If your company offers consumer credit, you probably communicate with your customers using many different standardized forms and notices. These may range from short notices to complicated contracts that explain the terms of your credit plan. This manual is intended to help you write consumer credit contracts and other forms in "Plain English" so that your customers can easily understand them. Over the past ten years, a number of major insurance companies, retailers, and banks have voluntarily redrafted their consumer communications into "Plain English." Many other companies have simplified their forms in response to state law developments. Since 1974, seven states have adopted "plain language" laws covering consumer contracts, including credit agreements. A number of other states are considering similar legislation. Why do creditors use "Plain English" language in consumer credit communications? Here are four reasons that companies have discovered: 1. "Plain English" is good for Customer Relations.
2. Customers expect to understand what you have to say.
3. Customers need to understand their obligations.
4. "Plain English" communications can save you money.
Obviously, there is no "right" way to write a letter or credit document. Except for certain federal and state requirements, the substance of your communications with you customers -- and even your decision whether communicate with them -- are choices for you to make. As you read on, you may wish to check some of your company's contracts and form letters to see how they measure up against the "Plain English" principles presented below.
Please note: While this manual generally discusses some of the federal statutes that apply to the consumer credit process, it is not a guide to compliance with consumer credit laws. Consult a lawyer to ensure that your document complies with all the federal and state laws that govern your business. Planning is critical to "Plain English" writing, especially for complicated credit documents. Therefore, you should plan to:
1. Determine the Purpose of the Document Think about the document from two points of view: your own and your customer's. Do you want the document to tell your customers how to take specific actions? Do you want it to define the rights and duties of both you and your customers? Make sure that the document says everything you want or need it to say. 2. Identify Practical Problems with Existing Forms Ask your employees to tell you if and why they find certain sections of your current forms troublesome. For example, ask loan officers what problems they have explaining or interpreting credit agreement to prospective customers. Ask billing department and customer relations personnel how they would clarify your forms and letters to avoid or resolve problems. And then, check with your customers to get answers to the same questions. 3. Eliminate Unnecessary Provisions Some credit contracts are more complicated than necessary because they cover contingencies that rarely occur in consumer credit transactions. Ask you lawyers how often the use protective clauses to collect debts and whether some or all of these clauses could be omitted to simplify the agreement. 4. Comply with Legal Requirements As you plan any credit document, keep in mind applicable federal and state legal requirements. These laws often govern when you must communicate with your customers and determine the content and organization of the document.
Remember: When planning any credit document, be sure it also complies with all state laws that apply to the credit plans you offer as well as with all applicable federal laws. State laws that govern the timing, content, and organization of credit communications vary considerably. In addition, more than one state law may apply to any particular credit plan. For this reason, when drafting credit contracts and disclosures, remember to review with your lawyer the requirements of all state laws that may apply. These include:
Note that in some states all of the pertinent state requirements are codified under the Uniform Consumer Credit Code (U.C.C.C.). 5. Organize the Document Logically Once you determine the purpose of the document and the information it must contain, organize the information clearly and logically. Divide the document into sections and put related information together. The actual wording of a "Plain English" credit document is just as important as planning what it will say and how it will look. When you compose a "Plain English" credit document, be sure that you:
1. Write for your customers Your first step is to identify your customers. What do your marketing statistics tell you about the average age, educational level, income, and other characteristics of your customers? For example, approximately 54 percent of the adult in this country read below the 11th grade level; 20 percent do not read well enough to follow the cooking instructions on a frozen dinner. These considerations might affect the reading level you aim for and the style you use in your communications. 2. Use a personal writing style A personal writing style allows your message to come through clearly. Whenever possible, you want to indicate:
You can make your writing style more personal by using personal pronouns and the active voice. Use Personal Pronouns Using personal pronouns is an easy way to make your communication more readable. When you use personal pronouns, instead of words like :"the lender" and "the borrower," you make clear from the start which party is "we" and which party is "you." For example:
