July 2, 2011


What's hidden between the fineprint? (click to enlarge)
It's the damage that we do and never know. It's the words that we don't say that scare me so. 
— Elvis Costello, Accidents Will Happen

Fine print is nasty and too common. And sometimes comical. Who realized that steaming coffee might be hot? Thanks for the tip. Want more? Here are 11 funny fine print warnings.

There's something worse than fine print: what's left out altogether. At least fine print makes the limitations clear. With white space, the onus is on you to
  1. know what's normally included (e.g., spare tire with your new car)
  2. notice what's missing (e.g., spare tire)
  3. understand the impact (e.g., inflating/sealing canister instead of a spare tire)
For example, I got Zoom Q3HD video camera, which uses AA batteries. Batteries are normally included. They were this time but of low quality. This was okay because AA batteries are readily available and we've got lots. Guess what was missing? An AC adapter. The impact is high battery consumption even when you're near electricity. I bought an accessory kit with an adapter, tripod and case. (I was surprised that the case was not included.)

Examples Of White Space

We just survived a week without a dial tone. Vonage would have worked throughout since our cable Internet was unaffected. Their "unlimited" plan is capped at 3,000 minutes a month. That's far from the 43,200 minutes in a 30 day month but you know the limit at the outset.

In contrast, my "unlimited" mobile data plan appears to have penalties above 5 GB. I can't get a clear answer to what would happen. They don't want to define "unlimited". Here you may not notice the constraints until you exceed them.

Data roaming plans can be very expensive outside your country but you probably don't know how much you might pay.

Bad Example

Life insurance contracts run dozens of pages in length. They're written in legalese. You may infer what the salesperson implies ... but try proving that if there's a misunderstanding.

Recently, Sally (not her real name) took a policy loan. She used the cash value of her policy as collateral to borrow from the insurance company. She didn't want to pay tax on the amount loaned. She asked her salesman the maximum she could borrow. He told her $24,000. That's what she borrowed and repaid over two years.

She also got the tax bill she specifically asked to avoid.
What Happened
Insurance premiums in Canada cover the protection you're receiving and the excess provides tax sheltered growth. Withdrawals or loans above this Adjusted Cost Basis are taxable. This policy had a gain of $14,000 that was taxed at 46.4% here in Ontario.

How did this happen? The salesman was self-serving. He found out how much Sally could borrow without her policy lapsing (and his compensation ending). That's a very different objective than finding out how much she could borrow tax-free. The salesman now has one less client to worry about.
Sally was not given a clear explanation of the tax implications of borrowing. Calling the insurance company's head office didn't help. They score low in corporate governance and did little more than refer her back to the salesman who caused the problems. This is another example of why after-sales service stinks.

Despite her pre-planning, Sally's reward is a tax bill of $6,400. She could have easily borrowed from a line of credit at a similar loan rate and paid no tax.


Podcast 124 (5:39)

direct download | Internet Archive page | iTunes

PS If fine print baffles or bores you, look for someone who's good at seeing the invisible. Or search online.

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