Credit Card Agreement Testing Survey FINAL

CONSUMER FINANCIAL PROTECTION BUREAU
INFORMATION COLLECTION REQUEST – SUPPORTING STATEMENT
CREDIT CARD AGREEMENT TESTING SURVEY
(OMB CONTROL NUMBER: 3170-0029)

TERMS OF CLEARANCE: None

EMERGENCY JUSTIFICATION
The Bureau of Consumer Financial Protection (“CFPB”) respectfully requests emergency
processing and approval of the collection of information discussed below because the proposed
information collection is essential to the mission of the agency and the use of normal clearance
procedures is reasonably likely to prevent collection.
The CFPB requests approval to conduct research related to a shortened credit card agreement
Pentagon Federal Credit Union (“Pentagon Federal”) is piloting this fall. The research will result in
recommendations for development of and revisions to the Bureau’s approach to improving the
readability of credit card agreements. The research activities will be conducted by phone surveys of
consumers who will have received the agreements from Pentagon Federal. The feasibility and value of
this approach has been demonstrated by other agencies in developing disclosures and other forms. The
survey will provide illustrative information only. Survey results will not be used to make statisticallyvalid assessments for the purposes of extrapolating to the broader US population.
The planned research activities will be conducted during calendar Q1 2013 and calendar Q2
2013. Pentagon Federal began distributing the test agreement to consumers in October, 2012. The test
agreement will continue being distributed until the requisite number of respondents have agreed to
participate, at which point Pentagon Federal will return to distributing the long-form agreement. As
the survey includes questions that ask a consumer to recall their impression of the cardholder
agreement, the survey must be administered shortly after initial receipt of the agreement, when those
impressions remain fresh. The CFPB thus requests emergency processing and approval of the
following information collection request as the normal clearance process would disrupt the collection.

A. JUSTIFICATION
1. Circumstances Necessitating the Data Collection
One of the first projects undertaken by the Consumer Financial Protection Bureau (CFPB) was to
develop and make publicly available a prototype model shortened and simplified consumer credit card
agreement. While the Truth in Lending Act, 15 U.S.C. 1601 et seq. (“TILA”) provides a set of
formatting requirements that govern credit card agreements, consumer groups and consumer media

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reported that the agreements themselves were too difficult to understand.1
In December 2011, the CFPB publicly announced its initiative to simplify credit card agreements. As
part of this initiative, the CFPB developed a proof-of-concept credit card agreement that was displayed
to the public for comment (www.consumerfinance.gov/credit-cards/knowbeforeyouowe). The CFPB
also announced a partnership with Pentagon Federal Credit Union to launch a pilot of the shortened
agreement with Pentagon Federal customers. Frank Pollack, the CEO of Pentagon Federal, spoke at the
public event and expressed strong support for the initiative.
Pentagon Federal is one of the largest credit unions in the country, with over $15 billion in assets. It
primarily serves active-duty and retired military personnel, as well as civilians employed by defense
agencies. In addition to traditional credit union share accounts, Pentagon Federal has a portfolio of
credit card products that it offers to its members.
Pentagon Federal adapted CFPB’s proof-of-concept agreement to fit one of their credit card offerings.
Pentagon Federal began distributing this simplified short-form agreement for newly opened accounts
and renewed accounts in October, 2012. Pentagon Federal has agreed to survey its members in order
to learn more about the impact of the new credit card agreement. The CFPB has designed the survey
instrument (included as Attachment A), and Pentagon Federal will administer the survey through a
third-party contractor of its choosing.
Pentagon Federal will administer the survey to each of its members that opens or renews a Travel
Rewards American Express credit card during the survey period. One group, the test group, will
receive the shortened agreement. The other group, the control group, will receive the standard credit
card agreement that Pentagon Federal has been using up until this point. Due to operational limitations
at Pentagon Federal’s fulfillment processing provider, the organization can only actively distribute one
agreement at a time. As a result, the test group that receives the treatment (simplified agreement) will
be selected based on the timing of when they apply for the card.
Pentagon Federal is currently sending the short-form test agreement to new and renewing cardholders,
and will continue doing so until 250 customers agree to participate in the survey.2 The control group
will consist of customers who apply for the card in the months following the test; Pentagon Federal
will continue distributing the control agreement until at least until 250 customers agree to participate
The Bureau does not anticipate that the likelihood of participating will differ systematically based on
which agreement the customer received, and participants in each group will be selected and
interviewed at roughly the same interval following their receipt of the agreement.
Pentagon Federal’s survey administrator will contact customers approximately 2 weeks after receipt of
the agreement. Respondents who do not pick up will be called once per week until 4 weeks after
1

See, for instance: Prater, Connie. “U.S. Credit Card Agreements Unreadable to 4 Out of 5 Adults”. CreditCards.com. July
22, 2010. http://www.creditcards.com/credit-card-news/credit-card-agreement-readability-1282.php. (Last accessed July 24,
2012). This article is included as Attachment C.
2
Respondents are counted as having agreed to participate when they answer “Yes” to survey question C1. Any participant
who indicates that they do not recall receiving the agreement and do not intend to activate the credit card will not be
counted as a participant. The survey is included as Attachment A.
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receipt of the agreement, at which point the survey administrator will move on to a new case. The
survey administrator will attempt to contact customers a maximum of 3 times before moving on to the
next case. To increase the likelihood of response, the survey administrator will vary the day of the
week and time of day for each call.
The survey will provide illustrative information only that will allow Pentagon Federal to gather
information about the strengths and weaknesses of both the simplified test agreement as well as their
standard existing agreement. This will inform Pentagon Federal’s decision on whether to expand the
pilot program to other credit card offerings. This survey will not be used to make statistically-valid
assessments for the purposes of extrapolating to a broader population.
This partnership represents a unique opportunity for the CFPB to learn how Pentagon Federal
customers reacted to the short-form agreement. The CFPB has a significant interest in Pentagon
Federal undertaking this survey because it believes the survey may provide suggestive evidence on
whether a short-form credit card agreement can, in certain environments, lead to a demonstrable
impact on consumers. The outcome of this research will help the CFPB decide whether to continue to
dedicate resources to pursuing a short-form credit card agreement.
Customers whose applications for this specific credit card are approved by Pentagon Federal during the
relevant period will have the opportunity to participate in the survey. Pentagon Federal will invite all
such customers to participate, regardless of whether a consumer activates the card. Information
collected is not meant to be, and will not be treated as, a sample that is statistically generalizable to the
overall American population.
2. Use of the Information
The CFPB has created a telephone questionnaire (included as Attachment A) that assesses the extent to
which Pentagon Federal’s customers used short form and long form agreements differently. In order to
determine whether to adapt the short-form agreement being piloted, Pentagon Federal is contracting
with a telephone survey administration service to administer the questionnaire to its customers. A
detailed description of the survey process is included in Section B.2. of this request.
Pentagon Federal will share anonymous, unidentified survey results with the CFPB. At no point will
personally identifiable information (PII) be sent to or accessed by the CFPB. Individuals’ responses
will be shared with the Bureau after all PII fields have been removed and all open-ended narrative
fields have been stripped of PII and any other information that may pose a disclosure risk.
The CFPB will analyze the frequency of various responses for each question asked. Within the openended narrative questions, the CFPB will analyze which sentiments are expressed by Pentagon Federal
customers most frequently. The data will not be treated as generalizable to any population beyond
those Pentagon Federal customers whose applications for this specific credit card were approved
during the data-collection period and who chose to participate in the survey.
Survey results will inform the CFPB’s future efforts to simplify and shorten credit card agreements in
order to improve consumer understanding of key terms. The Bureau may elect to publish a report
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explaining the methodology and aggregated results of the survey.
3. Use of Information Technology
The survey will be administered exclusively by phone. Participation in the survey will be entirely
voluntary and will take approximately 15 minutes on average.
4. Efforts to Identify Duplication
This will be the CFPB’s first attempt to collect the information sought in this survey. There are no
comparable efforts to shorten agreements currently being undertaken within the CFPB. There have
been no similar surveys undertaken by the federal government. In 2010, the CFPB Office of Card and
Payment Markets performed a survey on the CARD Act. There is not significant duplication of
questions asked in that survey.
5. Efforts to Minimize Burdens on Small Entities
Not applicable. The reported results of the survey will have no direct impact on any small entity. The
survey is designed to elicit responses from individuals, not entities.
6. Consequences of Less Frequent Collection and Obstacles to Burden Reduction
If this information is not collected, it will not be possible to assess the perceived utility of Pentagon
Federal’s short form credit card agreement pilot. As a result, the CFPB will not be able to learn from
Pentagon Federal’s pilot shortened credit card agreement when undertaking future efforts to simplify
and shorten credit card agreements.
The frequency of collection is not applicable because the survey is a one-time event and participation
is entirely voluntary. There is no need to collect information from an individual more than once.
7. Circumstances Requiring Special Information Collection
No special circumstances require the collection to be conducted in a manner inconsistent with the
guidelines in 5 CFR 1320.6.
8. Consultation Outside the Agency
The CFPB has worked closely with Pentagon Federal to best understand their customer base and how
to appropriately communicate with their consumers. On Pentagon Federal’s behalf, the CFPB has
authored a phone questionnaire (included as Attachment A). Pentagon Federal will administer the
survey through a contractor, and will shoulder all costs associated with survey implementation.
Pentagon Federal has contracted with Dr. Robert Morgan, a professor at the University of Alabama’s
Culverhouse College of Commerce and Business Administration (curriculum vitae included as
Attachment B). Dr. Morgan will administer the survey through Culverhouse College’s Center for
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Business and Economic Research, which houses a permanent call center for social science research.
Before any surveys are conducted, Dr. Morgan will conduct an orientation for all call center
employees. During this meeting, Dr. Morgan will discuss the project’s context and explain PII control
practices. Upon receiving the survey questionnaire from Pentagon Federal, Dr. Morgan will conduct
mock calls with call center employees to ensure that the estimated time for a cardholder to complete
the survey is accurate.
Dr. Morgan and his staff will then offer each cardholder (as identified by Pentagon Federal) the
opportunity to respond to the survey. After administering the survey, Dr. Morgan will compile the
data, destroy all records containing PII and any other information that may pose a disclosure risk, and
transmit the results to Pentagon Federal and the CFPB. Dr. Morgan and his staff will scrub all openended narrative fields of PII and any other information that may pose a disclosure risk before
transmitting the file to Pentagon Federal and the CFPB.
9. Payments or Gifts to Respondents
No payments or gifts are provided to respondents.
10. Assurances of Confidentiality

