CONGRESSIONAL RECBR13 -SENATE

h4r Presldent t h e r e iilell

ussion in t h e (711am-

t ~ n ~ n t p i o v i d i n ~ t o

e Cr- rniilg rnrl 4 lnical assisrnnce t h e ijird for 3220 000 $or the Ionding plat- Zorrs

I ndclitiulial rmount erhaps S230000 I r aked tl~rougll I s tack issue Fairmic- iboard of ciirectors vants to ell a i-)nj~r-i - I tc eom] anc s s txk ) residents off

[bid 5 16 a t 6

menbcrs of t h e i n t e l l ec tua l h e h a ~ R J a n d of t h e 13

p r a c t i t i o n e r of th more than mere15 he h a s t h r o u g h s o u g h t to m a k e t and more effectiv i s t r a t i o n of j u s t i c

LIIWftlJJCIE ICgtlJRNAI SUPTOiS I-I0LrSI3 TFCUTII-IT$-1IKNDPNCi IjILL

MY 17~Ci)iDliHE 1111 Pricii~intrc-gtCI)~-lt iiii L~Ii~~~liei~ ~ ~ ~ l l i s t ~ ( d J n r ~ r ~ ~ a l I irifo~i~l ~ gt I I ~ ( I S ~ I I t~ i L i ~ c ~ ~ ~ L l ~ ( i ~ ~ ~ ~ i I -Iil(di~i I I~II 11scci ~ICIII+IPi-i k ) ~ ti(

J Ijir8t~talim 1 1 o r s1gt-I L I ~ ~ VKCC i i r ~ ~ i i a ~ Illr ~~~jtlmei~L c f 1 I t111tl-1-in-Ic~~tiinfbil n l ~ i c h r e - rit c ~ i f ri froiz ttachin 11 ( 11 iar L O ]~c l c l n t o i n lclor) 11cc~kly i a l a r g I-I cxcrc ol SSO Ille rciito~iel ~~ l i i t s oui lixL i l ilt x~~ ~ i ~ ~ i s i o ~ ~ sbe (11pa1tic-iac~ilcl II ~ I I ~ I Vico~i~ vlle~e c)editors (In lriln t h o a r ~ i i s h m c n t ~ ~ ( 1 1before ) j~~c~cltin c o ~ i r l is cl~tai lrd

M r F~cicitt J ask u n u ~ i ~ ~ n u scon-sel t t l~at t h e ed i to r i a l be l~rint eci i n the IErco~ltn

T l l c r e iidnj ob iec ( ion i~e t l i f o i i a l a o i dewd t o be ~l i l tecl in t h c RE(O~II as fallows

COXI~UMEP 1Rorec~rlriCnrmT Ilo~lst ]jnasaqe 01- L Iougl~ Lru1h 111 I c l~d -

ills ljil l n o~nctlliil of iwr-~i~ligt~ii t I

rollsl i r i a rn ] ) ]~ far Ite]) Ieolltr S~~ l I rn l l (D-hZo ho hns io~lglit t h e g)orl fiht for legislation t o lct t he of ten h~lled ccJlisurnrr k n o n pprzril~~trly vhit haroving ilJ roii in) Tt carried by a n u~erwhrln in~ UZ t o 4 rote

This ersioii is consldrral~lv 111crc rrrcpiny gtIn z1 -1~plsse callicr by t 1 ~ Pcn~lc [ov lht rhoc rlnttr~r Goes t o cnic~recc cnln- t i tw

Llit tile sc1lltc lh( house vti11lrt rcciirc 111li i 11~ crcclit liscr bc lolcl ti rtintc ic io1Xl 1l~llcc cllarge In tlollnrs nrl lie tp-~ ~ l c j ~ i l l l ~ l ~~111111~1 iIlLircst rate ( ~ 1 1 I-liiiig Ialuncc TTlllirc Ihc cuxte loacvcr h r ~c~c rnurl rec1uire reailcr 1111 ts ~It~)rt~ll~rllt to hcxir ilt(rezL snrc Late c h ~ r ~ c rl fint ~ I I I I T I I ~ - - - - I I I ~ ]~1r~~i11y--r ~~l~ rvolrinr ciire ccol~nts Tlir IIIIII ~lso iliorl~t~tt911 I sennte cxnnipi~n in tiis-lilhl13 vleli i i ~ e credit cl1lrge is ss tlian $10

10 c-~l) things n tllc l ~ o u s e tlcte o n n ~rc~vihiollto strict t~c soinciil~c~scr[tel cir~igtlniclt o peoples vraRes b y rr~clittrs Cnly 1 G parzrnt of L debtol nrtts thovr 3 0 I reek col~lcl bc attachccl E~lioycr c~ould le Imrred rrom firing workers t h e irst 1 nllc a ~ ~ r n i s h n i c n tis iilcct ngriiiirjt I hinl li1tsc provisions 12e cC signilirnntw n ~ ~ l d value il IViscorslll where esising l ia cx - enl)tl only n pittlrlce cf n garlisi~ees carll- i11gs i111d olTers lo protection ngninrit (is-111iisnls Fcdernl action lowever would not iltcr tile odious fact t h a t Lrlrconsin g c r n ~ l t s ages to be garnished even before a judg-rnent is obtained in court

Thc tougher house version is glLzen a fair chance o f success i l i conference For t h e sake of consumers In t b e $100 nl i l l io~l con- sumer finance jungle I t deserves sllcccss

COTVGRESSIONAL RECORD -SEN1 March 1 1gss USDA HALTS PU CHASESCHEESE

CE$ DROP

e renewed at- s to use dairy t in the food-

famous Tonkin g debated on the joint resolution

voted against a was used to justi-

of the war in Viet-

STATESMANSHIP BY INDUSTRIAL BANKERS ASSOCIATION ON TRUT1-I IN LENDING Mr PROXMIRE Mr President one

of the jobs of Washington trade associ- ations is to inform Members of Congress of the views of the pertinent industry concerning legislative iss~es However trade associations also lave another im- portant job and that is to inform the industry of the views of Congress In other words co~mmunications is a two-way street

In this connection I was delighted to encounter an excellent editorial written by Mr Max A Uenney of the American Industrial Bankers Associstion This as- sociation has over the years consistently opposed the truth-in-lending bill How- ever now that the bill appears to be reaching its Anal enactment Mr Den- ney is advising the members of the In- dustrial Bankers Associatioil to acceptreality and to recognize the heightened awareness which Congress has for con- sumer protection issues

Mr President I ask unanimous con- sent that the editorial be printed in the RECORD

There being no objection the editorial

creciit And the Ailance business is a very part of the consumer crsdtt industry

In all probability a so-called truth-111 lending bill of some type will be p~ssed Ijr-lore Congress adjourns for the Presidential Colvention Frt August and from that day for-ward we v~Fll be under federal control

Tile b ~ s l c premise of this type of legislo- tion is that the consumer has not been S I I I ~ informed on the cost of credit because it 1 1 ~ ~ sol been disclosed to him as simple annual interest Therefore in order for the consurrler to understand and be able to rnRke L u choice in his m e of credit i t is essentiu t h 3 ~ all credit transactiorls disclose tAe cost thrre-of in percentages Many Of those who l ~ a ~ ~dvocated this lcgislnticn have atternpt~~ to play upon the emotiol~ of their listcl~crs

One declslon the finance i ~ d u s t r y wtl ll( to mnlre in this connectlo11 is how it is goi11g to adjust its operations llow and In l i ~ e f ~ -

Lure to this 1egislction In addltio~l i t 111~s

ctart preparing tself for rnore regulations from the federz~l level as this is orllp tile first move from Washington towrird ccnnl)l(si5 cortrol We must look a t the future in tllis respect from a purely abstract stnndpoi~~

The secoilci hig decisiorl which will II a tremend01~ affect on the future of r1c I)-

tire collsumer credit industrv in I s pllnses is one that vill he made 1y tllo x1-

tionill Ccnferencc of Comlllissioners 011 ~ 1 -

form State Laws when i t presents t) tilc n-du-try in August 1968 its Anal draft ct a Unifcrm Consumer Credit Code

The draft as i t now reads declares that r KO

of its underlying purposes are to slni~)lli clarify and modernize the law governing I

tail instalment sales consumer credit snill loans 2nd usury and to further consurlier understanding of the terms on credit traus- actions Whether this will be the final result remains to be seen But the decision the fi-nance industry has to make is whether cr not it 1s going to get behind and support tlis new far-reaching Uniform Code when I t comes before the various state legislatures

In order to assist our members in arriving a t these decisions we have included in tlls issue of the Industrial Banker articles srlt-ten for the speciflc purpose of explaining tile history background and theories behlrlcl both the truth-in-lending legislation 2nd the Uniform Consumer Credit Code I t is our hope these articles will be helpful

One important thing to keep in mind In connection with the proposed Code and lcgls- lation is tha t there is a very close relation- ship between the two Both of these activitieswas ordered to be printed in the RECORD are the result of the tremendous push onas follows

Not too long ago when I was in the full- time practice of law I sat in the court room after having taken part in ti bitterly con-tested law sult and heard the judge say as he was about to render a declslon in the case The hour of declslon is a lonely one This need not necessarily be so if one does not become involved in the emotional dis- turbances that sometimes accompany the necessity of maklng a declslon

In the business world hardly a day passes without an executive being called upon to make one or more decisions which may af- fect the future of his business What he tries to do is to analyze all the facts weigh the alternatives then determine what is best for everyone concerned-without becoming emotionally involved

