Understanding Fine Print

What Is Fine Print?

The phrase "fine print" refers to contract terms and conditions, disclosures, or other significant information that is found in footnotes or a supplemental document and is not presented in the main body of the document.

Reading and understanding the fine print is essential when entering into an agreement. It often contains information that the issuer does not want to call to the recipient's attention but that is essential for the recipient to know.

KEY TAKEAWAYS

•The "fine print" is a term that refers to contract terms and conditions or disclosures placed in footnotes or at the end of the manuscript where it is easily overlooked by the reader.

•The information contained in the fine print is often essential for the recipient to know but is "hidden" at first glance.

•Credit cards are notorious for placing hidden fees, interest rates, and payment terms in the fine print of contracts.

•The fine print is often included in a contract as plausible deniability from claims of fraud.

•Understanding the fine print leads to understanding the entire deal as opposed to only reading what is in the primary text of a contract.

Understanding Fine Print

The fine print provides additional and applicable information that is important to understanding the entire contract or information provided. Sometimes the fine print might not be considered attractive, therefore the writers of a contract bury it as opposed to putting it front and center, making it difficult and unclear for an individual to know what they are signing up for.

For example, an individual may sign up for a gym membership and after three months of not using their membership, they decide to cancel the membership to avoid wasting money. When they go to cancel it they are told that their membership is contractual for 12 months, a stipulation that was included in the fine print but not clearly made known to the individual when signing the contract.

Credit card agreements are famous for placing "surprise" fees, interest rates, and payment terms in the fine print of contracts. The information in the fine print may be required by law or may be recommended by a company's legal department.

For example, the fine print on a credit card contract might include important financial information such as the card's introductory annual percentage rate (APR), the APR after the introductory period ends, the length of the introductory period, the APR for balance transfers and cash advances, the card's annual fee, and late payment fees.

As another example, if an investor reads a public company's financial report, the investor might have to read the fine print to learn about the company's accounting methods, long-term debt, employee stock ownership, or pending litigation to get a clearer picture of how the numbers are derived and if they are actually in line with their peers.

Criticism of Fine Print

Fine print is often controversial because of its deceptive nature. The purpose of fine print is to make the reader believe that the offer is better than it might actually be. Although the real terms of the offer are technically available to a reader in the smaller print of the advertisement—thus ensuring plausible deniability from claims of fraud—this smaller print is often designed to be overlooked by the reader.

The unsuspecting reader, distracted by the attractive aspects of the offer, may not bother to read the fine print due to time constraints and/or personal needs. A reader may also assume that the smaller print is less important than the larger print.

Many offers advertised in large print only apply when certain conditions are met; in many cases, these conditions are difficult or nearly impossible to meet.

Many highly regulated sectors, such as banking and financial services, complain of overly regulated mandates that require documents to be laden with legalese. Anyone who has obtained a conventional mortgage knows the weight fine print adds to the loan documents.

Although well-intentioned, the myriad clauses and caveats make transparency and comprehension difficult. Even if a person reads the fine print, the wording might make it difficult to understand, possibly on purpose. It is for this reason individuals should always come up with a list of questions and ask them outright before signing to get a clearer picture of what they are signing up for.

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