The Importance of Good Paperwork.

Felix Salmon does yeoman's work figuring out what the hell his bank is trying to tell him:

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So in a fit of masochistic perversity, I decided to do what I was told, and call Customer Service to ask them what on earth this notice meant. It took a while to get a human, of course: I had to type in my social security number, and then my PIN, and then my ATM card number, and then another PIN, which was apparently wrong, and then my mother’s maiden name, and then the last four digits of the social security number I typed in at the beginning. At which point I was told that “at this time we are experiencing heavy call volume” (it was 11pm), before Ricky answered the phone and asked for my ATM card number (again), and my date of birth, and the last four digits of my social security number (for the third time), and for the date of letter. Then, finally, he put me on hold.

Eventually, Ricky came back to tell me that he was talking to his colleague but that he’d worked out that “you have a change in the rate that the account is set at”. He went away again, came back, said “All right sir, you still with me?” — and then we were disconnected, 16 minutes into the call.

I'm impressed that Felix had the sangfroid to document this experience; I usually lose my temper about halfway through any kind of customer-service phone tree. (Notable exception? The IRS has excellent customer service.)

But Felix's experience does get to the heart of criticism from consumer finance reformers: This is no way to run a market. If your customers do not understand products, they cannot differentiate between them, and there is no effective competition; moreover, this attitude toward communicating with customers invites abuse, which we've seen in battles over penalty fees and unannounced interest-rate hikes.

There are several ways to change this dynamic. Felix mentions BankSimple, a project to make banking both friendly and effective that I've been following with excitement since its inception earlier this year. But this problem also demands a broader solution, and that's where better regulation comes in -- starting with the Consumer Financial Protection Bureau's project to write a better model mortgage agreement, and moving into the full range of consumer credit disclosure improvements.

-- Tim Fernholz

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