At no point will personally identifiable information (PII) be sent to or accessed by the CFPB.
Respondents will be assured that their answers will not be attributed to them individually. The survey
itself will not capture PII. Individuals’ responses will be shared with the Bureau only after all openended narrative fields, in which a respondent may share PII, have been stripped of PII.
The information that Pentagon Federal provides to the CFPB will be subject to the protections of the
Bureau's rules on the disclosure of information and records found in 12 CFR Part 1070 et seq.,
particularly 12 CFR 1070.2(i)(1)(iv) and 1070.41(a), which generally bar the disclosure of confidential
business information of the kind that Pentagon Federal will provide the Bureau.
Through Pentagon Federal’s standard credit card application process, personally identifiable
information (PII) is shared with Pentagon Federal. Pentagon Federal will share certain portions of that
PII with the survey administrator for the sole purpose of contacting potential respondents. At no point
will unnecessary sensitive information (such as account number, credit card number, or social security
number) be shared with the survey administrator.
Each of the cardholder agreements – the standard agreement and the shortened agreement – notifies
consumers that Pentagon Federal may share their data with third party vendors for approved purposes.
This data will be stored on a server dedicated to the University of Alabama’s call center. Shortly
following project completion, the data will be destroyed.
In addition, all information collection activities will be conducted in full compliance with the
requirements of the Privacy Act, 5 U.S.C. § 552a, and all collection instruments will contain a Privacy
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Act statement consistent with the Privacy Act, which will be read to the respondents during the
telephone survey. (See Attachment A).
11. Justification for Sensitive Questions
The survey does not pose any sensitive questions. No demographic information will be collected.
12. Estimated Burden of Information Collection
The full survey will be administered to 500 people whose applications for this specific credit card are
approved by Pentagon Federal and who voluntarily agree to participate in the survey. Based on
Pentagon Federal’s experiences conducting phone surveys of its customers in the past, we estimate that
roughly 1000 people will be called and that 500 will agree to participate. The survey will take
approximately 15 minutes on average to complete; this will be validated by testing the survey before
calling begins.
Process:
Telephone
questionnaire – agree
to participate
Telephone
questionnaire –
decline to participate
TOTAL

Number of
Respondents:

Average Burden Per
Response:

Total Burden Hours:

500

15 minutes

125 hours

500

1 minute

8.3 hours
133.3 hours

13. Estimated Total Annual Cost Burden to Respondents or Recordkeepers
There will be no annualized capital or start-up costs for the respondents to collect and submit this
information. Thus, the total burden will be approximately 133.3 hours, as shown above.
The survey will be conducted only once, so there will be no recurring burden.
14. Estimated Cost to the Federal Government
There are no additional costs to the Federal Government.
15. Program Changes or Adjustments
Not applicable. This is a new collection.
16. Plans for Tabulation, Statistical Analysis, and Publication
The results of this study will be used only to inform the design of future iterations of the simplified
disclosure. No statistical analysis will be conducted, and the results will not be extrapolated beyond the
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survey respondents.
The Bureau may elect to publish a report explaining the methodology and aggregated results of the
survey.
17. Display of Expiration Date
Because the survey will be conducted by phone, the OMB control number and the OMB expiration
date cannot be visibly displayed. The call center employees will be notified of and required to adhere
to the OMB expiration date. The OMB control number will be provided to each respondent during the
call.
18. Exceptions to the Certification Requirement
There are no exceptions to the certification statement in item 19 of Form 83-I.
19. Public Comments Received and Actions Taken
In response to Federal Register notice 77 FR 57560, the CFPB received three comment letters
regarding the proposed survey. A summary of these comments as well as the Bureau’s response is
included below.
Short-form Agreement Purpose
 Comment: The CFPB’s efforts to improve consumer understanding through mandated contract
forms undermines decades of focus by Congress and federal regulatory agencies on disclosure
documents that are separate from the contract between an issuer and a consumer.
o Response: The CFPB is not proposing to make any credit card agreements mandatory.
Pentagon Federal’s survey of its customers is one of several information sources the
Bureau will assess in determining whether to continue dedicating resources to shortform credit card agreements.
Survey Design Comments
 Comment: Given the unique nature of credit union customers, it would be improper to apply the
survey results to other credit card issuers.
o Response: The Bureau acknowledges that this collection is not generalizable beyond the
sample. Results from this survey will not be viewed as representing the experiences or
sentiments of other issuers’ customers.
 Comment: The survey tests consumers’ understanding of key credit card terms, but does not
control for the other channels through which consumers are notified of terms. As a result, the
test cannot lead to a complete view of how the short-form agreement impacts consumer
understanding because it does not evaluate the effectiveness of the agreement against the
effectiveness of existing disclosures, particularly the Schumer box. The survey should be
redesigned to ask questions that can only be answered by someone who has read and
understood the agreement, such as explaining how a grace period works or the process to
dispute a charge.
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o Response: While information gleaned from other sources is not specifically addressed
in the questionnaire, the design of the test controls for the impact of other information
sources. Survey recipients are divided into two groups: the test group (who receive
PenFed’s short-form agreement) and the control group (who receive PenFed’s existing
long-form agreement). Testing processes are identical for both groups; the difference
between groups is which agreement the subject received. As a result, we expect that
meaningful differences between the test populations are attributable to the agreements
themselves rather than external factors.
Comment: Including existing customers in the survey may skew the results. Existing customers
may be more or less likely to read the short-form agreement than new customers. Existing
customers may be less likely to read the short-form agreement as they are already familiar with
the features and benefits of these accounts. Conversely, existing customers who notice the
short-form agreement appears different than their earlier agreement may scrutinize the
document more closely.
o Response: Survey administrators will log whether each respondent is a new or renewing
customer. Pentagon Federal and the Bureau will have the ability to analyze whether
there are differences between the populations. Additionally, as stated throughout the
justification document, this survey will not be treated as generalizable beyond the
population being surveyed.
Comment: The survey does not address the critical question of whether customers feel it is
necessary or useful to understand the entire agreement or whether there are better ways and
times for customers to learn than by reading the contract.
o Response: One of the Bureau’s primary objectives as written in the Dodd-Frank statute
that created the Bureau is to ensure “consumers are provided with timely and
understandable information to make responsible decisions about financial
transactions.”3 This implies that Congress believes it to be crucial that consumers
understand the contractual terms of financial products. We believe that a short-form
Cardholder Agreement may improve the understandability of consumer credit card
products.
Comment: Survey recipients are invited to make several comparisons between a short-form
agreement and other credit card agreements. However, recipients will only have received one
form of the agreement or the other, but not both, making comparisons impossible.
o Response: The survey instrument has been modified to eliminate comparisons across
documents.
Comment: The short-form agreement includes a series of definitions that are hosted on the
internet by reference. The survey should, at a minimum, assess whether customers accessed
these definitions.
o Response: For respondents who receive the short-form agreement, the survey
instrument has been modified to include a section about the definitions document.
Comment: The survey assumes that a consumer’s ability to recall certain information is a
proper proxy for enhanced understanding of an agreement. This assumption should be proven
before the survey proceeds.