This gear 1968 may well be called the Year of Decision for the finance industry Two very important matters are coming up this gear that can and no doubt will affect the future of this industry for many years to come The first is tlle decision Congress is about to make on federal regulation of the consumer credit industry If Congress passes either the Proxmlre Bill (S 5) or the Sullivan Bill (HR 11601) or a combina-tion of both the federal government will soon start regulating and issuing rules per- taining to tine operation of all consumer

the part of some people during the past sev-eral years to create a Consumer Protection- ist Movement throughout the country A11 business is being affected by this movement A decision on the part of our industry regard- lng these two actlvlties is not going to be easy but i t will be necessary

An individual who has been closely ccn- nected with this industrys legislative prob- lems for many years was discussing recently the situation the flnance industry finds itself in today and commented I dont mind evolution but I sure dont like revolution

Well like i t or not agree with it or not a change is taking place in the manner in which the finance business and consumer credit will be conducted in the future Very few people like change but often in look- ing back on some big change one wonders why it had not been made earller And wheth- er the decision you as a member of this in- dustry have to make is a lonely one or not you are going to have to decide and decide soon where we go from here

As ycu consider these matters in reaching your dectslon may I suggest you keep In mlnd these very wise words Grant me the strength to accept the things I cannot change the courage to change the things I can and the wisdom to tell the difference

hlAx A DEMNEY Ezecutive vfce President

5388

oubled since

The federal governme

lower on import

re really neces-es it do any good

for the people of t ted States who sup-

s being taken by his

cummunlsm

EXTENSIONS OF REMARKS March 5 1968 tion by a vlsitlng were not They were trlbuk to a young names who volunt

never saw such wi A few years ago

was beaten up by

Ithe pollee nswell growlng awarenees

that if we want to e we must ail be- come involved

last Tuesday by a Washington Post of what the National

as a constltutional around with him charged with this

had he for The aiticles follow such dendly wea

which have no purp utility save the killing and maiming

those persons who for such weapons t some tragedy re-

Our reporters a t work on the s house a t headq points But the finally caught u illstruments a t hand

momentarily out of punks who would no hardihood to ask for

pens to get in the

ailythirig left to be There just isnt on the subject I

I t is senseless ter continue No No responslble p

this kind of slaugh-man is served by it is protected by it

Pistols ought to scarce in the com-salary to go out on rind they mmediatel hoodlum who can dollars to buv a g u n

has stated that there i for legislation designed to curb the in handguns Address by Congresswoman Sullivan at President Johnson has for this lsgis-

rime program Workshop on Consumer Credit in Fam- ndicated that ily Ficancial Management Sponsored

by Dist~ict of Columbia Home Eco-nomics Association

WON LEONOW K SULLIVAN CF MISSOURI

I N THE HOUSE OF REPRESENTATIVES

Tuesday March 5 1968

Mrs SULLIVAN Mr Speaker one of the most stimulating and potentiallyone of the most important community action meetings I hzve attended in a long time was held Saturday March 2 1968 in the National Educntion Association Building I t was a worlrshop on consumer credit in famih financial management sponsored by the District of ~oiumbia Home Economic Association

The members of this crrg~nlzatlon come from Federal agencies nat ional or-ganizations State a n d local go1rernmen-tal units in this area the school systems and privatebuaines It 14 Bn ouatmdlflggroup of profesaiotral people vitally inter-ested in the most basic problems of the community and I waa delighted to k able to meet with the members of Chis organization to discuss wmumer credit issues from the legislative standpoint

The workshop which began a t Y t m and did not adjourn until 4 pm re-vlewed such Issues as local laws on cl dit sources of credit education in the u of credit the psychological arid sociolo~lcal aspects of credit as well as the Consum- er Credit Protection Act passed by the House on February 1 Chairman of the ~vorkshop planning committee was Mrs Irene H Wolgamot president-elect of the District of Columbia Home Economics Association and assistant to the director of the Consumer and Food Economics Research Division Agricultural Research Service of the US Departmert of Agri- culture

Mr Speaker consumer credt is a val-uable economic tool which makes possi- ble the high level of consumr goods and services now available to lthe American people But the misuse-the abuse--of consumer credit is one of our most se- ~ ~ i o u sdomestic problems Congress can pass laws on this subject and so can the States But the problems will not be solved unless and until more groiips which have direct dealings with the low- income families in our communities emulate the Amerioan Home Economics Association and the local branches of thzt association in spotlighting the problems ~ncountelred by low-income families in the use of credit and devise programs to help educate more families on the pitfalls as well as the opportuni- ties in the use of credit

Under unanimous consent I submit the text of the remarks I made a t the ncrkshop on Saturday as follows

COsSUIER CREDIT AND LEGISLATION (Address by Congressman LEONORK SUL-

r1varr Democrat of St Louis Mo Chair- man S~thcommittee on Consumer Affairs House Committee 011 Banlring and Cur-rency a t Workshop on Consumer Credit in Family Financial Management spon-sored by DC Home Economics Assocla-Lion Saturday morning Idarch 2 1968 at Natfonal Education Association Bulld-icg Washington DC) Lleml-mrrs of Congress often dare to advise

other ptnple how to run their huhinesses or professicns wlthout always knowing too much abcut it and our vnly excuse for doing that is t Y whatever your professional fleld happens o he we usually have to pass lawg dealing with it or uffecting it If we stay in Congress long enough and keep our ears and eyes open and reed the fine print in the Commltce reports and listen to the debates and parcipate in our Committee work con- scientiously we carmot help but absorb some expertise on a lot of things-so much so that there js always the danger that we begin to thlnk we are experts in everything

A t this risk therefore of revealing a lack of humlity I would like to suggest that you consider doing something about the name of your professional group Economics i s a word whlch sczres most people who immediately think of incomprehensible discussions about the balance of payments deflcit the gold cover the rediscount rate the sum of the

EXTENSIONS OF REMARKS dlgite and the Rule of the 786 And home economlce to moet women I suspect mesnn leavning In hlgh school to sew B skirt which they would never conalder wearlng and memOrlzlng the starches cRtDOhydrates nod vitamlm

As a Member of Congress I have had many oppertunitim to work wlth home economists anCI learn about the Broader aspect of your work and I am deeply impressed by the range Of your interests and contributions I shall a l w ~ y sbe grateful to the professional people in the Mlssouri Extenslon Servlce for in-shnce In going to work on an assignment I nsked them to undertake early in my Con- gressional cnreer after the Department of Agriculture had hegun to distribute surplus food to the needy a t a time when I was in- stead trying to get a food stamp program through I ~ O M EECONOMISTS ARE REALLY CONSUMERISTS

I recelved no help whatsoever from the Department In those days for my food stamp proposal and slnce the surplus foods were available for dlstrlhution and were being dls-tributed I wanted to help the many unem- ployed people In my area whlch was then In a recession to get some advantage out of the foods availahle to them--corn menl flour powdered milk powdered eggs and lard were the main staples Of course those f d s could not provide either a nutritious or a satlsfy-ing diet but I discovered that many of the poor people getting these foods dla rot know how to to use them and certainly couldnt prepare tasty dlshes from them So I asked the Missouri Extension Servlce to help me and they developed some simple and practical recipes which were a tremendous help a t the tlme After that I turned to the people In your profession often because I found them to be intelligent nble and above all zn-volved Professor Rlchard L D Morse of Kan- sas State was one of OLU best witnesses on the consumer credit legislatlon just as one example That 1s why I was wlll~ng to give up a large share of the only free tlme I ever have to myself in a week-Saturday 1s Iny only time for any personal tasks-to meet wlth you and discuss our mutual interest in credlt problems

But as I said I think you should do some- thing about the word economics in your professional name Cons~derlng the scope of lour interests and activ~tiesI think you hould cons~der ~dentlfyirig your field as consunte tsnt and yourselves ns consumerists I know that those words dldnt always have favoraale connotations to everyone but I thlnk that nttltudes habe changed quite dramatically and in an environment where mankind IS constantly playing Russinn Roulette with its own survial consumerism means to me s l rnp l~ learning hotu to lzce I t IS not always a cxse of learning to live well elther Smog and cigarettes had water and bad fish and bad meat and had poultry s h x k and radiation hazards in the house- ~lold and on the job untested cosmetics for wh~ch the public becomes the guinea pigs- those are just some of the day-to-day hazards of keeping aive I know you are in- lolved n all of those ~ssues and many more

Although the subject of your discussions thns morning-consumer credit--is not gen- erally ~egarded as a lethal danger to the x ~ b l ~ chealth in the same way as the other Issues I mentioned I might say that we henrd much testimony in the hearings of my Subcommittee on Consumer Affairs on truth- In-lending legislation that the greedy over-use or the uninformed misuse-the abuse-of consumer credit frequently brlngs on family ragedies leading to physical and emo- tional ~llncss and even suicide

THE CREDIT ADDICTALSO NEEDS HELP A N D GUIDANCE

I have been talking for years about credit addicts to whom easy credit seems to be as allergic and as compelling as whlsky to

the alcoholic or nclrbotics M the junkies The merchants who knowingly cater to the hopelees and helpless credlt addict are guilty of a t least a moral offense and 1 hope that when the Consumer Credit Protection Act beromm law their oppmtunitiea for ex-plbitfng thfs aisease-like weakness will R e i n some way modifled or restricted but I truly doubt t h ~ tMI1 hrrppen