In addition, try to use pronouns and nouns consistently. For example, avoid using "you" and "the owner" to refer to the same person in the same document. Use the Active Voice Using the active voice also will make your writing more personal and direct. The active voice tells the reader immediately who is responsible for an action. For example, "We subtract payments and credits..." is clearer than "Payments and credits are then subtracted...." 3. Choose Words and Phrases that are Simple, Clear, and Precise "Plain English" requires using language that consumers can easily understand. For example, the following paragraph from a creditor's letter denying an application for credit words and phrases that are difficult to understand:
Written in "Plain English," this paragraph would read:
When choosing the words for credit contracts, disclosures, and other communications with your customers, remember: use common words; avoid jargon, explain necessary technical terms; and eliminate unnecessary words. Use Common Words Writers of "Plain English" recommend replacing complicated or legalistic words and phrases with simple, everyday words whenever possible. Avoid Jargon Where possible, replace technical or commercial terms that lawyers and other specialists may use. Otherwise, your customers may not understand what you mean. This contract clause, which sets out the cosigners liability if the borrower defaults, sues legal jargon that is unfamiliar to many people:
Compare the previous paragraph with this "Plain English" notice to cosigners that is required by the Federal Trade Commissions Credit Practices Rule:
The following words are examples of legal jargon that you can simplify:
Even when the words you use are common, you should be sure their meaning is clear in context. For example, some creditors use the phrase "excessive inquiries" to tell rejected applicants why the creditor denied them credit. What the creditor really means is "you have made too many recent applications for credit." Other creditors use phrases such as "residence too short" or "your residency is insufficient in duration" when what they really mean is "you have not lived at your current address long enough." Explain Technical Terms If you cannot avoid technical terms (for example, those that are required by state or federal law), explain the m in the text not in a separate "definitions" section. You might put the explanation in parentheses immediately after the technical term. For example, revised Regulation Z, which implements the 1980 Truth in Lending Simplification Act, suggests that creditors use the explanations shown here in parentheses:
You can use other punctuation, such as dashes, to help the leader recognize and explanation, as show here:
Be careful, however, not to replace technical words that have become widely understood. In fact, one study of a lease agreement showed that its simplified explanation of "security deposit" actually confused tenants. Eliminate Unnecessary Words Consumer Credit documents often contain unnecessary words. In the following example from a credit contract drafted before the FTCs Credit Practices Rule became effective, all of the capital letter words could have been eliminated:
Simply translated, this sentence means: "If I do not repay this loan, you can take the real estate that state law would otherwise allow me to keep." To simplify credit documents and other communications, avoid using strings of words with similar meanings, such as "cease and desist" or "due and payable." Instead, choose one word that best expresses the idea. Consider using action verbs instead of "verbal nouns" (or gerunds). For example, "describe" is shorter than "give a description"; "collect" is simpler than "make collection of." 4. Organize Your Words Simply and Carefully How you put your words together is as important as the words you select. For example, try to use the same words each time you express the same idea. If you use different words for similar concepts in legal documents, consumers may assume and courts may decide that you intended different meanings. For example, if you use the phrases "late payment" and "overdue payment" interchangeably, readers may think each phrase means something different. In addition, as you draft your document, try to use short sentences, descriptive subtitles and headings appropriate lists, examples, and parallel construction. Keep Sentences and Paragraphs Short Long sentences with prepositional phrases and subordinate clauses are hard to follow. Try shortening sentences to an average of 25 words. Consider the following example that explains the "Average Daily Loan Balance." (It is part of the method used to compute finance charges in some open-end credit plans.)
Compare it with this much simpler version:
The second example is easier to understand because the sentences are short, and they show the sequence of the calculations in a series of steps. Make Subtitles and Headings Descriptive Subtitles and headings are particularly important in long, complex documents, such as credit agreements. Titles and headings help the reader separate ideas, see the logical flow of the document, and locate specific information quickly. Make sure the heading explains what the section contains. For example, a section that follows the heading: "What to do if there is an error in your bill" should only explain what the consumer must do to resolve a billing error. In composing shorter, less complicated notices or letters, consider using typical consumer questions as titles or headings. For example:
Use Lists Lists are useful for explaining complicated procedures and conditions. Be sure to introduce a list with a straightforward "Plain English" statement such as:
Use Examples People better understand information when it refers to specific situations. The following paragraph from a credit card agreement explains what happens when a customer has a "credit balance." For example: People better understand information when it refers to specific situations. The following paragraph from a credit card agreement explains what happens when a customer has a "credit balance."
