This article was first published in the fourth-quarter 2015 edition of Personal Finance magazine.
How often have you received a WMD from your financial services provider? I’m not referring to weapons of mass destruction, but to the ever-present danger of weapons of mass deception. They arrive uninvited, terrorise our logic, escape all sense and leave us drained, confused and desperately in need of clarity … or a claret.
You are a diligent person. You understand the need to insure your income, your possessions, your life. You do your homework. You explore the different financial products on the market and try to decide on the best ones for you and your family. You might even engage the services of a financial adviser to help you to decide. Finally, you buy a life assurance policy from a well-known company. You feel slightly smug, satisfied that you have made the right choice.
A few weeks later, your assurance policy arrives in the post. You open it to check that what you intended to insure is covered. This process is short-lived. A cloud of complexity descends. Words such as “benefit cessation date”, “non-accelerated benefit”, “premium waiver” and “cessionary” flood your brain. Panic sets in. What have I bought? What am I covered for? Who will receive the money when I die?
So, you take one of two actions: either you put the document into a drawer and hope it will cover you when you need it, or you call your (hopefully clued-up) financial adviser to explain it to you. Either way, you are now less smug, less sure about your choice, and far more sceptical about the assurance industry.
You believe there is nothing you can do about it. The industry is too big to fight. These practices have been going on for centuries and they will continue to do so. However, this is not true. South African financial services companies are now legally obliged to communicate with you using documents that are transparent, easy to understand and free from jargon and “small print”.
In South Africa, there has been a plethora of laws aimed at protecting the ordinary consumer against weapons of mass deception – thanks to our democratic constitution. In 1995, Justice Minister Dullah Omar called for “plain, simple and understandable language” in the country’s laws, in court judgments, in consumer documents, and in radio and television broadcasts. He referred to plain language as “democratising language”.
It is now part of our law that financial services companies must communicate with you in plain language. Thanks to our Constitution and Bill of Rights, South Africa is a leader in empowering consumers.
But what is plain language? It is not “cat sat on the mat” language. It is not a dumbing down of language. Rather, it is a sophisticated means of communication that requires careful consideration of the readers’ wants and needs. Opponents decry it. They say it is impossible to simplify complex legal and financial issues. But it can be done and is being done. Our Bill of Rights is written in plain language and it governs some 52 million people in our country.
Plain language has even been defined in our law. It is a technical definition, so sit tight while we drive through some of the terminology: “A document or visual representation is in plain language if an ordinary consumer in the target audience with average literacy skills and minimal experience can understand the content and significance of it without undue effort, having regard to:
* Context, comprehensiveness and consistency;
* Organisation, form and style;
* Vocabulary, usage and sentence structure; and
* The use of any illustrations, examples, headings or other aids to reading and understanding.” (Adapted from section 22 of the Consumer Protection Act of 2008.)
The definition refers to an ordinary consumer in the target audience. That’s us! Financial services companies must communicate with their consumers in mind. A consumer of “average literacy” must understand the language used.
This is problematic for several reasons. In South Africa, plain language does not mean plain English only. And literacy must also consider financial literacy. Research has shown that graduate and postgraduate consumers have difficulty understanding retirement annuity policies.
For a document to be in plain language, it must be written for a consumer with minimal experience of the goods or services referred to. This means that an insurance company should write up your policy as though you have never bought insurance before. The definition tells us that you must understand not only the content, but also why the document is significant to you. This means that you must understand how long you will be locked into a retirement investment and the consequences of withdrawing your money early.
You need to understand all these components “without undue effort”. It may be considered undue effort if you need to contact the call centre so that they can explain charges that have been added to your investment portfolio.
Context matters, too. The reason for rejecting an insurance claim should be clear and upfront and not buried in a barrage of emotional platitudes: “Dear Valued Customer. It is with regret that we advise we have rejected your claim. We look forward to continuing to give you, our esteemed customer, excellent service. Yours faithfully, InsureCo.”
The communication must be comprehensive – you must receive all the information that you need to make an informed decision. The new tax-free savings products in South Africa sound exciting, but there are tax penalties if you invest more than the law allows. You need to understand how this works.
Consistency is key. This means that a homeowner’s insurance policy shouldn’t interchangeably refer to the home, the premises, the risk address, the buildings and the residence. After all, everyone knowns that your home is your castle.
The structure of the document is important. Research shows that scattered information causes most frustration for consumers. We have all seen disclaimers (those paragraphs that say companies are not responsible for their mistakes) buried in the small print at the bottom of the last page. They know no one reads that far. Hardly fair, is it?
