Self-Defeating Marketing

Today I got a “Welcome Guide” from Bank of America because I was until recently a Countrywide customer. Countrywide, like many institutions that are in trouble, was offering some very high CD rates last year before being acquired by Bank of America, so I put money there – below the FDIC limit, of course – just like I put money at IndyMac and Wachovia shortly before they failed. (For people who like to chase high rates, I recommend Bank Deals.)

Anyway, this nicely designed welcome guide had a page titled “Clarity,” with this text:

We’re working to take the guesswork out of home lending with ideas such as our Clarity Commitment. This simple one-page loan summary clearly highlights key terms of each new loan. We’ve made it easy to read and easy to understand. So when you’re ready to buy or refinance, you can be confident that you’re choosing a loan that’s right for you.

Unfortunately, there’s a footnote that say, in very fine print:

This summary is provided as a convenience, does not serve as a substitute for a borrower’s actual loan documents and is not a commitment to lend. Borrowers should become fully informed by reviewing all of the loan and disclosure documentation provided. Not available on all products and programs.

I understand the value of high-level disclosures and the need for detailed contracts. But as a marketing message, this one seems to shoot itself in the foot.

By James Kwak

13 responses to “Self-Defeating Marketing

  1. there must be some law school class about the difference between what’s in a legal document and whats in marketing material and whether gaps between one and the other are misleading or illegal…

  2. BofA is required to include that language to comply with TILA. Aren’t you in law school or something?

  3. I still think it provides value. People who are unwilling (or too naive) to read the whole contract (including fine print) will still be aware of key terms.
    Providing of course the key terms they choose to highlight are indeed those, most likely to apply to any situation.
    What does their Social Responsibility department say about this (surely adding to their carbon footprint, but hopefully better informing some customers)?

  4. You will learn soon that lawyers leave a footnote on much that is written in America…. :-)

  5. Eric Dewey, Portland, Oregon

    Here’s what happened: executive management started to realize that their exposure to claims of unfair and deceptive acts or practices was increasing (sec 5 of the FTC Act) so they decided to create a shortened version of their regulatory disclosures as a feel-good measure that might protect them.

    The Legal/Compliance team made them put in the footnote (after hours of high-level arguments) to ensure that they weren’t just making things worse (which is very likely).

    This is a new tactic used by the banks over the past few years – Capital One, where I was a compliance officer until 2007, did the same basic thing with their credit card disclosures beginning in late 2006.

    And in some ways, it represents a legitimate alternative to the detailed regulatory disclosures that the government requires, and which nobody except compliance people ever read.

    I have no doubt the Countrywide marketing folks puked all over the footnote for days, weeks, or months before finally giving in. Happens all the time.

  6. James Kwak

    Yes. I was just pointing out that as marketing, the footnote killed the desired effect.

  7. What, nothing today on the regulation of derivatives or lack there of…?

  8. That’s interesting. I spent my career in real estate transactional law, and have conducted many hundreds of closings on propery ranging from small unimproved parcels to major apartment projects. I read every document related to borrowing, and came to have a clear understanding of the pitfalls of the process. The largest pitfall is caused by consumer ignorance. The single biggest improvement I would make in the process is to have a mandatory disclosure, not like the famously opaque Truth In Lending statement, but rather in plain english (or a language of choice) which clearly explains the outcome of the borrowing in stark and concise terms. I frequently spent the better part of an hour to assist people in penetrating the opacity of the process. I really wanted the client to understand what they were doing. There were lots of lenders who stopped doing closings with me because of this. If I got a questionable deal in, before closing I would make the loan officer agree to come to closing to explain the deal to his customer in my presence. Most didn’t want to do this. Because they knew that they were ripping off their customer. I am retired now, and haven’t done a residential closing since 2000. I hope things are changing for the better now.

  9. isn’t that misleading in the same way that Nancy Pelosi according to the London Times wouldn’t say the CIA lied to her but mislead her which entitled her to say she never knew …
    I hope that over-leveraged home-owners will be allowed to rescue themselves in the future by reasoning along the same line?

    ” Asked if the CIA had lied, Ms Pelosi replied: “They misled us all the time.”” http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6289213.ece

  10. The foot shot is only triggered when one reads the fine print. A few years into our meltdown and we’d probably still be surprised how few people actually read the fine print.

  11. markwolfinger

    And it’s so expensive to print.
    What is wrong with these people?

  12. Every document should be in terms for the normal human being to understand. We should not need a lawyer to understand a document that we are signing involving any financial burden. Everyone that has gotten a mortgage knows that they can not understand the complicated language unless they know law. This has been intentional for many years. Everytime we have refinanced we are being told by whoever is there what we are suppossed to be signing. The last time this happened to us we found out that our broker straight up lied to us. As a result we are losing our home. Instead of hold us as homeowners responsible, why do they not go after the ones that have deceived all of us. They are making it look like we are the crooked ones because we trusted someone. The truth of the matter is that WE ARE NOT the culprits here. We are the victims. The fraud is rampant and yet there is nothing stopping it.

  13. unfortunately, even if a deal is described in on the face of it “normal” lanuage there is still ample wiggling room for the author to make it seem safe and reasonable (believe me I’ve typed for a “normal” language lawyer who was not a crook). The only way you can get it straight is by offering sample calculations for every possible scenario and make it obligatory for all on the seller’s side to explain those calculations until clearly understood. But who’s going to check up on that? I see possibilities for fraught galore …