20 February 2015
A new quality mark for clear terms & conditions…but no one qualifies
It's almost a year now since Fairer Finance launched its campaign to clean up the complex, jargon-filled world of terms and conditions. During that time, we've met with regulators and numerous banks and insurers - and feel confident that we'll see some progress over the next year.
Throughout our talks, however, it's become easy to see why so many companies haven't done anything up till now. Most banks and insurers accept that their Ts&Cs and policy documents are too long and too complicated. But they also see that just about every other financial company is in the same boat - and they seem to take some comfort from the fact that very few consumers bother to read the documents anyway. The bottom line for the decision makers is that redesigning and rewriting your Ts & Cs will cost you time, money - and will set you up for conflict with your legal and compliance teams. And at the end of it all, your customers are unlikely to care or even notice.
A reason to do better
One of the reasons we launched Fairer Finance last year was to give companies a reason to prioritise problems such as this. Our transparency scoring includes an analysis of companies' Ts&Cs or policy documents - and if businesses improve their documents, they stand to see a tangible improvement in their scores in our tables. Since we published our ratings for the first time last March, a number of companies have shown willingness to engage in the process of improving their documents - but they want to know what good looks like, and are also keen to be able to put some kind of quality mark on their literature if they manage to achieve it.
So today, Fairer Finance is launching its Clear & Simple quality mark. We've designed some detailed criteria as to what good looks like, and will allow companies to display the mark on their literature if they meet our benchmark.
Sadly, we've not yet found a document that qualifies. But we're working with a number of companies to help improve their documents, and we're confident that we'll be able to award our first Clear & Simple quality marks in 2015.
Clarity, not brevity
While some industry commentators have talked about the aspiration of keeping Ts & Cs to a couple of sides of A4, we don't believe that brevity is always the answer. Financial products are often complex, and brevity can be an obstruction to getting the key information across. Having said that, most Ts & Cs are littered with legal disclaimers - many of which we believe could be dispensed with. While we can't prescribe what companies put in and take out of their Ts & Cs, those who qualify for our Clear & Simple quality mark will have to demonstrate a committment to keeping legal disclaimers to a miminum. Where such disclaimers need to stay, they will need to be phrased in simple language.
As well as using simple, jargon-free language, qualifying documents will also have to be clearly deisgned. It's astonishing how much of a difference it makes to comprehension if documents have a decent amount of white space, a relatively large font and use colour, images and infographics to bring the page to life. These are some of the things that we look for in the design element of our document analysis.
Finally, beyond the design and language, we will also be applying a subject expert lense to the documents we analyse - checking that all the key product information is included. Astonishingly, there are plenty of Ts & Cs that run to over 20,000 words, but still don't include some of the key information that a customer might be looking for.
Better documentation is only the start
Of course, clearer documents are only part of the issue here. Ultimately, our aim is to ensure that companies have done everything they can to help prospective customers understand what they are buying. That means tailoring the purchase process to the type of customer you're dealing with. So, for example, working much harder to explain your product in detail when you're selling a student their first bank account, while perhaps taking a slightly different approach when dealing with a 50 year old who is switching for the third time.
But clear documents are an essential part of the journey. And we hope we can encourage as many companies as possible to step up to our challenge and meet the standards of our new Clear & Simple quality mark. Watch this space.