Credit union members across the country face both the best and the worst in disclosure statements on their CU credit cards, according to survey of credit card disclosures conducted by a consumer and card media site.
CreditCards.com, a website that specializes in card news and card advertising, analyzed credit card disclosures from 1200 credit card issuers for both readability and understandability. According to its analysis, eight of the 10 least readable credit card disclosures in the country were published by CU card programs. But the analysis also found that all 10 of the most readable credit card disclosures in the country were published by CU card programs.
"The truth is that we had some credit unions in the bottom, some credit unions in the top and a whole lot of credit unions in the very middle," said CreditCards.com's Editor-in-Chief Daniel P. Gray. "But that's because credit unions dominate the credit card market" in terms of the numbers of issuers.
CreditCards.com decided to conduct the analysis after the Credit CARD Act of 2009 required that issuers with more than 10,000 card accounts to submit their credit card disclosures to the Federal Reserve that, in turn, was required to post them. The organization hired six researchers to plan and conduct the project, Gray explained.
"Our goal was to make the point that these things that are so often written badly don't have to be," he said. "And I think we did that."
The CreditCards.com researchers put the disclosures through a pair of software programs that have long been used in the textbook and educational industries to measure the readability of texts. The researchers and the programs scored the disclosures using something called the "frequency of gobbledygook index." The higher a disclosure document's score, the more years of education an average reader would need to be able to read and understand it, the organization said.
The project judged the credit card disclosure published by the $240 million University of Illinois Employees Federal Credit Union, headquartered in Champaign, Ill., with being the most readable in the country with a score of 6. That means someone with a sixth grade education should be able to read and understand the disclosure.
By contrast, CreditCards.com found the disclosure published by the $1.5 billion GTE Federal Credit Union, headquartered in Tampa, Fla., to be the worst in the country with a score of 18.5. That means that someone would need to have six years of college to be able to read and understand the disclosure, the organization said.
The average American reads at a ninth grade level, the site said, and only 20% read at a 12th grade level.
The analysis found that Fifth Third Bancorp published the wordiest credit card disclosure (with a score of 14.5) in the country. It came in at almost 21,000 words.
But while many people recognize the scope of the problem, there is no real consensus on what to do about it. Neither CUNA nor NAFCU would comment for the record about the issue, with CUNA indicating that while certain things have to be disclosed about credit card programs as a matter of law or regulations, the exact way a credit union does that is up to the credit union.
Bill Lehman, vice president of card consulting for Card Services for Credit Unions, said he doesn't consult on the issue because it is not a compliance matter, but he surmised that the more risk-averse a credit union might be, the more likely its card disclosure might be longer and more difficult to read.
"It sort of makes sense that if you have a much larger card program with more offerings and details, the longer and more complicated the disclosures may be," Lehman said, "especially if your credit union is very risk averse and wants to cover every eventuality."
Merry Pateuk, spokesman for PSCU, noted that the issue might be coming up more now because more people are paying attention to it in the wake of the furor over credit card practices in 2009. "I mean, who used to even read these things a few years ago?" Pateuk asked.
Both GTE FCU and the $1.5 billion Langley FCU (judged to have the second least readable card disclosures with a score of 18) said they are currently reviewing their disclosure documents and expect to have them rewritten soon. But both stressed that the lack of readability in their disclosures does not mean that their programs were in any way bad for their members.
"We realize that there is an idea out there that the reason these things are hard to read must be because we are trying to hide something," said Brett Noll, senior vice president at Langley. "But that is absolutely not the case. We have a great credit card for our members and they love it. We don't have any of the gotcha things or tricks or bad fees that you read about."
University of Illinois Employees CU, the credit union with the most readable card disclosure, isn't sure that it would still hold the title today.
"If I am not mistaken, we submitted that disclosure to the Fed in like December of 2009," said Greg Anderson, chief operating officer for the credit union. "Since then, we revamped the disclosure to comply with the CARD Act."
Anderson said the credit union had not consciously set out to write a readable card disclosure but had been motivated by a desire to be forthright about its card offering.
"That was pretty much our attitude. We have a good, clear card for our members and I guess we wanted to reflect that."