The ‘real’ terms of a loan are hidden in fine print

By Jackson Okoth

Dominic Adego, a software developer, working in Nairobi, is a distressed credit card loan defaulter.

After being dazzled by an aggressive sales agent of a leading commercial bank, Adego signed up for a credit card without what he now calls financial counselling.

With a gross salary of Sh120,000 a month, Adego did not bother to read the fine print on the application form before signing for the credit card.

When some Sh50,000 was loaded onto his new credit card, Adego went on a shopping spree, purchasing home theatre and a music system.

When he hit the card limit, Adego used his salary to meet monthly obligations, including rent, a Sacco loan, college fees for his brother and hire purchase payments on his exotic furniture, leaving him with nil balance to service the card debt.

Loan agreement

He claims the card was issued to him, using ‘undue influence’, definitely a difficult ground for defense, when a civil suit against him by the card issuer comes up for hearing.

This is not an isolated case.

For those who bother to read their loan agreements from banks or credit card companies, the disclosure statements are either tough to decipher or understand.

Most are usually densely printed in small point size in the glossy application forms.

If you actually read them, you’d have to puzzle through the stilted legal jargon to discover what you are about to get into and what will happen to you if you default.

The disclosures that banks and other lenders may seem designed to obscure, rather than highlight, the information consumers need to make sound financial decisions.

For instance, there are hidden card fees that usually pop up.

Many borrowers have in the past been dazed by the detail and fine print of their credit card agreements. Even the above average educated person may not understand some of these disclosures.

Although one does not need to be an expert to evaluate a loan offer, the information on the brochures and application form should be clear, conspicuous and concise.

For instance, credit card and loan issuers find brilliant, concise and catchy language to market their products to consumers.

But if a distressed borrower won a suit on the ground of undue influence, this could rattle credit card firms and banks.