Citibank’s New Credit Card Agreement: My Review

Via reader Raif Palmer, I learned that Citibank has rolled out a new form of credit card agreement, one that features, according to the cover note to Raif, “A new, clean design with simple language.”

Consumer contracts are different from business contracts. Generally I don’t do consumer contracts, but I couldn’t resist having a look at the new card agreement. You can, too—it’s here. Below are my comments on the card agreement itself. (I ignored the first page, the “Card Agreement Guide.”) I mostly limited my comments to how the card agreement says what it says; I didn’t consider what it says.

I’m sure this version is an improvement over what came before, but it leaves a lot to be desired. It’s as if they went halfway and stopped.

Whenever I do this sort of critique, my first instinct is to contact someone at the company: I aim to generate discussion, not pillory anyone. So I sent messages to Citibank through different channels, but I didn’t hear back from anyone.

There’s no reason why Citibank or its customers should have to tolerate mediocre work. With a project like this, the economies of scale are such that Citibank should have gotten it right. But despite all the blather about Excellence one hears from corporate America, I suspect that often quality is just one of many considerations taken into account.

And now, on to my comments:

Definitions

After the title, the card agreement begins as follows:

This Card Agreement (Agreement) is your contract with us.

Why give “Card Agreement” initial capitals? It’s just a reference to a thing and as shouldn’t take initial capitals. And why give it a defined term? (For more on this, see this blog post.) I know Citibank is simply doing it the way it’s been done since the time of the Ancient Ones, but I thought the whole point of this new, spiffy card agreement was to eliminate the BS legalese.

But a bigger issue is the definition section. Never mind that for business contracts I recommend putting the definition section toward the back, as it’s a bad idea to begin the body of the contract with perhaps the least compelling part of the contract. In this contract, I’d eliminate these defined terms entirely! This is a consumer contract, people!

Do you really need the defined term “Card”? Do you think the reader won’t know what’s going on if you just say “your card”? Same with “Account”. Same with “Purchase”. Also, there’s the tautology involved in using “your” with each of those defined terms and having “your” built into the definition.

For the other defined terms, I’d explain the concept in the text and leave it at that (except I’d make it clear who we, us, our, you, and your refer to). It’s not complicated stuff. For example, the current version manages without the defined term “Late Payment” in the following extract: ” If you don’t pay your New Balance, including any Balance Transfers, in full by the payment due date in a Billing Period …”

And there’s this: “Include and including – These terms mean ‘include [or including] without limitation.’” That should be omitted for three reasons: First, it will cause most cardholders to scratch their heads. Second, courts are willing to ignore it. And third, it would make more sense to focus attention on using includes and including in a way that doesn’t create confusion. (For more on this, see these three posts. But they don’t tell the full story, so I expect to tackle it again soon in a new article.)

And at least one definition is “stuffed.” The definition of “Late Payment” is “A payment is late if you don’t pay at least an amount equal to the Minimum Payment Due minus any Overlimit Amount by the payment due date.” That combines when a payment has to be made and how much has to be paid.

In terms of consistency, this contract uses four different conventions for stating integrated definitions:

• The Facts about Interest and Fees document (Fact Sheet) is part of this Agreement. [bold]
• This arbitration provision is governed by the Federal Arbitration Act (FAA) [no bold]
• a previous related Account or our relationship (called “Claims”) [use of called; quotation marks]
• by the American Arbitration Association (“AAA”) according to this arbitration provision [no bold; quotation marks]

This contract use both integrated and autonomous definitions to create defined terms, appropriately enough, but it also uses a third technique, as in  “Then we add to the U.S. Prime Rate a certain percentage amount, which we call the Margin.” And a fourth technique, as in “Your ‘Minimum Payment Due’ equals: …” That’s unhelpful.

Verb Structures

To express obligation, this contract uses you must (as in, “You must pay us for all amounts due on your Account”), you agree to (as in, “You agree to give us certain personal information about each Authorized User”), you have to (as in, “You have to pay us for any damages and/or expenses resulting from that use”), and we’ll (as in, “We’ll let you know if we agree or disagree with you.”).

To express prohibition, it uses you aren’t permitted to (as in, “You aren’t permitted to use your Account for unlawful Transactions”), you may not (as in, “You may not sell, assign or transfer your Account or any of your obligations under this Agreement”), and you cannot (as in, “We cannot try to collect the amount in question, or report you as delinquent on that amount”).

To express discretion, it uses you may (as in, “We may authorize Transactions that cause your balance to exceed your credit limit”), we have the right to (as in, “We have the right to charge you a late fee”), we can (as in, “This means that we can change rates and fees that apply to your Account.”), and you allow us to (as in, ” You allow us to discuss your Account with an Authorized User”).

Randomly using different verb structures to convey the same meaning is a feature of traditional contract drafting. There’s no excuse for inflicting this sort of chaos on the new card agreement.

Here’s some more verb-structure confusion:

This contract expresses as cardholder discretion (“You can ask us to add one or more Authorized Users to your Account”) what should be Citibank’s obligation (If you ask us, we will add one or more Authorized Users to your Account).

It expresses as Citibank discretion (“We may require immediate payment of your total Account balance”) what makes more sense as a cardholder obligation (At our request, you must immediately pay your total Account balance).

There’s some “throat clearing”:

You also agree that an Authorized User may use and receive information about the Account the same way you do.

The “You also agree that” part is redundant: we already know that the cardholder is agreeing to what’s in the contract! That’s the whole point of a contract.

And this contract repeatedly use may to express possibility, as in “Apps that use your Card to make Transactions may have separate terms of use.” Except when it uses the better option, might (“When this happens, you might not be able to use your Card or obtain information about your Account”).

Arbitration

Dumped in the middle of a contract that’s meant to use simple language is an un-simple arbitration provision. It comes from another source; note how all 14 instances of shall in this contract appear in the arbitration provision. (I’m all for disciplined use of shall in business contracts, but it’s best not to use shall in consumer contracts.)

This arbitration provision is used in credit cards other than Citibank’s credit cards, so it might be that Citibank isn’t able to change it. But no one should be under the illusion that it’s quality contract language. To get an idea of the sort of changes I’d make, go here to see my article about the American Arbitration Association’s standard arbitration clause.

Numbers

For number ten and less, the credit card agreement can’t decide whether to use words (“the U.S. Prime Rate from The Wall Street Journal (WSJ) two Business Days before the last day of each Billing Period”) or digits (“When we receive your letter, we must do 2 things”).

Miscellaneous Usages

The card agreement features the following suboptimal usages:

• (s) (as in, “the balance(s) of our choice”)
• third party
• the slash or “virgule” (as in “cellular/wireless”)

Verbosity

In “You may not sell, assign or transfer your Account or any of your obligations under this Agreement,” do we really need sell, assign, and transfer?

And in “Federal law and the law of South Dakota govern the terms and enforcement of this Agreement,” do we really need “the terms and enforcement of this Agreement” instead of just “this agreement”?

Boilerplate

The following is included in the boilerplate:

Headings. The headings in this Agreement are included as a matter of convenience and don’t define, limit or enlarge the scope of this Agreement or any of its provisions.

This internal principle of interpretation is included in contracts in case sloppy drafting results in a section having a heading that’s inconsistent with the text of that section. We don’t even have to get to the question of whether courts pay attention to it: the more basic question is why Citibank is worried about this problem occurring in a basic template on which it has presumably lavished attention.

And there you have it.