Certaitrly ft wont happen unless we keep in the Anal version of the legisrlrttfoa the pro- vlslons of the House bfll restrlctlng the use of gnrnlshment for garnishment is the main tool of the predatory creditor

But credit addiction like nlcol~ollsm and narcotics nddlction Is a problem which laws alone cannot solve Education in the dangers and pitfalls which exist for the nd- dlct seems to have only limited success Nevertheless we must try in every way we onn-tlrrough laws and through education-to help the potential victim avoid or over-come 1x1s problem Full disclosure of the real cost8 of all types of consumer credlt as re- qulred in my bill would provide the neces- sary information a consumer should have in order to he able to use credlt In an informed and intelligent manner But for those or whom excessive use of credlt regardless of the consequences has become Its own way of life the fact that he 1s paying 36 or even 10O0 or more for credit wlll not deter the credit addict from satisfying an exotic want today by pledging to pay an unconscionable or impossible tribute owing and due in some future tomorrow But to the extent that your work and your civic or church activlties hrln you lnto contact with these unfortu- nate victlms of the flaunting on Pvery hand of Amerlcnn matertai abundance all of you can help countless individunls and famiiics to recognize the traps and dangers and to exercifie some absolutely essentlal restraint IrIOST CONSUIIZESS T R Y TO USE CREDIT PROPERLY

Too much of what everyone wants hut can- nct always afford is made available to those who cnn aKord i t least-offered temptlngiy Like cnndy to a child-and taklng the profit ollt of this kind of oversell Is almost im-possrble as long as foolish or Uneducated people bedazzled by the glitter of merchan- dise they dont need and cant afford will sign anything and accept any terms to ob- tain ~ t

I have made a particular p ~ l n t of that fact-enlphaslzing ~t perhaps too much here today-ln order to put In some perspective the purposes and the l imltat lo~~s of the kind of leplslatlon vre van pass in Congress and In the State legislatures to d c ~ l wlth credlt a h u ~ e s

While of only lmited help Lo the credl ~ d d i c t this eqlslntion can he of vital assst- atice to the ast ~rfajorltycf consumers viho ack only P fair dPal in the nnrketplace who lntend to pay their debts and will do so llnder even the most ciiftcult conditions and clrcumstnces hut who are utterl- con- fused ~ h o u t the true cost of credit and completely frustrated In trying to use t h ~ s magic device in 2n informed manner Even the most respectable of credlt-grantl~g firms and institutions have llad to disguise t5e actual late of interest being charged for mot Iorms af credit

Let me el-~e you cne speclfic example of that-rlght in the Congress of the United Statee This 15 no scandal but a cnse of golng along with the pattern of the w1loe credlt econcmy

I select it as an example only because it shcws that the very best of lnstit~tioils for extending credit on the best terms generallp available Is guilty of using terminoloqy whlch confuses rather than informs the borrouver Under the COll~unler Credlt Pro- tection Act now In Senate-House Confer-ence this prscLe will eventuallp end but ln the meantime I hope that in this pnrtlc- ular Instance It will end Immediately

X

EXTENSIONS OF REMARKS ANNUAL RATE BIYCLOSURE IS ESSENT1AL

referring fo s notice o n t h e hiiiietin board of the Congressional EmplOyCe8 Fed- eral Credit Union My Cllairmsll on the Ho~tse Committee o n Banking and Currency Congressman Wright Patrnnn of Texas who hfls done more than any American to help make the credit union movement Successful in providing membership group8 with ability t o i~e lptiaemseive6 and each 0tner i n fIiiancia1 matters often describe6 tlle credlt union as being second only to the church fia nn instrument for community goad And I am rtn enthusiastic supporter of credit un - ions too

Most credlt unions make loans to their members for l a month On secured loans i t is often less Of course 1 I month 011 the unpaid balnnce is a n actual rate of 12h a year This is the way i t should be expressed This is the way the House truth-in-leucling bill would require i t to be expressed-ilot just for credit unions of course but for all consumer credit lenders or sellers Annual percentage rate disclosure has ~lways been tlie heart of the t rn th in lending idea first proposed in legislative form by former Senn- tor Paul H Douglas of Illinois eight years ago And the credit unlons I might add s ~ ~ p p o r tthe concept Bu t they do not practice i t themselves--not y e t n o t generally and the reason as we brought ou t in the llear- ings on my bill is t ha t if the credit unions expressed their rate on a n annual basis of 12 while every other credit institution was using ~rtontllly rates or the add-on or dls-count or other method of hiding the real rate the low credit unlon rate would sound fan- tastically higher thnn everyone elses EVEN THE BEST O F CREDIT 1NSTITUTlONS USE

CONFITSING T E R M S

And tha t brings me to the notice on the Congressional Employees Federal Credit Un- ion bulletin board which advertises tha t a t 1 interest a month on the unpaid balance a $75000 loan repayable in 12 months a t $68 00 a month (exccpt for the twelfth lnonth when the balance is less tl1ul $68001 costs ony $4875 in interest The interest the no- tice adcis and I quote ecll~~Is out to ap-proximtely 612 per annum And a n illus- tration given on tho leaflet proves this 61 times $75000 equas 841175

Well I hope elrerone here realizes tha t the rate referred to in his illustration ns 61 per innuin is llot tlle t rue interest rate but rathcr the so-culled acicl-on rate computed on the origillal amoLu11 not on the ~lnpaicl balance as if you had the use of the full Si5000 for 12 months instead of just one month The 171tcrcst mi(per ntltllLtn in filct is lllnost double that g ive~ lin the illustrn- tion-or 12percent l i rncs the monthy rate of 1 on the unparcl bnlri~ce-rather than 615 0

Another illustratiol1 on tlie same bulletin board notice describes what is actually a 9 per year interest rate on a secured loan IS having a n interest charge which equals out t3 0111~4 8 per annuln

Please let me repeat t ha t in using this illustration I am not singling out the Con- gressional Employees Federal Credit Union for doing something a w f ~ l They are follow- i ~ l g exactly the practice of the banks and other onsumer credit institutions in citing as interest rates ratcs which are con-structed on a basis other than the actual or acturial rate Furthermore If nlembers of a credit union are getting this confusing in- formntiorl from a n insti tution they them-selves own md other legitimate lenders also use this subterfuge to make the rate apmar about half of its real size you can imagine what kind of misinformation including com- pletely false inforn~ation consumers often receive from the fringe and gyp elements in the consumer credlt industry

STUONG CONSUMER CUEBIT PROTECTIOH ACT NOT YET ENACTED

Professor Morse has done n remarknbie job i n educating those in the fumfly economics field to the intricate technicalities of con-srlmer credlt terminology and deceptionampand the henrtnga of my Bubcommittee I believe have broadly expanded public awareness i n this field Based on the overwlielmlng p m a g e In the House on February 1of XR 11601 tlie Consumer Credit Protection Act many peQ-pIe now assume the bnttle hasbeen won and we are inevitably going to end up shortly with n strong all-inclus~ve and very effective law on consumer credlt

I a m not a t all convinced tha t such opti- inlsm is justified The Senate passed a bill last July by a vote of 92 to 0 which is only a partial truth-in-lending b i l l -one wlth great gaping loopholes through which a trenien-dous volume of consumer credit transactions can easily be channelled Only one of the five Senators on the Conference Committee has indicated general support for the Strong version of the legislation passed by the House

The Senate bill does not apply to the ad- vertising of credit I t provides no machinery for administrative enforcement-the individ-ual victimized consumer would have to ini- t iate his own law suit to obtain reclress There is not a viord in the Senate blll dealing wit11 the cruel device of garnishment as used in many states by predatory credit outlits preying on the gullible p r and hounding them to what I call economic death-that is clown the path of g~rrnlshment followed by joblessness and then bankruptcy as the only way out

MANY DIFFERENCES 1N HOUSE A N D

SENATE 61LL5

The Sennte blll establishes a privileged sanctuary for a11 transactions in which the credit charge is less than $1000-that would mean almost any consumer credit sale or loan up to about 8110 The creditor in such n transaction would 113t he required to s ta te any ra t e a t all even though he could he charging percentage rates in the hundreds compared to the four to six percent the same consumer now reccives on his savings And Lherc is another privileged sanctuary in the Senate bill for department store revoiving credit-under the Senate bill the rate could be stated merely as r monthly rate of say l ~ rather than a t the true rate of 18 per year

The Hmse bill I am proud to say recog- nized the dangers in these omissions and loopholes I t was probably the most compre- hensive consumer credit bill ever introduced in the C3ngress and it is certninly the strong- est one ever pssed by either House But we face a blttle-a real bnttle-to retain i ts E E F ~ tia1 fea t~l resin Cnnfererce

All Senators and most House Members are being deluged with mail attacking Title I1 of the bill dealing with garnishment This Title restricts garnishment to only 10 of a workers pay over $30 n week We also pro- hibit the firing of a worker because of a single garnishment This does not go nearly as far as Pennsylvania Texas or Florida and several other states have gone in protecting the wage-earner against the tragic conse-quences of harsh garnlshnlent laws But the collection agencies and some of their clients and associates are frenziedly predicting the e n d of consumer credit in this country if we pass a law restricting garnishment to mod- erate and reasonable levels They dont ex-plain llow credit has managed to exist in states which prohibit garnishment entirely