See §1021 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203.
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o Response: While it is plausible that recall does not equate to understanding, recall
suggests that a consumer has read their Cardholder Agreement. The Bureau is interested
both in whether a consumer reads and whether a consumer understands their agreement.
As a result, and given that we acknowledge this survey is not generalizable beyond the
responding population, we feel that questions assessing customers’ recall are helpful.
By examining the difference in responses between the control and test groups, the
Bureau and Pentagon Federal may, at the very least, assess whether customers were
more likely to read the short-form or long-form agreement.
Comment: While the CFPB indicates that the survey will be used for qualitative purposes, the
testing size of 500 respondents and the multiple-choice survey questionnaire are formats more
commonly associated with quantitative testing. Actual qualitative testing, on the other hand, is
typically conducted in-person or online, commonly involves sample sizes no larger than 40 and
invites each participant to share his or her views and experiences through more in-depth openended questions.
o Response: As stated throughout the justification document, we believe that the survey’s
results are suggestive and cannot be generalized to any population beyond the
respondents. The word qualitative, which was being used as an acknowledgement of
these limitations, has been removed from the justification document.
Comment: In order to decrease the likelihood of selection bias from disengaged customers, the
multiple choice questions must be presented in a manner that rotates the order of answers.
o Response: To decrease the likelihood of selection bias, survey administrators will be
instructed to vary the order in which multiple choice answers are presented.

Question-Specific Comments
 Comment: The survey refers to and asks questions about the Cardholder Agreement without
clearly defining which document is the Cardholder Agreement. Consumers may confuse the
agreement with numerous other documents they receive upon opening an account.
o Response: Question C.1 in the survey instrument has been modified to ensure that
consumers understand which document the administrator references.
 Comment: Question B.4 (“If you have a problem with your card, what would you do?”). The
examples of potential problems that the survey administrator is prompted to deliver all involve
emergency situations in which the customer is likely to call the issuer for support. As a result,
the survey fails to elicit a complete view of customer experiences.
o Response. The survey instrument has been modified so that the prompt includes nonemergency situations.
 Comment: Question D.1 (“Do you normally read Cardholder Agreements?”). This question
presupposes that the survey respondent has received credit cards prior to this one, but the
customer may be receiving their first card.
o Response: The survey instrument has been modified so that first time cardholders are
identified.
 Comment: Question D.1 (“Do you normally read Cardholder Agreements?”). If consumers
answer that they do not normally read Cardholder Agreements, the survey caller is prompted to
"encourage them to elaborate on their answer." Such open-ended prodding by survey callers
invites the introduction of multiple unintended variables into the survey results, particularly if
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survey callers use their own views or experiences to "encourage" Pentagon Federal customers
to elaborate on their answers.
o Response: We believe that including open-ended questions will allow Pentagon Federal
and the Bureau to collect illustrative though non-generalizable data on users’
perceptions of cardholder agreements.
Comment: Question D.3 (“Do you look for information on your credit card terms from sources
other than the paper Cardholder Agreement?”). This suggests that the question is focusing on a
time other than the time of agreement receipt. However, Question E.1 follows up with a
question asking what information you “were” looking for, suggesting that Questions D.3 was
referring to the time of agreement receipt. The questions that follow D.3 support that
interpretation. Customers will be confused and will answer inconsistently.
o Response: The survey instrument has been modified to clarify that Question D.3 refers
to moments when cardholders encounter problems with their card.
Comment: Question F.1 (“The layout of this agreement makes it easier for me to find and
understand the content of the agreement”). This question does not clarify to what the consumer
should compare his or her agreement. The question may lead consumers to state that the
agreement being tested is easier. Additionally, the question includes two very different
attributes: finding the content of the agreement and understanding the content of the agreement.
o Response: The comparative component of this question has been removed. The question
has been broken into two separate prompts: one that asks respondents about their ability
to find content and another that asks about their perceived understanding of the content.
Comment: Question G.5 (“Does PenFed need to give you a reason for increasing or decreasing
your credit limit?”). This question is not an accurate reflection of the contents of the Cardholder
Agreement. The Cardholder Agreement states “We may increase or decrease your credit limits
at any time and for any reason. There will be no advance notice.” The question, as written,
implies that PenFed is not required to give justifications for these changes, when in fact PenFed
is required to do so in certain circumstances.
o Response: The survey instrument has been modified so that it asks whether PenFed is
required to give the customer advanced notice of a line increase or decrease.

Emergency Clearance
 Comment: The CFPB does not demonstrate that emergency clearance is warranted as the
justification does not prove that the survey is “essential” to the mission of the agency.
o Response: One of the Bureau’s primary objectives as written in the Dodd-Frank statute
that created the Bureau is to ensure “consumers are provided with timely and
understandable information to make responsible decisions about financial
transactions.”4 We believe that investigating whether short-form agreements improve
the understandability of credit card agreements is essential to the mission of our agency.

4

See §1021 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203.
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B. COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
1. Respondent Universe and Selection Methods
Each customer whose application for the Travel Rewards American Express credit card is approved by
Pentagon Federal during the survey period will be called and given the opportunity to participate in the
survey. The survey will run until 500 cardholders (250 who received the existing agreement and 250
who received the shortened pilot) have agreed to participate in the survey. Respondents will consist
solely of individual persons seeking personal credit cards and will not include any commercial or
business card accounts.
Based on experience conducting phone surveys of their membership in the past, Pentagon Federal
anticipates a 50% response rate. To survey 500 of its customers, Pentagon Federal estimates that it will
call 1,000 cardholders, and 500 will decline to participate. Pentagon Federal has found that its
membership is highly responsive to this type of request and that additional measures to encourage a
high-response rate are unnecessary. Correspondence will not be used to boost response rates. During
each call, the survey administrator will offer to call at another time if more convenient for the
respondent.
2. Information Collection Procedures
Upon approving an application for a new Travel Rewards American Express credit card or reissuing an
existing card, Pentagon Federal will mail card origination materials to the customer. In these
materials, the consumer will receive either of the following: 1) Pentagon Federal’s existing, long-form
agreement, or 2) the simplified agreement that has been jointly developed by Pentagon Federal and the
CFPB.
Pentagon Federal will administer the survey to each of its members that opens or renews a Travel
Rewards American Express credit card during the survey period. Due to operational limitations at
Pentagon Federal’s fulfillment processing provider, the organization can only actively distribute one
agreement at a time. As a result, the test group that receives the treatment (simplified agreement) will
be selected based on the timing of when they apply for the card.
Pentagon Federal is currently sending the test agreement to new and renewing cardholders, and will
continue doing so until 250 customers agree to participate in the survey.5 The control group will
consist of customers who apply for the card in the months following the test; Pentagon Federal will
continue distributing the control agreement until at least until 250 customers agree to participate The
Bureau does not anticipate that the likelihood of participating will differ systematically based on which
agreement the customer received, and participants in each group will be selected and interviewed at
roughly the same interval following their receipt of the agreement.

