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Did complex language cause the Global Financial Crisis?

19 October 2009 – Last week the Information Access Group attended the biennial conference of PLAIN, the Plain Language Association International. There was a fascinating array of information presented, with the most controversial being that one of the main contributors to the Global Financial Crisis was the complex language used in loan contracts.

Several of the presenters suggested that the complex nature of the documents that describe loan terms were a problem for two very different groups – average people who took out mortgages and the bankers and lawyers on Wall Street who traded credit. Both of these groups signed contracts they didn't fully understand and suffered the consequences.

A major problem highlighted by this is that complex language is often used to bury the truth. Several of the presenters at the conference argued that, if the language in the 'fine print' of the disclosure documents had been clear and easy to understand, far fewer people would have signed up for loan products that they could not afford over the long term. And those at the top end of town would also have understood exactly what they were getting into.

Obviously there are other factors that came into play in causing the GFC, including a lack of regulation of the US banking system and, of course, greed. However, we do think it's fair to suggest that complex language made a contribution to the problem. We all know how difficult it is to read – and glean the truth – from the contracts that we enter into, whether they be for credit cards, phone plans, mortgages or, in the case of the GFC, packages of toxic loans.

One of the ironies raised by Christopher Blamford, the President of Clarity International, was that since the crash last year there have been hundreds of attempts in the media to describe how the credit crisis actually occurred – most of them written in plain language!

We have put together some more highlights from the conference, including the revelation that – lo and behold – a rather prominent NSW politician is a plain language advocate! Click here to read more about what Nathan Rees had to say.