G A R N I S H M E N T TITLE IN J E O P A R D Y

The peoplc who suffer from repeated gar-nishments usually as a result of deliberate overselI by unscrupulous merchants-yes t ha t is the thrust of the testimony we re-ceived on this from highly respected Federal Court bailkruptcp referees who have made

a study of this problem-those people I re-peat who suffer from this contemporary form of debtors prison do not d t e letters t o Members of Congress But those of you in the social work and related fieldk know who these people are and the problems they encounter

Can you help u s t o remove t h e cover of oblivion which hides the unseen suffering in t l ~ f sarea of conalrmer credit abuse so tha t the Senators who will soon be considering th is problem for the first t ime in a piece of national leglslation will be more aware of what we are talking about I n the House on the only test vote we had on garnishment on a Ilousubstantive section of the Title- we barely beat off the attack by a non-record vote of 101 to 98 Had this issue come to a rollcall I a m sure the margin of victory would have been much greater But i t is a new issue in the Senate-ancl only the col- lection agencies are being heflrd from on it over there

There are numerous ocher provisions of tile House bill which are new t3 Senate consicl- eration in connection with truth-la-lending or consumer credit protection legislation and 1 hope that thoee among you who are interested in the details and technical pro- visions will read the Congressional Reco~d for Janunrj- 30 and 31 dnd February 1 101 tle full debate on tlie bill CONSUhIERS nITrST REALIZE CREDIT IS EXPENSIVF

I n Lhe meantime however I urge you to c l s what you can to spread the word on the pl~ilosophy of the House hlll which is to strip away the inumbo-jumbo of technical legal terms which mean very precise things to the creditor and nothing whatsoever to the average consunler The consumer assumes tha t somebody il l his s ta te or Federil gov-ernment has laid out clenr and equitable rules for regulating tle credit lndustr and he further nssumes tha t if a percentzge rate is given i t is a inenningfu one But when he tries to figure ou t his actual rate on an actual transaction other than on real estate he fre- q-uently finds he cannot do so dnd thus blames himself for beizg poor in nnthe-matics Perhaps he is But that s not ttle rea- son he is having so much di8iculty under- standing what credit costs him Consumer credit is often deliberately planned t h a t way t o be lncomprehenlble to the customer Even real estate transactions are more con-fusing than they siould he or would 110

uncler H R 11601 Par t of t he fault lies i n the fac t t ha t we

grew up thinking 6 was a fair and rea-sonable rate of re turn on borrowed unoney 2nd we still tend to th ink t h a t is about the figure being charged We dont stop to think tha t the banks are paying 5 on some types of deposits and other savings institutions are paying more-and t h a t i t costs big busi-ness about 6 or more to borrow XIonev is expensive-it is now terribly expensive by any standard Yet when the sign says you can borrow from your credit union a t ap-proximately 614 how many people th ink t h a t is only a fraction of a percentage point higher than General Motors pays Or only 2 more than the bank pays you on a regular savings account

If and when m get a good consumer credit bill through Congress-and I hope i t is more when than ifM-those consumers who are interested enough to try to understand their credit costs and who wish to compare one form of credit offer with another (per-haps discovering i n the process t ha t i t is usually far better to use their own savings and pay on a 30-day or 90-day cash basis) they will iave the informatlon they need in order to make these computations

Bu t a lot of people wont bother 4nd its going to be your job-as consumerists-to educate them to do so The law will be only as effective as you and other intelligent motivated caring professional educators and sociologlsts make i t by stimulating the pub-

COTVGRESSIONAL RECORD -SEN1 March 1 1gss USDA HALTS PU CHASESCHEESE

CE$ DROP

e renewed at- s to use dairy t in the food-

famous Tonkin g debated on the joint resolution

voted against a was used to justi-

of the war in Viet-

STATESMANSHIP BY INDUSTRIAL BANKERS ASSOCIATION ON TRUT1-I IN LENDING Mr PROXMIRE Mr President one

of the jobs of Washington trade associ- ations is to inform Members of Congress of the views of the pertinent industry concerning legislative iss~es However trade associations also lave another im- portant job and that is to inform the industry of the views of Congress In other words co~mmunications is a two-way street

In this connection I was delighted to encounter an excellent editorial written by Mr Max A Uenney of the American Industrial Bankers Associstion This as- sociation has over the years consistently opposed the truth-in-lending bill How- ever now that the bill appears to be reaching its Anal enactment Mr Den- ney is advising the members of the In- dustrial Bankers Associatioil to acceptreality and to recognize the heightened awareness which Congress has for con- sumer protection issues

Mr President I ask unanimous con- sent that the editorial be printed in the RECORD

There being no objection the editorial

creciit And the Ailance business is a very part of the consumer crsdtt industry

In all probability a so-called truth-111 lending bill of some type will be p~ssed Ijr-lore Congress adjourns for the Presidential Colvention Frt August and from that day for-ward we v~Fll be under federal control

Tile b ~ s l c premise of this type of legislo- tion is that the consumer has not been S I I I ~ informed on the cost of credit because it 1 1 ~ ~ sol been disclosed to him as simple annual interest Therefore in order for the consurrler to understand and be able to rnRke L u choice in his m e of credit i t is essentiu t h 3 ~ all credit transactiorls disclose tAe cost thrre-of in percentages Many Of those who l ~ a ~ ~dvocated this lcgislnticn have atternpt~~ to play upon the emotiol~ of their listcl~crs

One declslon the finance i ~ d u s t r y wtl ll( to mnlre in this connectlo11 is how it is goi11g to adjust its operations llow and In l i ~ e f ~ -

Lure to this 1egislction In addltio~l i t 111~s

ctart preparing tself for rnore regulations from the federz~l level as this is orllp tile first move from Washington towrird ccnnl)l(si5 cortrol We must look a t the future in tllis respect from a purely abstract stnndpoi~~

The secoilci hig decisiorl which will II a tremend01~ affect on the future of r1c I)-

tire collsumer credit industrv in I s pllnses is one that vill he made 1y tllo x1-

tionill Ccnferencc of Comlllissioners 011 ~ 1 -

form State Laws when i t presents t) tilc n-du-try in August 1968 its Anal draft ct a Unifcrm Consumer Credit Code

The draft as i t now reads declares that r KO

of its underlying purposes are to slni~)lli clarify and modernize the law governing I

tail instalment sales consumer credit snill loans 2nd usury and to further consurlier understanding of the terms on credit traus- actions Whether this will be the final result remains to be seen But the decision the fi-nance industry has to make is whether cr not it 1s going to get behind and support tlis new far-reaching Uniform Code when I t comes before the various state legislatures

In order to assist our members in arriving a t these decisions we have included in tlls issue of the Industrial Banker articles srlt-ten for the speciflc purpose of explaining tile history background and theories behlrlcl both the truth-in-lending legislation 2nd the Uniform Consumer Credit Code I t is our hope these articles will be helpful

One important thing to keep in mind In connection with the proposed Code and lcgls- lation is tha t there is a very close relation- ship between the two Both of these activitieswas ordered to be printed in the RECORD are the result of the tremendous push onas follows

Not too long ago when I was in the full- time practice of law I sat in the court room after having taken part in ti bitterly con-tested law sult and heard the judge say as he was about to render a declslon in the case The hour of declslon is a lonely one This need not necessarily be so if one does not become involved in the emotional dis- turbances that sometimes accompany the necessity of maklng a declslon

In the business world hardly a day passes without an executive being called upon to make one or more decisions which may af- fect the future of his business What he tries to do is to analyze all the facts weigh the alternatives then determine what is best for everyone concerned-without becoming emotionally involved

This gear 1968 may well be called the Year of Decision for the finance industry Two very important matters are coming up this gear that can and no doubt will affect the future of this industry for many years to come The first is tlle decision Congress is about to make on federal regulation of the consumer credit industry If Congress passes either the Proxmlre Bill (S 5) or the Sullivan Bill (HR 11601) or a combina-tion of both the federal government will soon start regulating and issuing rules per- taining to tine operation of all consumer

the part of some people during the past sev-eral years to create a Consumer Protection- ist Movement throughout the country A11 business is being affected by this movement A decision on the part of our industry regard- lng these two actlvlties is not going to be easy but i t will be necessary

An individual who has been closely ccn- nected with this industrys legislative prob- lems for many years was discussing recently the situation the flnance industry finds itself in today and commented I dont mind evolution but I sure dont like revolution

Well like i t or not agree with it or not a change is taking place in the manner in which the finance business and consumer credit will be conducted in the future Very few people like change but often in look- ing back on some big change one wonders why it had not been made earller And wheth- er the decision you as a member of this in- dustry have to make is a lonely one or not you are going to have to decide and decide soon where we go from here