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Respondents are counted as having agreed to participate when they answer “Yes” to survey question C1. Any participant
who indicates that they do not recall receiving the agreement and do not intend to activate the credit card will not be
counted as a respondent. The survey is included as Attachment A.
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Approximately two weeks after receiving the credit card agreement, the customer will receive a
telephone call inviting the customer to participate in a survey. At this point, the customer will have the
option to complete the survey, schedule a call for another time, or decline to participate in the survey.
For customers who agree to participate in the survey, the caller will proceed through the questionnaire
(included as Attachment A).
Pentagon Federal’s survey administrator will contact customers approximately 2 weeks after receipt of
the agreement. Respondents who do not pick up will be called until 4 weeks after receipt of the
agreement, at which point the survey administrator will move on to a new case. The survey
administrator will attempt to contact costumers a maximum of 3 times before moving on to the next
case. To increase the likelihood of response, the survey administrator will vary the day of the week
and time of day for each call.
Once the survey has been completed, the survey administrator will compile the survey responses,
remove all PII and any other information that may pose a disclosure risk, and transmit the data to
Pentagon Federal and the CFPB. As stated above, the survey results are not meant to be, and will not
be treated as, a sample that is statistically generalizable to the overall American population.

3. Methods to Maximize Response Rates and Address Issues of Non-Response
Pentagon Federal has found that its membership is highly responsive to this type of request and that
additional measures to encourage a high-response rate are unnecessary. To ensure that the respondent
is being called at a convenient time, call center employees will offer to call all respondents at another
time.
This test will not be treated as statistically generalizable data. Information gathered will be used only
to inform Pentagon Federal’s commercial uses for its shortened agreement and the CFPB’s future
simplified agreement efforts. The outcome of this research will help the CFPB decide whether to
continue to dedicate resources to pursuing a shorter credit card agreement.
4. Testing of Procedures or Methods
After receiving the questionnaire from Pentagon Federal, Dr. Morgan will run mock surveys with less
than 10 Culverhouse College call center employees who are unfamiliar with the project. During these
mock calls, Dr. Morgan’s team will verify that the survey takes approximately 15 minutes to
administer and that all questions are worded clearly.
5. Contact Information for Statistical Aspects of the Design
Telephone surveys will be conducted by Dr. Robert Morgan, whose contact information is below.
Dr. Robert Morgan
Culverhouse College of Commerce and Business Administration
University of Alabama
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(205) 348-9557
Administrative questions regarding the CFPB use of this clearance should be directed to:
Sean O’Mealia
Card and Payment Markets
Consumer Financial Protection Bureau
(202) 435-7118

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Attachment A
Cardholder Agreement Survey
Phone Questionnaire

Goals of the Survey are to find out:
1) Are consumers likely to the read the agreement?
2) Are consumers likely to understand what they read?
3) Are consumers likely to find the information they receive meaningful and useful?

A. Intro
Hello, my name is [__] and I’m calling from Pentagon Federal Credit Union. Can I speak with
[customer name]?
Hello [customer name], my name is [ ] and I am calling from Pentagon Federal Credit Union. We’re
conducting a survey to learn more about our customers’ use of our Cardholder Agreement. We’re
partnering with the Consumer Financial Protection Bureau to learn how credit card terms can best be
presented to consumers.
This survey is being conducted through the joint efforts of PenFed and the Consumer Financial
Protection Bureau (CFPB). The information that you provide will permit the CFPB to receive
feedback on its efforts to simplify credit card agreements and make them more understandable. As
required by federal law, the Office of Management of Budget has approved these questions under the
Paperwork Reduction Act. The OMB control number for this collection is 3170–XXXX.
Also, a federal law called the Privacy Act directs how the federal government treats the information
contained in your answers to these questions. To understand how and when your information may be
shared, you can read the Privacy Act Statement on the CFPB’s website at
www.consumerfinance.gov. We anticipate this survey taking about 15 minutes of your time.
Is this a convenient time for you?
IF YES: [continue]
IF NO: When would be a good time for me to call back? [record callback date and time, thank and
terminate]
OK, let’s get started. Are you the person responsible for your PenFed Premium Travel Rewards
American Express credit card?
IF YES: [continue]
IF NO: Can I speak with the person that is?
IF YES: Thank you. [Wait for them, reread A and then continue]
IF NO: When would be a good time for me to call back to speak with them? [record callback date
and time, thank and terminate].
14

Before we proceed, I need to make sure I've dialed correctly, is this your phone number [ ]?
We will only share your responses with the CFPB. We will not share your identity with them. The
CFPB’s rules require them to keep any information we share with them confidential to the maximum
extent permitted by law. No sales calls are made as a result of participation. Your participation is
voluntary, and if there are any questions you feel you can't answer, please let me know. Now, if I have
your permission, I'll begin.
B. Experience with Credit Cards
1. How many years ago did you get your first credit card?
2. Would you say that you almost always, sometimes or hardly ever pay the full balance at the end
of the month?
3. Did you comparison shop before choosing to open your PenFed credit card?
4. If you have a problem with your card, what would you do? [Example of problems: adding an
authorized user, card is declined, unknown charge or fee]
a. Call customer service / contact PenFed
b. Consult your cardholder agreement
c. Consult PenFed’s website
d. Seek information elsewhere (internet, financial information sources)
e. Do something else? What?
C. Experience with PenFed Agreement
1. Do you recall receiving the Cardholder Agreement with your PenFed Premium Travel Rewards
American Express credit card?
a. For respondents who received the short-form agreement: The Cardholder Agreement
has the PenFed logo at the top left hand corner of the first page. Underneath that logo,
the first sentence reads “This is your account agreement for your PenFed Premium
Travel Rewards American Express card.”
b. For respondents who received the long-form agreement: The Cardholder Agreement
has a black box across the top of the first page with the following white text “Important:
please read and retain for your records.” The phrase “Cardholder Agreement and
Disclosure Statement” is underneath that box.
i. IF YES: [continue]
ii. IF NO: Have you activated this card?
1. IF YES: [Proceed to D]
2. IF NO: Do you plan to activate this card?
a. If YES:[ Proceed to D]
b. IF NO: [Proceed to Outro]
2. Which of the following best describes your review of the Cardholder Agreement?
a. Didn’t even look at it
b. Saw it but didn’t read it;
c. Looked for specific information;
d. Skimmed it for general information; or
e. Read it in full
15

i. IF a or b: [Proceed to D]
ii. IF c: In minutes, approximately how long do you think you spent reviewing the
Cardholder Agreement? [Proceed to E]
iii. IF d or e: In minutes, approximately how long do you think you spent reviewing
the Cardholder Agreement?
1. What do you recall about the contents of the Cardholder Agreement? Did
any terms or aspects stand out to you? [Proceed to F]
D. Questions for those that didn’t read the agreement
1. Do you normally read Cardholder Agreements? [Do not ask if respondent indicated this is their
first credit card in Section B]
a. IF NO: Why not? [Encourage them to elaborate on their answer]
b. IF YES: Why not this time?
2. If you have a problem with your card, would you
a. Call customer service / contact PenFed
b. Consult your cardholder agreement
c. Consult PenFed’s website
d. Seek information elsewhere (internet, financial information sources)
3. If you have a problem with your card, do you look for information on your credit card terms
from sources other than the paper Cardholder Agreement?
a. IF NO: [Proceed to H]
b. IF YES:
i) Which sources did you use?
ii) Which terms or aspects of your agreement did you consider?
4. Did you keep the agreement?
[Proceed to G]
E. Questions for those looking for specific information
1. What specific information were you looking for?
2. Why did you look for specific information rather than reading the Cardholder Agreement in
full?
3. What do you recall about the other contents of the Cardholder Agreement? Did anything else
stand out to you?
[Proceed to F]
F. Affective Questions
1. The layout of this agreement makes it easy for me to find the content of the agreement.
a. Agree
b. Neither agree nor disagree
c. Disagree
2. The layout of this agreement makes it easy for me to understand the content of the agreement.
a. Agree
b. Neither agree nor disagree
c. Disagree
3. Was there any information that you wished was easier to find?
16