Financial services companies must avoid jargon, legalese, Latin and complex words. We have 11 official languages in South Africa, but Latin is not one of them.
So fight back the next time you read:
NOTWITHSTANDING THE GENERALITY OF THE AFOREGOING, THE CARDHOLDER SHALL HAVE SEVERAL SPECIFIC OBLIGATIONS FOR THE CARRIAGE AND/OR USAGE OF THE CREDIT CARD HEREINBEFORE MENTIONED. IT SHALL NOT BE PERMITTED FOR ANY OTHER PERSON, WHETHER KNOWN TO THE CARDHOLDER OR NOT, TO USE OR ATTEMPT TO USE THE CREDIT CARD AND IT IS THE CARDHOLDER’S EXPRESS OBLIGATION TO ENSURE THAT THERE IS NO UNAUTHORISED USE OF THE CREDIT CARD. FURTHERMORE, THE CARDHOLDER SHALL HAVE A DUTY, INTER ALIA, TO ENSURE THE CREDIT CARD IS KEPT AND RETAINED IN A SAFE AND SECURE PLACE AT ALL TIMES AND FURTHER TO ENSURE THE PERSONAL IDENTIFICATION NUMBER (HEREINAFTER REFERRED TO AS THE PIN NUMBER) IS KEPT PRIVATE AND CONFIDENTIAL AT ALL TIMES, SUBJECT TO THE PROVISION THAT THE PIN NUMBER SHALL BE KEPT SEPARATE FROM THE CREDIT CARD AT ALL TIMES AND FURTHER THAT IT SHALL NOT BE LEFT IN ANY PLACE WHERE AN UNAUTHORISED PERSON MAY GAIN ACCESS TO IT. THE CARDHOLDER’S SIGNATURE SHALL BE AFFIXED TO THE REVERSE SIDE OF THE CREDIT CARD FORTHWITH UPON RECEIPT THEREOF, PROVIDED THAT SUCH SIGNATURE SHALL BE IN INK.
All this means is:
Your duties for using the credit card:
1. Only you may use the card. You must ensure that no one else uses it.
2. When you receive the card, you must sign it in ink immediately.
3. Keep the card in a safe place. Keep your PIN secret and separate from the card.
Easier for you
Plain language means being active. Passive sentences, such as “It is recommended that you buy shares in Acme Limited”, conveniently fail to make it clear who is doing the recommending. Is it the investment house? Is it the financial adviser? Is it Acme Limited itself? Who is accountable to you for giving this recommendation?
Plain language means helping you find your way around the document. Headings are like signposts on a road guiding you to your next destination. Plain language means giving you summaries, so you can choose how much of the document you want to read. Plain language means not having to invest in a magnifying glass to read ant-size typefaces.
While the law provides the stimulus for many financial services companies to rewrite their documents in plain language, the success or failure of these initiatives depends in part on whether you take your right to receive clear documents seriously.
Financial services providers have a duty to you to:
* Give you all the information you need to make an informed decision;
* Match marketing promises in policy documents;
* Explain jargon and legalese in a way you understand;
* Set out the risks clearly;
* Make it clear what is and is not covered;
* Have an easy-to-follow claims process;
* Make it clear that you may lose your capital investment if there are no guarantees in an investment product; and
* Have an easy-to-follow complaints procedure.
So the next time you receive a WMD in your inbox – be it a letter, a leaflet, a brochure or a policy – challenge the financial services company that sent it. You can recognise these WMDs instantly because:
* They arrive with a warning siren: the bellow of the upper-case subject line “FOR YOUR URGENT ATTENTION”. The “urgent” email flag serves as its reinforcement.
* The collateral damage is massive. The email is copied to everyone, even those least involved in its subject.
* The fallout is a mushroom cloud of complexity. “Herewith as per our previous discussion in the instance of our prior telephonic communication.”
* The comprehension carnage continues with a dense wall of text, offering neither shelter nor respite. Try as you might, you can’t find a full stop anywhere, only minefields of chaotic commas and lost apostrophes.
* Fragments of language fly all over the place in global linguistic devastation. The writer has even planted some Latin words such as “inter alia” and “de facto” in the document without understanding what they mean.
* The draining of your time and energy continues as you gingerly find your way through “notwithstanding any exclusion that would otherwise override an exception” and “the policy shall either be voidable or void ab initio and of no further force or effect”.
* The email ends with “I trust this is in order”. You have no idea what “this” refers to.
* Candice Burt is co-founder of the plain language consulting and training firm, Simplified. She is a plain-language lawyer and immediate past president of Clarity, an international organisation that promotes the use of plain legal language.