Read Financial Documents Before Signing

in Opinion, Parable, Rant

Sure I Read It (maybe)

Most financial documentation is treated the same way as the Bible, in that most people claim to have read it, but few really have done so (and even fewer can remember the contents (and still more misinterpret the contents), of those who have claimed to have read it). This is what the financial industry is hoping you will do, so it is in your own best interest to read all documentation over carefully, to at least understand the financial “jist” of the document.

What do I mean by financial “Jist”?

  • Is this a “cover my ass” document from the financial institution so that you cannot sue them later? Most equities/mutual fund/etc., documents are this type of document. The company has lawyers who are trying to get you to absolve the company of any guilt if you lose your family fortune. I have no doubt Bernie M. may have had the exact same documents that folks signed without asking first what they meant.
  • Hope you read the fine print, because you just stepped into a financial leg hold trap, document. These are more insidious documents, in that whoever is trying to get you to sign it is attempting to trap you into terms that are beneficial to them, but not to you. These happen more than you think, so it is important to make sure that what you are being told verbally, matches what you are signing.

The cover my ass document seems to be appearing everywhere, as more interesting litigations appear, and while very annoying, are not as disturbing as the financial leg hold trap documents.

Leghold trap

That is gonna hurt!

Who might have a financial leg hold trap document?

  • A lender who is telling you one set of terms verbally, but putting in writing a different set of numbers, or worse, not telling you about penalty clauses that can be invoked, if you attempt to break the loan agreement. What are the costs of breaking your Mortgage or Loan? Can you answer that question? If not, you had best go find out, you might be unpleasantly surprised by your agreement
  • Car leasing agreements that have many extra penalty clauses, or return fees that they may not mention (and you’d only find out about if you read lease agreement closely). Saying, “You never told me that”, isn’t going to make those charges go away.
  • Warranty agreements that state that the vendor has a right to refuse warranty work, with no excuse. This one I have heard of, and you really do need to read what warranty and return policies are when you buy things. If you haven’t read the warranty statement closely you might be left out in the cold.

If you are really unsure of the contents of a document, simply don’t sign it until you are confident you know what its contents actually mean. Claiming ignorance later is not really a great defense, and if this is something financially important to you maybe you need a lawyer or at least a trusted friend look it over.

In this instance reading is believing (and understanding, hopefully).

My motivation for this article was from two sources:

  • One of my favorite sites is Hanzi Smatter which is dedicated to the misuse of Chinese Characters in Western Culture, where you will find countless examples of folks who have had Chinese character tattoos put on them using the Chinese Gibberish font. If folks don’t check what is being etched onto their body for the rest of their lives, when should they check the validity of a set of characters?
  • A work associate who seems to have been caught in a Mortgage Bear Trap, where if they wish to break their Mortgage agreement they must pay a penalty equal to all interest charges throughout the life of their mortgage contract (not the standard three month, 6 month or remainder of agreement penalty). Yikes!

{ 4 comments }

  • Sandy @ yesiamcheap January 11, 2011, 6:36 PM

    Re: coworker and the mortgage thing, is that even enforceable? Is it legal? He needs to consult and attorney.

    Reply
    • bigcajunman January 11, 2011, 6:42 PM

      They signed it, so if it is in the document, they agreed to it, not sure how there is any legal way out (except for maybe a Usury charge).

      Reply
  • Eric Blood Axe January 11, 2011, 6:18 PM

    If you were to spell “Jist”, gist you wouldn’t need inverted commas.

    Reply

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