4. Was there any information that you wished was explained better?
5. Did you review the agreement multiple times, or just once?
6. Did you benefit from reading the agreement before using the card?
a. IF the person implies that they got little to no benefit: Did you only read the agreement
because you felt like you “should”?
7. How does this agreement compare to other agreements you have received?
8. When reading the agreement, which best describes how you felt?
a. Confident that I understood the agreement as a whole
b. Comfortable with most of the agreement
c. Confused by most of the agreement
d. Overwhelmed by the agreement as a whole
9. Can you elaborate on why you felt that way?
10. Did you keep the agreement?
G. Questions about the terms of the agreement
Now I’m going to ask you about some of the specific terms of your credit card. It’s ok if you can’t
recall some of the specifics. [Interviewers should not disclose the bracketed information in items 1-6
unless specifically asked by the customer]
1. What is the interest rate on purchases? [9.99% APR]
2. Does the card have a fixed or variable interest rate? [Variable]
3. Does the card have an annual fee? [No]
4. If you don’t pay at least the minimum payment by the due date, what are the consequences?
a. IF they answer: “I get charged a late payment fee” then ask: What is the maximum late
payment fee? [$25]
5. Does PenFed need to give advance notice for increasing or decreasing your credit limit? [No]
[For respondents who received the short-form agreement, proceed to H]
[For respondents who received the long-form agreement, proceed to I]
H. Incorporation of Definitions
In your Cardholder Agreement, several terms are underlined. This signifies that the definition for that
term can be found in a separate definitions document that can be accessed online at PenFed’s website.
I’m going to ask you a few questions about that definitions document.
1. Were you aware of the existence of this separate definitions document prior to being asked this
question?
2. [if Yes]: Do you have Internet access?
a. [IF Yes]: Did you go to PenFed’s website to access the definitions document?
b. [If No]: Did you call PenFed to request a copy of the definitions document?
i. [IF respondent answers 1.a or 1.b Yes, proceed to question H.2]
ii. [IF respondent answers 1.a or 1.b No, proceed to section I]
3. Did you find the definitions easy to understand? Please elaborate on your answer.
I. Outro
On behalf of Pentagon Federal Credit Union, thank you for your time. It’s been a pleasure speaking
17

with you, and I know that PenFed looks forward to serving you in the future. Goodbye.

18

Attachment B
ROBERT M. MORGAN
Manderson Graduate School of Business
College of Commerce and Business Administration
University of Alabama
Tuscaloosa, Alabama 35487-0223

[email protected]
(205) 348-9557

ACADEMIC INTERESTS
Research and Teaching Interests: marketing strategy, relationship marketing, innovation,
global marketing strategy, services marketing, industrial marketing, and supply chain
management.

EDUCATION
Ph.D., Business Administration, Texas Tech University, Lubbock, Texas, 1991.
Major Field: Marketing; Supporting Fields: Law, Political Science, Finance.
Dissertation: "Relationship Commitment and Trust in Marketing"
M.B.A., University of Dallas, Irving, Texas, 1987.
B.S., University of Kansas, Lawrence, Kansas, 1983.
Major: Pharmacy
B.S., Wichita State University, Wichita, Kansas, 1981.
Major: Biology; Minor: Chemistry

TEACHING EXPERIENCE
2004-Present

Professor of Marketing and J. Reese Phifer Faculty Fellow of
Marketing, University of Alabama

1997-2004

Associate Professor of Marketing and J. Reese Phifer Faculty Fellow
of Marketing, University of Alabama

1991-1997

Assistant Professor of Marketing, University of Alabama.

1987-1991

Graduate Instructor, Texas Tech University

1986-1987

Lecturer, Texas Womens’ University,
Graduate School of Physical Therapy

CONSULTING EXPERIENCE
Current and Past Clients: Visa International, AT&T, Citi, Ford Motor Company, Mazda North
America, Regions, AmSouth, BBVA Compass, Shell Oil, Prudential Financial, Pentagon
19

Federal Credit Union, SouthTrust, Carlson Marketing, BASF, Adobe, Radisson Hotels,
Hallmark, American Express, Military Officers Association of America, St. Vincent’s Medical
Center
ADMINISTRATIVE EXPERIENCE
August 2011 – Present

Executive Director, Innovation Initiatives
Culverhouse College of Commerce & Business
Administration

August 2010 – August 2011

Associate Dean, Manderson Graduate School of
Business

August 2005 – August 2010

Head, Department of Management and Marketing

September 2003 - August 2005

Marketing Area Coordinator

PRACTITIONER EXPERIENCE
1987-1991
1984-1987

Clinical Specialist, Methodist Hospital, Lubbock, Texas.
Director, Clinical Pharmacy Services, Presbyterian Hospital of Dallas,
Dallas, Texas.

RESEARCH AND PUBLICATIONS
Refereed Articles
Vivek, Shiri, Sharon E. Beatty, and Robert M. Morgan (2012), “Customer Engagement:
Exploring Customer Relationships Beyond Purchase,” Journal of Marketing Theory
and Practice, 20 (2).
Deitz, George D. and Robert M. Morgan (forthcoming), “A Resource-Advantage Model of Firm
Value Creation,” European Business Review.
Park, Jeong E., Sungho Lee and Robert M. Morgan (2011), “A Negative Side of Outsourcing
Marketing Functions and Market-Based Learning Process,” Journal of Strategic
Marketing, 19 (5), 471-487.
Richey, Glenn R., M. Tokman, G. Deitz, and Robert M. Morgan (2010), “Joint Venture Stability
and Cooperation: Direct, Indirect, and Contingent Effects on Resource
Complementarity and Trust,” Industrial Marketing Management, 39 (5), 862-873.
Hansen, John D., George D. Deitz, and Robert M. Morgan (2010), “Taxonomy of ServiceBased Loyalty Program Members,” Journal of Services Marketing, 24 (4), 271-282.
Crutchfield, Tammy N. and Robert M. Morgan, (2010), “Building Long-Term Patient-Physician
20

