Putting contracts into plain English
David Hirsch’s epiphany came a few years ago as he was reviewing the contract for a college-savings plan for his daughter. The contract was riddled with fine print and legal gobbledygook.
“I couldn’t understand it at all,” said Hirsch, 51, of Malibu. “First I got furious. Then I got inspired.”
The once-and-future Internet entrepreneur is putting together a database called the National Fine Print Repository. When it’s unveiled to the public in coming months, it will provide a resource for people to get clear explanations of what may lurk in that cellphone or credit card contract.
This week, Hirsch took the wraps off his new company, Transparency Labs, with a presentation at Finovate, a financial-technology event in New York.
“This fine-print world we’re living in, it’s bad for consumers, it’s bad for business, and it’s bad for the country,” he told me. “You’ve got people not understanding what they’re agreeing to, and they’re getting clobbered.”
We all know what Hirsch is talking about: weasel words in contracts that allow a company to change the terms at any time, or that lay the groundwork for sky-high fees, or that forbid a consumer from filing a lawsuit.
Think of the National Fine Print Repository as a sort of CliffsNotes for contracts. Users will run a search for whatever company they’re doing business with. If the contract is in the database, an easy-to-understand summary of key provisions will pop up.
Hirsch said about 20 people are reading and summarizing contracts for the database -- a job that must be among the most thankless in the tech world. Their explanations will be written so they can be understood by anyone with a ninth-grade reading level.
The database already contains about 2,000 contracts for banks, credit card issuers, cellphone companies and retirement accounts, Hirsch said. In the future, the scope of industries will include mortgage lenders, insurance providers, travel companies and software makers.
Hirsch, who made his fortune as chief executive of a real estate website called Homestore (now Move Inc.), said he’s invested more than $1 million of his own money into the database. The focus so far has been on amassing all that fine print and on developing the technical means to help consumers wade through it.
He said he hopes to make the database available to consumers by early 2012. And if all goes well, Hirsch said, it will also be embraced by the corporate world as a much-needed tool for bringing greater transparency to customer relations.
“This project is very neutral,” he said. “We’re not getting into this as if there were good guys and bad guys.”
To make money, Hirsch said, his site could provide a seal of approval to companies that merit a consumer’s trust, or it could offer a subscription service whereby it would monitor a user’s contracts for changes.
Will it work? Maybe. As it stands, precious few consumers read the jargon-filled contracts they’re inflicted with, let alone understand everything they’re agreeing to. When was the last time you read everything online before clicking the “I accept” box?
There’s an opportunity here for a company that says it will read the fine print so you don’t have to.
“It can be overwhelming,” Hirsch said. “We’re trying to help people understand how their ox is gored.”
Sign me up.
Just the facts
Here’s another new website that’s worth checking out: NLC Invested (https://invested.nlc.edu).
It’s a straight-shooting resource from the National Labor College and the AFL-CIO that aims to provide working families with the financial basics for key moments in their lives, such as the arrival of a new baby or dealing with a foreclosed home.
“People have specific times in their lives when they need help,” said Zach Teutsch, director of investor education for the union. “Our approach is that people will go to the site during moments of change and transition.”
Another distinguishing feature of NLC Invested: It isn’t trying to sell you anything. Many sites that purport to focus on financial literacy are in fact trying to deepen your relationship with a bank or brokerage.
“We have no skin in the game,” Teutsch said. “We’re just offering information in plain English that’s unbiased and easy to understand.”
The section on a new baby, for example, explains the importance of starting early with college savings and provides links to additional information on the options available, as well as a calculator to help crunch the numbers.
Similarly, a section on home buying clearly explains how mortgages work (and prudently suggests you may want to rent for a while in a specific neighborhood before taking the plunge). A section on divorce lays out the tax implications of untying the knot.
NLC Invested isn’t a comprehensive guide to everything you need to know about money. But it’s a good place to start finding answers at times in your life when making the right financial decisions really counts.
David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to firstname.lastname@example.org