Outlook & Opinions

Fine print

by Elizabeth Warren

All of life is in the fine print -- and that's precisely the problem.

Contract law is based on the idea that two people can come together and strike a deal, knowing that the courts will enforce their agreement if something goes wrong. I teach contract law, and I firmly believe that it is the foundation of our free-market economy and critical to personal liberty.

Over the past generation, the proliferation of fine print, in everything from car loans to credit card applications to television commercials, has shaken what we value about contracts. Fine print means that one party (think: a big corporation) can lay down the terms of the deal in a way that the other party (think: a customer) is unlikely to figure out. Long after the contract has been signed, the party that inserted all the fine print can do almost anything -- raise prices, cut service, extend the contract -- all because the fine print says so.

Remember that our current financial crisis began one lousy mortgage at a time -- one lousy, incomprehensible, complex mortgage loaded with tripwires and legalese at a time. Many borrowers knew they were engaging in a high-risk game, but millions of others were unaware of what they had agreed to until the foreclosure notices started coming.

Fine print costs everyone else money, too, because it makes products impossible to compare. (Just look at four credit card agreements and try identifying the cheapest one.) By decreasing competition, fine print increases prices.

My proposal is simple: no more fine print. If you can't explain something in simple, straightforward terms, it shouldn't be part of the agreement.

Elizabeth Warren is the Leo Gottlieb professor of law at Harvard Law School. She chairs the congressional panel overseeing the Troubled Assets Relief Program (TARP).

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