Relationships,” Health Marketing Quarterly, 27, 1-29.
Lacey, Russell and Robert M. Morgan, (2009), “Customer Advocacy and the Impact of
B2B Loyalty Programs,” Journal of Business and Industrial Marketing,
24 (1&2), 3-13.
Lacey, Russell and Robert M. Morgan, (2007), “Committed Customers as Strategic
Marketing Resources,” Journal of Relationship Marketing, 6 (2), 51-66.
Lacey, Russell W., Jaebeom Suh, and Robert M. Morgan, (2007), “Differential
Effects of Preferential Treatment Levels on Relational Outcomes,” Journal of
Service Research, 9 (3), 241-256.
Brockman, Beverly K. and Robert M. Morgan, (2006), “The Moderating Effect of
Organizational Cohesiveness in Knowledge Use and New Product
Development,” Journal of the Academy of Marketing Science, 34 (3),
295-308.
Crutchfield, Tammy N., Deborah Spake, Giles D’Souza, and Robert M. Morgan (2003), “Birds
of a Feather Flock Together: Strategic Implications for Advertising Agencies,” Journal
of Advertising Research, 43 (4), 361-373.
Brockman, Beverly K. and Robert M. Morgan (2003), “The Role of Existing Knowledge in New
Product Innovativeness and Performance,” Decision Sciences, 34 (2), 385-419.
Brockman, Beverly K. and Robert M. Morgan (1999), “The Evolution of Managerial Innovations
in Distribution: What Prospects for ECR?” International Journal of Retail and
Distribution Management, 27 (10), 397-408.
Spake, Deborah F., Giles D’Souza, Tammy N. Crutchfield, and Robert M. Morgan (1999),
“Advertising Agency Compensation: An Agency Theory Explanation,” Journal of
Advertising, 28 (3), 53-72.
Morgan, Robert M. and Shelby D. Hunt (1999), “Relationship-Based Competitive Advantage:
The Role of Relationship Marketing in Marketing Strategy,” Journal of Business
Research, 46 (3), 281-290.
Hunt, Shelby D. and Robert M. Morgan (1997), “Resource-Advantage Theory: A Snake
Swallowing Its Tail or a General Theory of Competition?” Journal of Marketing, 61
(October), 74-82.
Hunt, Shelby D. and Robert M. Morgan (1996), “The Resource-Advantage Theory of
Competition: Dynamics, Path Dependencies, and Evolutionary Dimensions,” Journal
of Marketing, 60 (October), 107-114.
Hunt, Shelby D. and Robert M. Morgan (1995), “The Comparative Advantage Theory of
Competition,” Journal of Marketing, 59 (April), 1-15.
* This article was selected for the Harold H. Maynard Award for 1995, chosen
21

by the members of the Journal of Marketing Editorial Review Board “for its
significant contribution to marketing theory and thought.”
* This article was selected for the Sheth Foundation/Journal of Marketing
Award in 2004, which honors “articles that have made long-term contributions
in the field of marketing and marketing theory.”
Morgan, Robert M. and Shelby D. Hunt (1994), "The Commitment-Trust Theory of
Relationship Marketing," Journal of Marketing, 58 (July): 20-38.
* In 2004 this article was identified by ISI Web of Knowledge as the most
frequently cited article in the Economics and Business literatures for the past
decade.
Hunt, Shelby D. and Robert M. Morgan (1994), "Organizational Commitment: One of Many
Commitments or Key Mediating Construct?" Academy of Management Journal,
(December).
Hunt, Shelby D. and Robert M. Morgan (1994), "Relationship Marketing in the Era of Network
Competition," Marketing Management, 3 (1): 19-28.
Book Chapters
Hunt, Shelby D. and Robert M. Morgan (2004), “The Resource-Advantage Theory of
Competition: A Review,” in Review of Marketing Research, Naresh Malhotra, ed.,
Armonk, NY: M. E. Sharpe.
Morgan, Robert M, Tammy N. Crutchfield, and Russell Lacey (2000), “Patronage and Loyalty
Strategies: Understanding the Behavioral and Attitudinal Outcomes of Customer
Retention Programs,” in Relationship Marketing: Gaining Competitive Advantage
Through Customer Satisfaction and Customer Retention, T. Hennig-Thurau and U.
Hansen, eds., Berlin: Springer Verlag.
Morgan, Robert M. (1999), “Relationship Marketing And Marketing Strategy: the Evolution of
Relationship Marketing Strategy Within the Organization,” in Handbook of
Relationship Marketing, J. Sheth and A. Parvatiyar, eds., San Diego: Sage
Publications.
Invited Conference Presentations
Morgan, Robert M, Michael Ehret, Torsten Oltmanns (2008), “The Impact of Culture on
Relationships in Global Marketing Organizations: Academic and Industry Perspectives”
Winter Educators Conference, American Marketing Association, Austin, TX, February
16.
Bagozzi, Richard, Kjell Gronhaug, Robert M. Morgan, and Klaus-Peter Wiedman
(2006), “Is It Time for a General Theory of Marketing?” Summer Educators
Conference, American Marketing Association, Chicago, IL, August 4-7.
22

Hunt, Shelby D. and Robert M. Morgan (2005), “The Comparative Advantage Theory of
Competition: Perspectives,” Winter Educators Conference, American Marketing
Association, San Antonio, TX, February 11-12.
Morgan, Robert M., and R. Shane Sharpe (1999), “Electronic Retailing: The Promising New
Opportunities,” at University of Alabama 1999 Retailing Day, R. Robicheaux, chair,
Tuscaloosa, AL, October 22.
Morgan, Robert M. (1998), “Electronic Commerce and Retailing in the New Millenium,” at 1998
International Conference on Japanese Distribution Strategy, M. R. Czinkota and M.
Kotabe chairs, Honolulu, HI, November 22-24.
Morgan, Robert M. (1996), “Relationships as Resources: Relationship Marketing in Marketing
Strategy,” at 1996 International Conference on Relationship Marketing: Development,
Management, and Enhancement of Relationships, Jagdish N. Sheth and Albrecht
Söllner, eds., Berlin, March 29-31.
TEACHING
Undergraduate Courses
Business of Engineering
Marketing Principles
Marketing Channels
Industrial Marketing
Strategic Marketing
Field Project in Marketing
Principles of Electronic Commerce
Graduate Courses
Global Marketing Strategy
Advanced Market Analysis
Special Topics: Marketing Strategy in a Digital Age
Project Management in Marketing
Interorganizational Relationships in Marketing (Doctoral Seminar)
Marketing Theory (Doctoral Seminar)
Marketing Strategy (Doctoral Seminar)

Doctoral Committees
Committee Chair
Woojung Chang
Mert Tokman
John Hansen
George Deitz
John Park
23

Russell Lacey
Janet Parish
Jaeboem Suh
Beverly Brockman
Tammy Crutchfield
Zachary Finney
Committee Member
Lauren Skinner
Andy Turner
James Coleman
Junki Lee
Darin White
Seungoog Weun
Sean Dwyer
Rusty Henley
Robert Culpepper
Deborah Spake
Nicole Hoffman
Jason Lueg
Betsy Holloway
Foreign Dissertations Reviewed
Meng, Malvin Yeo Wei (2005), “An Experimental Approach Towards the
Investigation of the Process of Trust Formation in an Online
Environment,” unpublished dissertation completed at Monash University,
Clayton, Victoria, Australia.
Lim, Su Kiat (2004), “The Relationship Between Organisational Resources,
Capabilities, Agility, and Organisational Performance,” unpublished
dissertation completed at Monash University, Clayton, Victoria, Australia.

UNIVERSITY SERVICE
University Committee on Instructional Technology, 2011/2012
College of Commerce and Business Administration, MBA Programs Committee, Chair,
2004/2005
College of Commerce and Business Administration, MA/PhD Committee, Chair, 2002/2003
College of Commerce and Business Administration, Computer Advisory Committee,
2003/2004
Department of Management and Marketing, Marketing Area Doctoral Admissions Committee,
Member, 2000 to present.
Department of Management and Marketing, Marketing Area Doctoral Preliminary Examination
24

Committee, Member, 1994 to 1997, chair 1997 to 2000.
Department of Management and Marketing, Marketing Area Doctoral Evaluation Committee,
Member. May 1992 to December 1993..
College of Commerce and Business Administration, Computer Advisory Committee. May
1992 to August 1995.