As ycu consider these matters in reaching your dectslon may I suggest you keep In mlnd these very wise words Grant me the strength to accept the things I cannot change the courage to change the things I can and the wisdom to tell the difference

hlAx A DEMNEY Ezecutive vfce President

5388

oubled since

The federal governme

lower on import

re really neces-es it do any good

for the people of t ted States who sup-

s being taken by his

cummunlsm

EXTENSIONS OF REMARKS March 5 1968 tion by a vlsitlng were not They were trlbuk to a young names who volunt

never saw such wi A few years ago

was beaten up by

Ithe pollee nswell growlng awarenees

that if we want to e we must ail be- come involved

last Tuesday by a Washington Post of what the National

as a constltutional around with him charged with this

had he for The aiticles follow such dendly wea

which have no purp utility save the killing and maiming

those persons who for such weapons t some tragedy re-

Our reporters a t work on the s house a t headq points But the finally caught u illstruments a t hand

momentarily out of punks who would no hardihood to ask for

pens to get in the

ailythirig left to be There just isnt on the subject I

I t is senseless ter continue No No responslble p

this kind of slaugh-man is served by it is protected by it

Pistols ought to scarce in the com-salary to go out on rind they mmediatel hoodlum who can dollars to buv a g u n

has stated that there i for legislation designed to curb the in handguns Address by Congresswoman Sullivan at President Johnson has for this lsgis-

rime program Workshop on Consumer Credit in Fam- ndicated that ily Ficancial Management Sponsored

by Dist~ict of Columbia Home Eco-nomics Association

WON LEONOW K SULLIVAN CF MISSOURI

I N THE HOUSE OF REPRESENTATIVES

Tuesday March 5 1968

Mrs SULLIVAN Mr Speaker one of the most stimulating and potentiallyone of the most important community action meetings I hzve attended in a long time was held Saturday March 2 1968 in the National Educntion Association Building I t was a worlrshop on consumer credit in famih financial management sponsored by the District of ~oiumbia Home Economic Association

The members of this crrg~nlzatlon come from Federal agencies nat ional or-ganizations State a n d local go1rernmen-tal units in this area the school systems and privatebuaines It 14 Bn ouatmdlflggroup of profesaiotral people vitally inter-ested in the most basic problems of the community and I waa delighted to k able to meet with the members of Chis organization to discuss wmumer credit issues from the legislative standpoint

The workshop which began a t Y t m and did not adjourn until 4 pm re-vlewed such Issues as local laws on cl dit sources of credit education in the u of credit the psychological arid sociolo~lcal aspects of credit as well as the Consum- er Credit Protection Act passed by the House on February 1 Chairman of the ~vorkshop planning committee was Mrs Irene H Wolgamot president-elect of the District of Columbia Home Economics Association and assistant to the director of the Consumer and Food Economics Research Division Agricultural Research Service of the US Departmert of Agri- culture

Mr Speaker consumer credt is a val-uable economic tool which makes possi- ble the high level of consumr goods and services now available to lthe American people But the misuse-the abuse--of consumer credit is one of our most se- ~ ~ i o u sdomestic problems Congress can pass laws on this subject and so can the States But the problems will not be solved unless and until more groiips which have direct dealings with the low- income families in our communities emulate the Amerioan Home Economics Association and the local branches of thzt association in spotlighting the problems ~ncountelred by low-income families in the use of credit and devise programs to help educate more families on the pitfalls as well as the opportuni- ties in the use of credit

Under unanimous consent I submit the text of the remarks I made a t the ncrkshop on Saturday as follows

COsSUIER CREDIT AND LEGISLATION (Address by Congressman LEONORK SUL-

r1varr Democrat of St Louis Mo Chair- man S~thcommittee on Consumer Affairs House Committee 011 Banlring and Cur-rency a t Workshop on Consumer Credit in Family Financial Management spon-sored by DC Home Economics Assocla-Lion Saturday morning Idarch 2 1968 at Natfonal Education Association Bulld-icg Washington DC) Lleml-mrrs of Congress often dare to advise

other ptnple how to run their huhinesses or professicns wlthout always knowing too much abcut it and our vnly excuse for doing that is t Y whatever your professional fleld happens o he we usually have to pass lawg dealing with it or uffecting it If we stay in Congress long enough and keep our ears and eyes open and reed the fine print in the Commltce reports and listen to the debates and parcipate in our Committee work con- scientiously we carmot help but absorb some expertise on a lot of things-so much so that there js always the danger that we begin to thlnk we are experts in everything

A t this risk therefore of revealing a lack of humlity I would like to suggest that you consider doing something about the name of your professional group Economics i s a word whlch sczres most people who immediately think of incomprehensible discussions about the balance of payments deflcit the gold cover the rediscount rate the sum of the

EXTENSIONS OF REMARKS dlgite and the Rule of the 786 And home economlce to moet women I suspect mesnn leavning In hlgh school to sew B skirt which they would never conalder wearlng and memOrlzlng the starches cRtDOhydrates nod vitamlm

As a Member of Congress I have had many oppertunitim to work wlth home economists anCI learn about the Broader aspect of your work and I am deeply impressed by the range Of your interests and contributions I shall a l w ~ y sbe grateful to the professional people in the Mlssouri Extenslon Servlce for in-shnce In going to work on an assignment I nsked them to undertake early in my Con- gressional cnreer after the Department of Agriculture had hegun to distribute surplus food to the needy a t a time when I was in- stead trying to get a food stamp program through I ~ O M EECONOMISTS ARE REALLY CONSUMERISTS

I recelved no help whatsoever from the Department In those days for my food stamp proposal and slnce the surplus foods were available for dlstrlhution and were being dls-tributed I wanted to help the many unem- ployed people In my area whlch was then In a recession to get some advantage out of the foods availahle to them--corn menl flour powdered milk powdered eggs and lard were the main staples Of course those f d s could not provide either a nutritious or a satlsfy-ing diet but I discovered that many of the poor people getting these foods dla rot know how to to use them and certainly couldnt prepare tasty dlshes from them So I asked the Missouri Extension Servlce to help me and they developed some simple and practical recipes which were a tremendous help a t the tlme After that I turned to the people In your profession often because I found them to be intelligent nble and above all zn-volved Professor Rlchard L D Morse of Kan- sas State was one of OLU best witnesses on the consumer credit legislatlon just as one example That 1s why I was wlll~ng to give up a large share of the only free tlme I ever have to myself in a week-Saturday 1s Iny only time for any personal tasks-to meet wlth you and discuss our mutual interest in credlt problems

But as I said I think you should do some- thing about the word economics in your professional name Cons~derlng the scope of lour interests and activ~tiesI think you hould cons~der ~dentlfyirig your field as consunte tsnt and yourselves ns consumerists I know that those words dldnt always have favoraale connotations to everyone but I thlnk that nttltudes habe changed quite dramatically and in an environment where mankind IS constantly playing Russinn Roulette with its own survial consumerism means to me s l rnp l~ learning hotu to lzce I t IS not always a cxse of learning to live well elther Smog and cigarettes had water and bad fish and bad meat and had poultry s h x k and radiation hazards in the house- ~lold and on the job untested cosmetics for wh~ch the public becomes the guinea pigs- those are just some of the day-to-day hazards of keeping aive I know you are in- lolved n all of those ~ssues and many more

Although the subject of your discussions thns morning-consumer credit--is not gen- erally ~egarded as a lethal danger to the x ~ b l ~ chealth in the same way as the other Issues I mentioned I might say that we henrd much testimony in the hearings of my Subcommittee on Consumer Affairs on truth- In-lending legislation that the greedy over-use or the uninformed misuse-the abuse-of consumer credit frequently brlngs on family ragedies leading to physical and emo- tional ~llncss and even suicide

THE CREDIT ADDICTALSO NEEDS HELP A N D GUIDANCE

I have been talking for years about credit addicts to whom easy credit seems to be as allergic and as compelling as whlsky to

the alcoholic or nclrbotics M the junkies The merchants who knowingly cater to the hopelees and helpless credlt addict are guilty of a t least a moral offense and 1 hope that when the Consumer Credit Protection Act beromm law their oppmtunitiea for ex-plbitfng thfs aisease-like weakness will R e i n some way modifled or restricted but I truly doubt t h ~ tMI1 hrrppen

Certaitrly ft wont happen unless we keep in the Anal version of the legisrlrttfoa the pro- vlslons of the House bfll restrlctlng the use of gnrnlshment for garnishment is the main tool of the predatory creditor

But credit addiction like nlcol~ollsm and narcotics nddlction Is a problem which laws alone cannot solve Education in the dangers and pitfalls which exist for the nd- dlct seems to have only limited success Nevertheless we must try in every way we onn-tlrrough laws and through education-to help the potential victim avoid or over-come 1x1s problem Full disclosure of the real cost8 of all types of consumer credlt as re- qulred in my bill would provide the neces- sary information a consumer should have in order to he able to use credlt In an informed and intelligent manner But for those or whom excessive use of credlt regardless of the consequences has become Its own way of life the fact that he 1s paying 36 or even 10O0 or more for credit wlll not deter the credit addict from satisfying an exotic want today by pledging to pay an unconscionable or impossible tribute owing and due in some future tomorrow But to the extent that your work and your civic or church activlties hrln you lnto contact with these unfortu- nate victlms of the flaunting on Pvery hand of Amerlcnn matertai abundance all of you can help countless individunls and famiiics to recognize the traps and dangers and to exercifie some absolutely essentlal restraint IrIOST CONSUIIZESS T R Y TO USE CREDIT PROPERLY

Too much of what everyone wants hut can- nct always afford is made available to those who cnn aKord i t least-offered temptlngiy Like cnndy to a child-and taklng the profit ollt of this kind of oversell Is almost im-possrble as long as foolish or Uneducated people bedazzled by the glitter of merchan- dise they dont need and cant afford will sign anything and accept any terms to ob- tain ~ t

I have made a particular p ~ l n t of that fact-enlphaslzing ~t perhaps too much here today-ln order to put In some perspective the purposes and the l imltat lo~~s of the kind of leplslatlon vre van pass in Congress and In the State legislatures to d c ~ l wlth credlt a h u ~ e s

