fist paragraph would read something like:
By signing below, you agree to give up all legal rights to sue this company, but may submit to arbitration by a commercially license third party as apporved by us. You also relenquish all right to legal representation, and any rights to have your case heard before the courts.
In the case you request arbitration, you give us the right to add fees and interest charges to the amount you owe us, and you can't do a F#$#%$#& thing about it!!
Here's another reference: Clarity is an international organization that promotes plain legal language. Go to http://www.clarity-international.net
Erich, Paragraphs 2(b) and 6 allow for claims to be adjudicated in an appropriate small claims forum.
In Missouri, that's any claim less than $3,000.00. If you get the folks in the legislature to raise the small claims amount, these may make economic sense to consumer lawyers, and may still do so. If I file a Section 407 Unfair Merchandise Practices Act suit in Small Claims and request a judgment of the say, $1,000.00 which you claim as the typical loss, and ask for and get an additional $2,000.00 in damages or attorney's fees and file a couple dozen of these at the same time, it may make economic sense for me to do the suits.
If you sue and win in small claims, any appeal (which by Missouri statute is by filing a trial de novo within 10 days of the entry of the judgment) by the company (or you) is by binding arbitration pursuant to the terms of the agreement. Perhaps since the UMPA has been implicated, such may not be available under the holding of a case decided in Missouri's Western District Court of Appeals which held an arbitration clause in a cell phone contract to be inapplicable in an individual consumer's suit under a contract for services for personal use.
Anyway, when I opened the pdf file and expanded it to 125% , it wasn't too difficult to read. But, the agreement certailny doesn't favor the consumer, and may have type print or other violations of statutes which make the provoisions inapplicable.
I don't think Ben understands, because of the "even if you take them to court" comment. The point is that you CAN'T take them to court, because of the impossible to understand arbitration provision. If the businesses that inserted these clauses had their way, it means that no matter what happens, you can never sue.
Say you take out one of these payday loans, and later go into the store to make a payment. While you are there, a crazed employee beats you up, or robs you. Let's say this is the tenth time that year such an event has happened, but the employee keeps his/her job because they bring in good income for the employer. Arb clause? No court for you, instead, see if you can convince some arbitrator that is beholden to the lender for their continued support, that you should be compensated.
Remember the Magna Carta from your high school history or government class? Part of the Magna Carta stopped the king from being the ruler, and put disputes into the hands of juries. Arbitration takes that away.
What is the root word for "Arbitration"? "Arbitrary." There is a reason for that.
I find your article to be very informative, but I also find the state of missouri to be complacent with the way payday loans are destroying our consumers and the economy, which, I happen to be one of them. I got a personal loan from Americash Loans LLC 18 months ago for $800.00. Making more loans to pay more loans off, I couldn't pay them anything. Just recently I received a garnishment for a total of $7,787.54. They listed my principal amount to be $5,686.29, but that was not what I borrowed. They listed an additional interest fee of $1,944.25 and court cost of $157.00 bringing the total to a whopping sum of $7,787.54.
I don't now what to do and I can't afford any more money coming out of my check. I just know that this is illegal, and I guess thier are no laws that protect consumers in cases like this. If there is something or someone I can talk to? I'm open for advice just so I can see some hope in all of this. I can't begin to explain what this is doing to me and my family. It is taking its toll of a 52 year old black female, single parent with no one who can or will help me. I am sufferng emotionally, physically, and economically from all of this. With the rising cost of food and gas, the money they will take from me will leave us virtually in a hopeless situation.
Indeed, ignorance of the law can have disastrous consequences. I know of one fellow who started his own manufacturing business in Europe, then sought out someone in America to sell his products here. Not knowing American law, he adopted the convention of referring to the American salesperson as his "partner," even though he considered the salesperson just an employee. A few years later, the business owner sought to sell his business to a big American company, in part because the American salesperson had utterly failed to generate significant sales in America (despite the fact that America was the world's largest market for the company's products). Upon learning that the business owner had sold the business and intended to fire the American salesperson, the American salesperson promptly claimed that he couldn't be fired because he was a partner and *co-owner* of the business. Furthermore, he declared that the European business owner could not sell the business without his consent. Sadly for the European business owner, his repeated use of the legal term "partner," together with a few other facts in favor of the American salesperson, meant that the salesperson's claims could not simply be ignored. In the end, the European business owner ended up paying the salesperson a significant sum of money to dismiss the matter, all because of his innocent (and mistaken) use of the term "partner" — a practice that has no legal consequences in Europe, but that can have very significant consequences here.