PROFESSIONAL SERVICE
Journal Editorial Review Activities
Member, Editorial Review Board, Journal of Marketing, August 1996 - July 2002
Member, Editorial Review Board, Journal of the Academy of Marketing Science, 1998 – 2006,
2009 - Present
Ad Hoc reviewer, Journal of Marketing, May 1995 - August 1996
Ad Hoc reviewer, Journal of Marketing Research, May 1995 - present
Ad Hoc reviewer, Academy of Management Journal, May 1995 - present
Ad Hoc reviewer, Journal of the Academy of Marketing Science, May 1995 - 1998
Ad Hoc reviewer, Journal of Strategic Marketing, July 1995 - present

Conference Review Activities
Reviewer, 1997 American Marketing Association Winter Educator’s Conference.
Reviewer, 1996 American Marketing Association Summer Educator’s Conference.
Discussant, 1996 International Conference on Relationship Marketing: Development,
Management, and Enhancement of Relationships, Berlin, March 29-31.
Reviewer, June 1996 Annual Meeting of the Academy of Marketing Science.
Reviewer, 1993, 1994 Annual Meetings of the Southern Marketing Association
Other Professional Activities
Track Co-Chair, Marketing Strategy, 2008 American Marketing Association Summer
Educators’ Conference.
Track Co-Chair, Distribution Channels, 1997 American Marketing Association Summer
25

Educator’s Conference.
Track Chair, Relationship Marketing Theory, 1996 Conference on Relationship Marketing,
Emory University, Atlanta, GA, June 14-17, 1996.
HONORS AND AWARDS
2004

Sheth Foundation/Journal of Marketing Award, honoring articles that have made
long-term contributions in the field of marketing and marketing theory, for “The
Comparative Advantage Theory of Competition,” published in 1995.

2004

Thomas D. Moore Endowed Undergraduate Teaching Award, Culverhouse
College of Commerce and Business Administration, University of Alabama.

2004

Recognized by ISI Web of Science as among the 20 most cited authors in
indexed economics and business journals.

2004

Recognized by ISI Web of Science as co-author of single most cited article in
indexed economics and business journals for the previous decade for “The
Commitment-Trust Theory of Relationship Marketing,” published in the Journal of
Marketing, 1994.

1995

Harold H. Maynard Award for “best article on marketing theory and thought to
appear in the Journal of Marketing during 1995” for “The Comparative-Advantage
Theory of Competition,” with Shelby D. Hunt.

1990

Fellow, American Marketing Association Doctoral Consortium.

PROFESSIONAL MEMBERSHIPS
American Marketing Association
Academy of Marketing Science
Academy of Management
Strategic Management Society

26

Attachment C
U.S. Credit Card Agreements Unreadable to 4 Out of 5 Adults: Contracts Written at a
Reading Level Most Can't Understand6
Connie Prater, July 22, 2010
Credit card agreements are written on average at a 12th grade reading level, making them not
understandable to four out of five adults, according to a CreditCards.com analysis of all the
agreements offered by major card issuers in the United States.
The average American adult reads at a ninth-grade level and readability experts recommend
important information -- such as credit card agreements -- be written at that level. Only one in
five adults reads above a 12th-grade level.
"It is clear from your study that something must be done to make these agreements easier to
read," says Lauren Z. Bowne, staff attorney for Consumers Union, the nonprofit owner of
Consumer Reports magazine.
"Credit card contracts and other such documents are written in dense prose for a reason: So that
the customer will NOT be able to understand it," notes Roy Peter Clark, a national expert on
writing and a senior scholar at the Poynter Institute in St. Petersburg, Fla. "I may be cynical, but
I don't think their writing strategies are accidental, the collateral damage of a bureaucratic
mindset. I think those writers know exactly what they are doing."
Readability poses Catch-22
Bowne points out what has become a Catch-22 for many credit cardholders. Told to read their
agreements, they can't. Financial advisers strongly urge card users to read their credit card
agreements carefully to understand the deal they have with their card issuer. It has become even
more important since a 2009 federal credit card reform law led to multiple changes in terms. In
the new world of credit card use, they say, an informed consumer is better protected against
"gotcha" fine print and surprise penalties.
However, as the CreditCards.com analysis shows, most adults are unlikely to comprehend what
they are reading.
"That's easy to say, but sometimes difficult to do," says Andrew Bernstein, a certified credit
counselor for DebtHelper.com in West Palm Beach, Fla. He gives seminars on reading the small
print of credit card terms. Clients often turn to credit counselors to help them decipher the fine
print. Says Bernstein: "Credit counselors struggle reading it, too."
Researchers analyze more than 1,200 contracts
CreditCards.com hired a team of researchers who, using computer software, downloaded and

6

http://www.creditcards.com/credit-card-news/credit-card-agreement-readability-1282.php
27

analyzed every word of the majority of credit card agreements offered in America. More than
1,200 contracts were included in the analysis.
This became possible for the first time in May 2010, when the agreements were publicly posted
in a new Federal Reserve database; large card issuers were required to give the Fed their
agreements, and the Fed was required to post them online, by the Credit CARD Act of 2009.
CreditCards.com graded every statement using a standard common in the teaching and textbook
industries: the FOG Index. Readability formulas have been widely used by textbook and novel
publishers for decades to ensure they weren't writing above the reading levels of their target
audiences.
FOG stands for "Frequency of Gobbledygook" -- and it gives a numeric grade for any document.
The higher the grade level, the more difficult it is to read.
Gobbledygook? We encountered it frequently.
Can you read this?
The CreditCards.com analysis found:











The average U.S. credit card agreement is written at a 12.37 grade level. Note: Reading
levels do not correspond to the number of years of school a person has received. Some
people with high school diplomas read at the ninth grade level even though they received
12 years of education.
The toughest read: GTE Federal Credit Union's agreement, which required an 18.5
reading level -- the equivalent of someone who has spent more than six years in college.
The wordiest agreement -- for MasterCard and Visa cards issued by Fifth Third Bancorp - contained 20,799 words. It was written on a 14.5 reading level, according to the
analysis. For comparison, the original U.S. Constitution contains only 4,018 words.
William Shakespeare's shortest play, "The Comedy of Errors," has 17,858 words. The
average agreement runs 3,771 words.
The easiest reads, according to the analysis, required only sixth grade reading
proficiency. They included credit card agreements from the University of Illinois
Employees Credit Union, ESL Federal Credit Union and Affinity Federal Credit Union.
The analysis found it's easier for the average American to read a California real estate
purchase agreement or a chapter in the King James Bible than to plow through the
average credit card agreement.
Among the top 20 credit card issuers, those that issue more than 95 percent of all credit
cards in the United States, two divisions of Wells Fargo & Company showed
dramatically different results. The average agreement from Wells Fargo Financial
National Bank required a 15.7 reading level. The larger and more well-known Wells
Fargo Bank NA hit the readability mark: Its agreements had average reading levels of 9.3
-- exactly what readability experts recommend. Wells Fargo announced July 7 it was
merging the smaller banks' operations into the larger one. Expect a rewrite on the more
difficult contracts. "We anticipate that card products, terms and agreements will be
28



further standardized in the near future. We want to help our customers succeed
financially and we understand clear communications are fundamental to achieving that
objective," a spokeswoman said in an e-mailed statement. First National Bank of
Omaha's 15.8 average reading level makes it a virtual tie with Wells Fargo Financial for
the most unreadable contracts among large issuers.
Other large banks, on average, provide easy-to-read agreements: U.S. Bancorp (8.9),
Bank of America (9.0), Barclays Bank Delaware (8.1) Citibank South Dakota, NA (8.2),
American Express Bank, FSB (8.1) and Capital One Bank, NA (7.3). Consumer
advocates say if these banks can produce more understandable agreements, other issuers
can, too.