Use Parallel Construction Parallel construction in "Plain English" documents basically requires agreement of phrasing in clauses and lists. For example, this list does not use parallel construction:
A simple adjustment is usually all that is needed to make the structure of a sentence or list parallel:
Whenever possible, avoid inserting sentences in the middle of a list. They may break the readers concentration and leave the rest of the list unconnected to its introduction. For example:
Making your document visually clear and attractive will help your customers understand it better. If your "Plain English" forms have narrow margins, small type, and a sea of uninterrupted text, they could still be as difficult for your customers to read as if you had not made any improvements. Good graphic design in a printed document involves a number of elements, including:
1. Choose Type that is Easy to Read Credit contracts and disclosures will be easier to read if you pay particular attention to typesize, typeface, and weight of the type. Remember that some federal and state consumer credit laws require using certain typesizes. Other laws require using larger or boldface type to emphasize key disclosures. Typesize Typesize greatly affects the legibility of written communications. The size of type is measured in "points." For example, 6-point type is used in classified newspaper advertising and 10-point type is used in newspaper articles. The size of type you choose to use in your credit documents can help make them easier to read. Typeface Typeface also affects readability. There are two classes of typeface: serif (letters with small extensions) and sans-serif (letters without extensions). Whichever typeface you select, choose one that is easy to read. And, try not to mix typefaces; consistency aids the reader. Weight of Type Type comes in several weights (or thicknesses). A medium-weight type may be best for ordinary text. Boldface can be used for headings, emphasis, and for certain disclosures, as required by law. 2. Use White Space Effectively White space can add to the attractiveness and legibility of your printed document. This involves use of margins, "leading" (space between lines), and line length. Margins Generous margins and ample space between paragraphs can make your text easier to read and call attention to your message. You can place headings in the left margin for emphasis or you can also indent lists of items to make them stand out. Leading "Leading" is the amount of space between the lines of print. One to three points of leading with 10-point type is usually adequate. A little extra leading can make a printed credit document easier to read. Line Length The length of the lines of print also affects ease of reading. A printed line that is too short requires too much eye movement for easy reading. The optimum line length for reading ease usually is between 50 and 70 characters. 3. Use Capital Letters Selectively Many contracts use all capital letters for emphasis. This technique, however, actually makes copy more difficult to read. Compare this paragraph from a collection letter:
with the following "Plain English" version of the same collection letter:
If you want to emphasize more than a few words in a printed document, you also can use another technique, such as boldface, italic, larger, or colored type. 4. Use Color Wisely Choose color for paper and ink that produce enough contrast for easy reading. In addition, use colors for emphasis. For example, printing the "ANNUAL PERCENTAGE RATE" and "FINANCE CHARGE" disclosures in red ink, when the rest of your copy is in black or blue ink, will emphasize those terms. Too many colors, however, can confuse the reader. To evaluate how well your new forms work, try testing them out. You can test your documents in several ways. Some companies use survey and "focus group" research to determine whether their revised forms meet their objectives. Others use readability formulas that evaluate the document based on the average number of words per sentence or the number of syllables for each 100 words. Generally, the shorter the words, sentences, and paragraphs, the easier the document is to read. You also can informally measure your customers reactions to your new documents. Try showing the revised forms to a test group of customers, friends, and employees who fit your customer profile. To measure customer reaction, use criteria such as:
This kind of testing can tell you if your revised forms meet your objectives, or whether they still need some adjustment before you use them. Finally, once you successfully simplify your letters and forms, you may find that publicizing your "Plain English" efforts attracts new customers to your services or products.
August 1987 |