While of only lmited help Lo the credl ~ d d i c t this eqlslntion can he of vital assst- atice to the ast ~rfajorltycf consumers viho ack only P fair dPal in the nnrketplace who lntend to pay their debts and will do so llnder even the most ciiftcult conditions and clrcumstnces hut who are utterl- con- fused ~ h o u t the true cost of credit and completely frustrated In trying to use t h ~ s magic device in 2n informed manner Even the most respectable of credlt-grantl~g firms and institutions have llad to disguise t5e actual late of interest being charged for mot Iorms af credit

Let me el-~e you cne speclfic example of that-rlght in the Congress of the United Statee This 15 no scandal but a cnse of golng along with the pattern of the w1loe credlt econcmy

I select it as an example only because it shcws that the very best of lnstit~tioils for extending credit on the best terms generallp available Is guilty of using terminoloqy whlch confuses rather than informs the borrouver Under the COll~unler Credlt Pro- tection Act now In Senate-House Confer-ence this prscLe will eventuallp end but ln the meantime I hope that in this pnrtlc- ular Instance It will end Immediately

X

EXTENSIONS OF REMARKS ANNUAL RATE BIYCLOSURE IS ESSENT1AL

referring fo s notice o n t h e hiiiietin board of the Congressional EmplOyCe8 Fed- eral Credit Union My Cllairmsll on the Ho~tse Committee o n Banking and Currency Congressman Wright Patrnnn of Texas who hfls done more than any American to help make the credit union movement Successful in providing membership group8 with ability t o i~e lptiaemseive6 and each 0tner i n fIiiancia1 matters often describe6 tlle credlt union as being second only to the church fia nn instrument for community goad And I am rtn enthusiastic supporter of credit un - ions too

Most credlt unions make loans to their members for l a month On secured loans i t is often less Of course 1 I month 011 the unpaid balnnce is a n actual rate of 12h a year This is the way i t should be expressed This is the way the House truth-in-leucling bill would require i t to be expressed-ilot just for credit unions of course but for all consumer credit lenders or sellers Annual percentage rate disclosure has ~lways been tlie heart of the t rn th in lending idea first proposed in legislative form by former Senn- tor Paul H Douglas of Illinois eight years ago And the credit unlons I might add s ~ ~ p p o r tthe concept Bu t they do not practice i t themselves--not y e t n o t generally and the reason as we brought ou t in the llear- ings on my bill is t ha t if the credit unions expressed their rate on a n annual basis of 12 while every other credit institution was using ~rtontllly rates or the add-on or dls-count or other method of hiding the real rate the low credit unlon rate would sound fan- tastically higher thnn everyone elses EVEN THE BEST O F CREDIT 1NSTITUTlONS USE

CONFITSING T E R M S

And tha t brings me to the notice on the Congressional Employees Federal Credit Un- ion bulletin board which advertises tha t a t 1 interest a month on the unpaid balance a $75000 loan repayable in 12 months a t $68 00 a month (exccpt for the twelfth lnonth when the balance is less tl1ul $68001 costs ony $4875 in interest The interest the no- tice adcis and I quote ecll~~Is out to ap-proximtely 612 per annum And a n illus- tration given on tho leaflet proves this 61 times $75000 equas 841175

Well I hope elrerone here realizes tha t the rate referred to in his illustration ns 61 per innuin is llot tlle t rue interest rate but rathcr the so-culled acicl-on rate computed on the origillal amoLu11 not on the ~lnpaicl balance as if you had the use of the full Si5000 for 12 months instead of just one month The 171tcrcst mi(per ntltllLtn in filct is lllnost double that g ive~ lin the illustrn- tion-or 12percent l i rncs the monthy rate of 1 on the unparcl bnlri~ce-rather than 615 0

Another illustratiol1 on tlie same bulletin board notice describes what is actually a 9 per year interest rate on a secured loan IS having a n interest charge which equals out t3 0111~4 8 per annuln

Please let me repeat t ha t in using this illustration I am not singling out the Con- gressional Employees Federal Credit Union for doing something a w f ~ l They are follow- i ~ l g exactly the practice of the banks and other onsumer credit institutions in citing as interest rates ratcs which are con-structed on a basis other than the actual or acturial rate Furthermore If nlembers of a credit union are getting this confusing in- formntiorl from a n insti tution they them-selves own md other legitimate lenders also use this subterfuge to make the rate apmar about half of its real size you can imagine what kind of misinformation including com- pletely false inforn~ation consumers often receive from the fringe and gyp elements in the consumer credlt industry

STUONG CONSUMER CUEBIT PROTECTIOH ACT NOT YET ENACTED

Professor Morse has done n remarknbie job i n educating those in the fumfly economics field to the intricate technicalities of con-srlmer credlt terminology and deceptionampand the henrtnga of my Bubcommittee I believe have broadly expanded public awareness i n this field Based on the overwlielmlng p m a g e In the House on February 1of XR 11601 tlie Consumer Credit Protection Act many peQ-pIe now assume the bnttle hasbeen won and we are inevitably going to end up shortly with n strong all-inclus~ve and very effective law on consumer credlt

I a m not a t all convinced tha t such opti- inlsm is justified The Senate passed a bill last July by a vote of 92 to 0 which is only a partial truth-in-lending b i l l -one wlth great gaping loopholes through which a trenien-dous volume of consumer credit transactions can easily be channelled Only one of the five Senators on the Conference Committee has indicated general support for the Strong version of the legislation passed by the House

The Senate bill does not apply to the ad- vertising of credit I t provides no machinery for administrative enforcement-the individ-ual victimized consumer would have to ini- t iate his own law suit to obtain reclress There is not a viord in the Senate blll dealing wit11 the cruel device of garnishment as used in many states by predatory credit outlits preying on the gullible p r and hounding them to what I call economic death-that is clown the path of g~rrnlshment followed by joblessness and then bankruptcy as the only way out

MANY DIFFERENCES 1N HOUSE A N D

SENATE 61LL5

The Sennte blll establishes a privileged sanctuary for a11 transactions in which the credit charge is less than $1000-that would mean almost any consumer credit sale or loan up to about 8110 The creditor in such n transaction would 113t he required to s ta te any ra t e a t all even though he could he charging percentage rates in the hundreds compared to the four to six percent the same consumer now reccives on his savings And Lherc is another privileged sanctuary in the Senate bill for department store revoiving credit-under the Senate bill the rate could be stated merely as r monthly rate of say l ~ rather than a t the true rate of 18 per year

The Hmse bill I am proud to say recog- nized the dangers in these omissions and loopholes I t was probably the most compre- hensive consumer credit bill ever introduced in the C3ngress and it is certninly the strong- est one ever pssed by either House But we face a blttle-a real bnttle-to retain i ts E E F ~ tia1 fea t~l resin Cnnfererce

All Senators and most House Members are being deluged with mail attacking Title I1 of the bill dealing with garnishment This Title restricts garnishment to only 10 of a workers pay over $30 n week We also pro- hibit the firing of a worker because of a single garnishment This does not go nearly as far as Pennsylvania Texas or Florida and several other states have gone in protecting the wage-earner against the tragic conse-quences of harsh garnlshnlent laws But the collection agencies and some of their clients and associates are frenziedly predicting the e n d of consumer credit in this country if we pass a law restricting garnishment to mod- erate and reasonable levels They dont ex-plain llow credit has managed to exist in states which prohibit garnishment entirely

G A R N I S H M E N T TITLE IN J E O P A R D Y

The peoplc who suffer from repeated gar-nishments usually as a result of deliberate overselI by unscrupulous merchants-yes t ha t is the thrust of the testimony we re-ceived on this from highly respected Federal Court bailkruptcp referees who have made

a study of this problem-those people I re-peat who suffer from this contemporary form of debtors prison do not d t e letters t o Members of Congress But those of you in the social work and related fieldk know who these people are and the problems they encounter

Can you help u s t o remove t h e cover of oblivion which hides the unseen suffering in t l ~ f sarea of conalrmer credit abuse so tha t the Senators who will soon be considering th is problem for the first t ime in a piece of national leglslation will be more aware of what we are talking about I n the House on the only test vote we had on garnishment on a Ilousubstantive section of the Title- we barely beat off the attack by a non-record vote of 101 to 98 Had this issue come to a rollcall I a m sure the margin of victory would have been much greater But i t is a new issue in the Senate-ancl only the col- lection agencies are being heflrd from on it over there

There are numerous ocher provisions of tile House bill which are new t3 Senate consicl- eration in connection with truth-la-lending or consumer credit protection legislation and 1 hope that thoee among you who are interested in the details and technical pro- visions will read the Congressional Reco~d for Janunrj- 30 and 31 dnd February 1 101 tle full debate on tlie bill CONSUhIERS nITrST REALIZE CREDIT IS EXPENSIVF

I n Lhe meantime however I urge you to c l s what you can to spread the word on the pl~ilosophy of the House hlll which is to strip away the inumbo-jumbo of technical legal terms which mean very precise things to the creditor and nothing whatsoever to the average consunler The consumer assumes tha t somebody il l his s ta te or Federil gov-ernment has laid out clenr and equitable rules for regulating tle credit lndustr and he further nssumes tha t if a percentzge rate is given i t is a inenningfu one But when he tries to figure ou t his actual rate on an actual transaction other than on real estate he fre- q-uently finds he cannot do so dnd thus blames himself for beizg poor in nnthe-matics Perhaps he is But that s not ttle rea- son he is having so much di8iculty under- standing what credit costs him Consumer credit is often deliberately planned t h a t way t o be lncomprehenlble to the customer Even real estate transactions are more con-fusing than they siould he or would 110

uncler H R 11601 Par t of t he fault lies i n the fac t t ha t we

grew up thinking 6 was a fair and rea-sonable rate of re turn on borrowed unoney 2nd we still tend to th ink t h a t is about the figure being charged We dont stop to think tha t the banks are paying 5 on some types of deposits and other savings institutions are paying more-and t h a t i t costs big busi-ness about 6 or more to borrow XIonev is expensive-it is now terribly expensive by any standard Yet when the sign says you can borrow from your credit union a t ap-proximately 614 how many people th ink t h a t is only a fraction of a percentage point higher than General Motors pays Or only 2 more than the bank pays you on a regular savings account