Deliberate confusion?
Consumers and others accuse the banks of deliberately writing unintelligible agreements to
confuse cardholders.
"I got lost in the first sentence," Ron DeLa Rosa, an attorney in Austin, Texas, says after reading
GTE Federal Credit Union's agreement.
"I'm sure all those legal minds came up with all those words to make things as confusing as
possible for whoever the credit cardholder is 'cause that way when they get sued they'll always
have a way out," DeLa Rosa says, adding: "That's the way attorneys do it."
Bankers deny deliberate deception and defend the densely worded fine print, blaming all the
federal and state laws that require disclosure of terms. "It's unfair to say that these are
deliberately made complicated," countered Nessa Feddis, a spokeswoman for the American
Bankers Association. "They try to make them simple, but there are legal requirements for
disclosures."
A new Consumer Financial Protection Bureau -- signed into law by President Obama on July 21
as part of the 2010 Wall Street reform package -- may offer some relief. Among other things, the
agency will have the power to mandate that credit card contracts be written in plain English so a
majority of Americans can understand them.
"Americans need adequate information about the benefits and costs of complex consumer
financial products such as credit cards to make the personal choices that are best for them,"
Michael Barr, assistant U.S. Treasury Secretary for financial institutions, said in a statement
responding to written questions. "Improving basic financial awareness is also critical to helping
consumers process information and avoid abusive products. These are just some of the reasons
we need to establish a federal bureau of consumer financial protection."
Ohio Attorney General Richard Cordray, who has been an outspoken advocate for more credit
card regulations to protect Ohio residents from abuse, said credit card lenders should make their
agreements more consumer friendly.

29

"While it is true that much of the content for agreements is mandated by federal statute, it is clear
from the breakdown here that some institutions meet the requirements at a reasonable reading
level. All others should do the same," Cordray said in a statement.
When something goes wrong
Credit card agreements contain the fine print of the credit card terms and dictate how millions of
credit cards issued in the United States may be used.
Banks and credit unions mail them when card users first open their accounts or when customers
request copies. They are often put away in a drawer or tossed with the junk mail. Credit
counselors and consumer advocates say the truth is that very few cardholders ever read their
agreements -- until something goes wrong.
"If people don't read these things when they open the account, they sure as hell need to read them
if they have a problem," says John Cogan Jr., executive assistant for policy and program review
and executive counsel to the Rhode Island Health Insurance Commissioner. Rhode Island is one
of a handful of states (including Colorado and Minnesota) that have adopted laws or rules
requiring health insurance policies to be written at seventh, eighth or 10th grade reading levels.
"If you have a problem with your credit card company or your health insurance company, even if
you don't take the time to read it at the outset, you really do need to read it if something happens.
So, if you can't read it then, then you're really in a tough spot."
Erica K. Jackson, director of the Center for Financial & Consumer Outreach at Penn State Erie,
recommends consumers call their card issuers' customer service representative and ask for
explanations of confusing terms or provisions. She acknowledged, however, that customer
service representatives may give conflicting or inaccurate information at times.
"Consumers need to ask questions," Jackson says. "If you don't understand what is included in
your documentation, be proactive, make sure that they call and get the answers that they need."
Content more important than readability?
Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group (PIRG), is
all for readability, but is more concerned about what the contracts say and any "tricks and traps"
contained in them than how they say it.
"What good does being able to read a contract mean if the contract says, 'We win, you lose'?"
Mierzwinski points out.
Linda Sherry, national priorities director for Consumer Action, a San Francisco-based consumer
group, says credit card agreements should be written at the ninth grade level.
She added: "The agreements tell you little about your so-called 'rights' and focus solely on your
responsibilities under the one-sided agreement. Since these are contracts of adhesion, and
consumers can't amend the terms, they are useless in that regard, no matter how simply they are
written.
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"If they can still -- mostly with notice but sometimes without -- change the terms at any time for
any reason, consumers have no power except to vote with their feet, and given the similarity
across the six largest companies, that is not much of a choice."
Banks: Wordy contracts unavoidable
Banking industry spokeswoman Feddis says lengthy, complicated agreements are unavoidable
because credit card companies must obey the laws governing what they must disclose to card
users.
"Information like what happens when your card is lost or stolen, that has to be in the agreement.
The privacy notice took up a third of the space on one contract. There's no choice," says Feddis,
vice president and senior counsel of the American Bankers Association trade group.
"If you're married and living in Wisconsin, you get this disclosure, and if you're in Maryland,
you get another one," Feddis adds. "It's just stuff that has to be in there for legal reasons."
William DuBay, an author and readability consultant whose clients have included the Los
Angeles County Consumer Affairs Department, argues that if consumers can't understand what
they are reading, they can't give informed consent to the terms. Informed consent is a term often
used in the medical field. It means you understand what you are agreeing to and signing.
The two points of view highlight a debate that has developed among attorneys who specialize in
contracts law.
Feddis says there's a limit to how simple the credit card agreements can be. "Then you don't have
a contract -- or you have a contract that can be challenged. Then it goes to an extensive lawsuit."
Says DuBay: "People say you can't get everything in one page. But it's not rocket science. You
just have to find out what's essential. You have to force their hand."
Clearer communications
A few banks took steps to make their credit card terms easier to understand and accessible to
customers. Chase, which had credit card agreements that averaged 12.7 in reading level in the
analysis, introduced its Clear and Simple program in 2007. Bank of America launched a
campaign -- the Credit Card Clarity Commitment -- to make its credit card terms clearer in 2009.
"We listen to our customers and are always looking at ways we can improve our card agreements
to ensure that we're providing customers with clear, easy to understand information," BofA
spokeswoman Betty Riess said in an e-mailed response.
Wells Fargo Bank's ninth grade average reading level was no accident, according to Lisa
Westermann, assistant vice president of public relations.
"The Wells Fargo Bank Credit Card agreements are among the briefest in the industry and are
rated at a ninth grade comprehension level; consistent with the level reading experts recommend.
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We continually work to make our letters as clear as possible using 'customer friendly'
terminology. We began an initiative several years ago to ensure our customer communications
are clear, concise, consistent and customer friendly," according to Westermann.
Leslie E. Linfield, executive director of the Institute for Financial Literacy in Portland, Maine,
and a national authority on adult financial literacy education, says offering plain English credit
card agreements may give one bank a competitive advantage over other issuers.
Linfield says issuers with easy-to-understand terms send the message: "We want to be your
financial institution of choice. We speak in plain English. There's nothing complex. You don't
have to go to graduate school to understand what it means to do business with us."
Too hard for most adult readers
"The average adult in the U.S. reads at the ninth grade level," says DuBay, the readability
consultant who advocates the use of "plain language" when writing for the general public. A
2003 U.S. Department of Education study of adult literacy found that 87 percent of people older
than 16 were rated "less than proficient" at reading lengthy, complex texts. Research based on
the federal literacy survey shows only one in five adults read above the 12th grade level,
according to DuBay.
"Experts advise that anything for the public should be written at the ninth grade level," he says.
"If it's about health and safety, it should be written on the fifth grade level."
He adds: "People can identify a text that's too difficult almost instantaneously ... They're very
good at recognizing it."
As for credit card agreements, "The average reader is not able to read them ... A credit card
contract should not be more than a page long. It should be written in easy-to-read type," DuBay
says.
Fed now requires one-page summary tables
The Federal Reserve took steps to help confused consumers by requiring credit card issuers to
produce a one-page summary table of some of the key terms of their contracts. That requirement
took effect July 1, 2010, as part of a slew of other beefed up disclosure requirements included in
Regulation Z of the Truth in Lending Act.
Now, when consumers get new credit cards, they will also receive a new one-page summary
table of the terms. However, this table is not the credit card agreement. In disputes, the legalesefilled long form governs.
Feddis, from the bankers trade group, says the new summary will help simplify the long
agreements. "They are more likely to read that than they are an agreement even if the agreement
is shortened and simplified," she says.

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Sherry from Consumer Action is skeptical of summary tables that will condense the key terms
into one page. "I am afraid people will focus only on some superficial level stuff and not really
understand all 'traps' that may await them."
This story's FOG index
By the way, congratulations. You have finished reading a story whose FOG readability is 14.3.
Contributing to this report: Researchers Dava Caballero, Chris Friedrich, Avi Ghosh, Emily
Heckroth, Matt Houston, Lisa Jones and Carole W. Thorp. Database analyst John Stansbury and
videographer Angela Grant also contributed.

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