If and when m get a good consumer credit bill through Congress-and I hope i t is more when than ifM-those consumers who are interested enough to try to understand their credit costs and who wish to compare one form of credit offer with another (per-haps discovering i n the process t ha t i t is usually far better to use their own savings and pay on a 30-day or 90-day cash basis) they will iave the informatlon they need in order to make these computations

Bu t a lot of people wont bother 4nd its going to be your job-as consumerists-to educate them to do so The law will be only as effective as you and other intelligent motivated caring professional educators and sociologlsts make i t by stimulating the pub-

5388

oubled since

The federal governme

lower on import

re really neces-es it do any good

for the people of t ted States who sup-

s being taken by his

cummunlsm

EXTENSIONS OF REMARKS March 5 1968 tion by a vlsitlng were not They were trlbuk to a young names who volunt

never saw such wi A few years ago

was beaten up by

Ithe pollee nswell growlng awarenees

that if we want to e we must ail be- come involved

last Tuesday by a Washington Post of what the National

as a constltutional around with him charged with this

had he for The aiticles follow such dendly wea

which have no purp utility save the killing and maiming

those persons who for such weapons t some tragedy re-

Our reporters a t work on the s house a t headq points But the finally caught u illstruments a t hand

momentarily out of punks who would no hardihood to ask for

pens to get in the

ailythirig left to be There just isnt on the subject I

I t is senseless ter continue No No responslble p

this kind of slaugh-man is served by it is protected by it

Pistols ought to scarce in the com-salary to go out on rind they mmediatel hoodlum who can dollars to buv a g u n

has stated that there i for legislation designed to curb the in handguns Address by Congresswoman Sullivan at President Johnson has for this lsgis-

rime program Workshop on Consumer Credit in Fam- ndicated that ily Ficancial Management Sponsored

by Dist~ict of Columbia Home Eco-nomics Association

WON LEONOW K SULLIVAN CF MISSOURI

I N THE HOUSE OF REPRESENTATIVES

Tuesday March 5 1968

Mrs SULLIVAN Mr Speaker one of the most stimulating and potentiallyone of the most important community action meetings I hzve attended in a long time was held Saturday March 2 1968 in the National Educntion Association Building I t was a worlrshop on consumer credit in famih financial management sponsored by the District of ~oiumbia Home Economic Association

The members of this crrg~nlzatlon come from Federal agencies nat ional or-ganizations State a n d local go1rernmen-tal units in this area the school systems and privatebuaines It 14 Bn ouatmdlflggroup of profesaiotral people vitally inter-ested in the most basic problems of the community and I waa delighted to k able to meet with the members of Chis organization to discuss wmumer credit issues from the legislative standpoint

The workshop which began a t Y t m and did not adjourn until 4 pm re-vlewed such Issues as local laws on cl dit sources of credit education in the u of credit the psychological arid sociolo~lcal aspects of credit as well as the Consum- er Credit Protection Act passed by the House on February 1 Chairman of the ~vorkshop planning committee was Mrs Irene H Wolgamot president-elect of the District of Columbia Home Economics Association and assistant to the director of the Consumer and Food Economics Research Division Agricultural Research Service of the US Departmert of Agri- culture

Mr Speaker consumer credt is a val-uable economic tool which makes possi- ble the high level of consumr goods and services now available to lthe American people But the misuse-the abuse--of consumer credit is one of our most se- ~ ~ i o u sdomestic problems Congress can pass laws on this subject and so can the States But the problems will not be solved unless and until more groiips which have direct dealings with the low- income families in our communities emulate the Amerioan Home Economics Association and the local branches of thzt association in spotlighting the problems ~ncountelred by low-income families in the use of credit and devise programs to help educate more families on the pitfalls as well as the opportuni- ties in the use of credit

Under unanimous consent I submit the text of the remarks I made a t the ncrkshop on Saturday as follows

COsSUIER CREDIT AND LEGISLATION (Address by Congressman LEONORK SUL-

r1varr Democrat of St Louis Mo Chair- man S~thcommittee on Consumer Affairs House Committee 011 Banlring and Cur-rency a t Workshop on Consumer Credit in Family Financial Management spon-sored by DC Home Economics Assocla-Lion Saturday morning Idarch 2 1968 at Natfonal Education Association Bulld-icg Washington DC) Lleml-mrrs of Congress often dare to advise

other ptnple how to run their huhinesses or professicns wlthout always knowing too much abcut it and our vnly excuse for doing that is t Y whatever your professional fleld happens o he we usually have to pass lawg dealing with it or uffecting it If we stay in Congress long enough and keep our ears and eyes open and reed the fine print in the Commltce reports and listen to the debates and parcipate in our Committee work con- scientiously we carmot help but absorb some expertise on a lot of things-so much so that there js always the danger that we begin to thlnk we are experts in everything

A t this risk therefore of revealing a lack of humlity I would like to suggest that you consider doing something about the name of your professional group Economics i s a word whlch sczres most people who immediately think of incomprehensible discussions about the balance of payments deflcit the gold cover the rediscount rate the sum of the

EXTENSIONS OF REMARKS dlgite and the Rule of the 786 And home economlce to moet women I suspect mesnn leavning In hlgh school to sew B skirt which they would never conalder wearlng and memOrlzlng the starches cRtDOhydrates nod vitamlm

As a Member of Congress I have had many oppertunitim to work wlth home economists anCI learn about the Broader aspect of your work and I am deeply impressed by the range Of your interests and contributions I shall a l w ~ y sbe grateful to the professional people in the Mlssouri Extenslon Servlce for in-shnce In going to work on an assignment I nsked them to undertake early in my Con- gressional cnreer after the Department of Agriculture had hegun to distribute surplus food to the needy a t a time when I was in- stead trying to get a food stamp program through I ~ O M EECONOMISTS ARE REALLY CONSUMERISTS

I recelved no help whatsoever from the Department In those days for my food stamp proposal and slnce the surplus foods were available for dlstrlhution and were being dls-tributed I wanted to help the many unem- ployed people In my area whlch was then In a recession to get some advantage out of the foods availahle to them--corn menl flour powdered milk powdered eggs and lard were the main staples Of course those f d s could not provide either a nutritious or a satlsfy-ing diet but I discovered that many of the poor people getting these foods dla rot know how to to use them and certainly couldnt prepare tasty dlshes from them So I asked the Missouri Extension Servlce to help me and they developed some simple and practical recipes which were a tremendous help a t the tlme After that I turned to the people In your profession often because I found them to be intelligent nble and above all zn-volved Professor Rlchard L D Morse of Kan- sas State was one of OLU best witnesses on the consumer credit legislatlon just as one example That 1s why I was wlll~ng to give up a large share of the only free tlme I ever have to myself in a week-Saturday 1s Iny only time for any personal tasks-to meet wlth you and discuss our mutual interest in credlt problems

But as I said I think you should do some- thing about the word economics in your professional name Cons~derlng the scope of lour interests and activ~tiesI think you hould cons~der ~dentlfyirig your field as consunte tsnt and yourselves ns consumerists I know that those words dldnt always have favoraale connotations to everyone but I thlnk that nttltudes habe changed quite dramatically and in an environment where mankind IS constantly playing Russinn Roulette with its own survial consumerism means to me s l rnp l~ learning hotu to lzce I t IS not always a cxse of learning to live well elther Smog and cigarettes had water and bad fish and bad meat and had poultry s h x k and radiation hazards in the house- ~lold and on the job untested cosmetics for wh~ch the public becomes the guinea pigs- those are just some of the day-to-day hazards of keeping aive I know you are in- lolved n all of those ~ssues and many more

Although the subject of your discussions thns morning-consumer credit--is not gen- erally ~egarded as a lethal danger to the x ~ b l ~ chealth in the same way as the other Issues I mentioned I might say that we henrd much testimony in the hearings of my Subcommittee on Consumer Affairs on truth- In-lending legislation that the greedy over-use or the uninformed misuse-the abuse-of consumer credit frequently brlngs on family ragedies leading to physical and emo- tional ~llncss and even suicide

THE CREDIT ADDICTALSO NEEDS HELP A N D GUIDANCE

I have been talking for years about credit addicts to whom easy credit seems to be as allergic and as compelling as whlsky to

the alcoholic or nclrbotics M the junkies The merchants who knowingly cater to the hopelees and helpless credlt addict are guilty of a t least a moral offense and 1 hope that when the Consumer Credit Protection Act beromm law their oppmtunitiea for ex-plbitfng thfs aisease-like weakness will R e i n some way modifled or restricted but I truly doubt t h ~ tMI1 hrrppen

Certaitrly ft wont happen unless we keep in the Anal version of the legisrlrttfoa the pro- vlslons of the House bfll restrlctlng the use of gnrnlshment for garnishment is the main tool of the predatory creditor

But credit addiction like nlcol~ollsm and narcotics nddlction Is a problem which laws alone cannot solve Education in the dangers and pitfalls which exist for the nd- dlct seems to have only limited success Nevertheless we must try in every way we onn-tlrrough laws and through education-to help the potential victim avoid or over-come 1x1s problem Full disclosure of the real cost8 of all types of consumer credlt as re- qulred in my bill would provide the neces- sary information a consumer should have in order to he able to use credlt In an informed and intelligent manner But for those or whom excessive use of credlt regardless of the consequences has become Its own way of life the fact that he 1s paying 36 or even 10O0 or more for credit wlll not deter the credit addict from satisfying an exotic want today by pledging to pay an unconscionable or impossible tribute owing and due in some future tomorrow But to the extent that your work and your civic or church activlties hrln you lnto contact with these unfortu- nate victlms of the flaunting on Pvery hand of Amerlcnn matertai abundance all of you can help countless individunls and famiiics to recognize the traps and dangers and to exercifie some absolutely essentlal restraint IrIOST CONSUIIZESS T R Y TO USE CREDIT PROPERLY

Too much of what everyone wants hut can- nct always afford is made available to those who cnn aKord i t least-offered temptlngiy Like cnndy to a child-and taklng the profit ollt of this kind of oversell Is almost im-possrble as long as foolish or Uneducated people bedazzled by the glitter of merchan- dise they dont need and cant afford will sign anything and accept any terms to ob- tain ~ t

I have made a particular p ~ l n t of that fact-enlphaslzing ~t perhaps too much here today-ln order to put In some perspective the purposes and the l imltat lo~~s of the kind of leplslatlon vre van pass in Congress and In the State legislatures to d c ~ l wlth credlt a h u ~ e s

While of only lmited help Lo the credl ~ d d i c t this eqlslntion can he of vital assst- atice to the ast ~rfajorltycf consumers viho ack only P fair dPal in the nnrketplace who lntend to pay their debts and will do so llnder even the most ciiftcult conditions and clrcumstnces hut who are utterl- con- fused ~ h o u t the true cost of credit and completely frustrated In trying to use t h ~ s magic device in 2n informed manner Even the most respectable of credlt-grantl~g firms and institutions have llad to disguise t5e actual late of interest being charged for mot Iorms af credit

Let me el-~e you cne speclfic example of that-rlght in the Congress of the United Statee This 15 no scandal but a cnse of golng along with the pattern of the w1loe credlt econcmy

I select it as an example only because it shcws that the very best of lnstit~tioils for extending credit on the best terms generallp available Is guilty of using terminoloqy whlch confuses rather than informs the borrouver Under the COll~unler Credlt Pro- tection Act now In Senate-House Confer-ence this prscLe will eventuallp end but ln the meantime I hope that in this pnrtlc- ular Instance It will end Immediately

X

EXTENSIONS OF REMARKS ANNUAL RATE BIYCLOSURE IS ESSENT1AL

referring fo s notice o n t h e hiiiietin board of the Congressional EmplOyCe8 Fed- eral Credit Union My Cllairmsll on the Ho~tse Committee o n Banking and Currency Congressman Wright Patrnnn of Texas who hfls done more than any American to help make the credit union movement Successful in providing membership group8 with ability t o i~e lptiaemseive6 and each 0tner i n fIiiancia1 matters often describe6 tlle credlt union as being second only to the church fia nn instrument for community goad And I am rtn enthusiastic supporter of credit un - ions too

Most credlt unions make loans to their members for l a month On secured loans i t is often less Of course 1 I month 011 the unpaid balnnce is a n actual rate of 12h a year This is the way i t should be expressed This is the way the House truth-in-leucling bill would require i t to be expressed-ilot just for credit unions of course but for all consumer credit lenders or sellers Annual percentage rate disclosure has ~lways been tlie heart of the t rn th in lending idea first proposed in legislative form by former Senn- tor Paul H Douglas of Illinois eight years ago And the credit unlons I might add s ~ ~ p p o r tthe concept Bu t they do not practice i t themselves--not y e t n o t generally and the reason as we brought ou t in the llear- ings on my bill is t ha t if the credit unions expressed their rate on a n annual basis of 12 while every other credit institution was using ~rtontllly rates or the add-on or dls-count or other method of hiding the real rate the low credit unlon rate would sound fan- tastically higher thnn everyone elses EVEN THE BEST O F CREDIT 1NSTITUTlONS USE

CONFITSING T E R M S

And tha t brings me to the notice on the Congressional Employees Federal Credit Un- ion bulletin board which advertises tha t a t 1 interest a month on the unpaid balance a $75000 loan repayable in 12 months a t $68 00 a month (exccpt for the twelfth lnonth when the balance is less tl1ul $68001 costs ony $4875 in interest The interest the no- tice adcis and I quote ecll~~Is out to ap-proximtely 612 per annum And a n illus- tration given on tho leaflet proves this 61 times $75000 equas 841175

Well I hope elrerone here realizes tha t the rate referred to in his illustration ns 61 per innuin is llot tlle t rue interest rate but rathcr the so-culled acicl-on rate computed on the origillal amoLu11 not on the ~lnpaicl balance as if you had the use of the full Si5000 for 12 months instead of just one month The 171tcrcst mi(per ntltllLtn in filct is lllnost double that g ive~ lin the illustrn- tion-or 12percent l i rncs the monthy rate of 1 on the unparcl bnlri~ce-rather than 615 0

Another illustratiol1 on tlie same bulletin board notice describes what is actually a 9 per year interest rate on a secured loan IS having a n interest charge which equals out t3 0111~4 8 per annuln

Please let me repeat t ha t in using this illustration I am not singling out the Con- gressional Employees Federal Credit Union for doing something a w f ~ l They are follow- i ~ l g exactly the practice of the banks and other onsumer credit institutions in citing as interest rates ratcs which are con-structed on a basis other than the actual or acturial rate Furthermore If nlembers of a credit union are getting this confusing in- formntiorl from a n insti tution they them-selves own md other legitimate lenders also use this subterfuge to make the rate apmar about half of its real size you can imagine what kind of misinformation including com- pletely false inforn~ation consumers often receive from the fringe and gyp elements in the consumer credlt industry

STUONG CONSUMER CUEBIT PROTECTIOH ACT NOT YET ENACTED

Professor Morse has done n remarknbie job i n educating those in the fumfly economics field to the intricate technicalities of con-srlmer credlt terminology and deceptionampand the henrtnga of my Bubcommittee I believe have broadly expanded public awareness i n this field Based on the overwlielmlng p m a g e In the House on February 1of XR 11601 tlie Consumer Credit Protection Act many peQ-pIe now assume the bnttle hasbeen won and we are inevitably going to end up shortly with n strong all-inclus~ve and very effective law on consumer credlt

I a m not a t all convinced tha t such opti- inlsm is justified The Senate passed a bill last July by a vote of 92 to 0 which is only a partial truth-in-lending b i l l -one wlth great gaping loopholes through which a trenien-dous volume of consumer credit transactions can easily be channelled Only one of the five Senators on the Conference Committee has indicated general support for the Strong version of the legislation passed by the House

The Senate bill does not apply to the ad- vertising of credit I t provides no machinery for administrative enforcement-the individ-ual victimized consumer would have to ini- t iate his own law suit to obtain reclress There is not a viord in the Senate blll dealing wit11 the cruel device of garnishment as used in many states by predatory credit outlits preying on the gullible p r and hounding them to what I call economic death-that is clown the path of g~rrnlshment followed by joblessness and then bankruptcy as the only way out

MANY DIFFERENCES 1N HOUSE A N D

SENATE 61LL5

The Sennte blll establishes a privileged sanctuary for a11 transactions in which the credit charge is less than $1000-that would mean almost any consumer credit sale or loan up to about 8110 The creditor in such n transaction would 113t he required to s ta te any ra t e a t all even though he could he charging percentage rates in the hundreds compared to the four to six percent the same consumer now reccives on his savings And Lherc is another privileged sanctuary in the Senate bill for department store revoiving credit-under the Senate bill the rate could be stated merely as r monthly rate of say l ~ rather than a t the true rate of 18 per year

The Hmse bill I am proud to say recog- nized the dangers in these omissions and loopholes I t was probably the most compre- hensive consumer credit bill ever introduced in the C3ngress and it is certninly the strong- est one ever pssed by either House But we face a blttle-a real bnttle-to retain i ts E E F ~ tia1 fea t~l resin Cnnfererce

All Senators and most House Members are being deluged with mail attacking Title I1 of the bill dealing with garnishment This Title restricts garnishment to only 10 of a workers pay over $30 n week We also pro- hibit the firing of a worker because of a single garnishment This does not go nearly as far as Pennsylvania Texas or Florida and several other states have gone in protecting the wage-earner against the tragic conse-quences of harsh garnlshnlent laws But the collection agencies and some of their clients and associates are frenziedly predicting the e n d of consumer credit in this country if we pass a law restricting garnishment to mod- erate and reasonable levels They dont ex-plain llow credit has managed to exist in states which prohibit garnishment entirely

G A R N I S H M E N T TITLE IN J E O P A R D Y

The peoplc who suffer from repeated gar-nishments usually as a result of deliberate overselI by unscrupulous merchants-yes t ha t is the thrust of the testimony we re-ceived on this from highly respected Federal Court bailkruptcp referees who have made

a study of this problem-those people I re-peat who suffer from this contemporary form of debtors prison do not d t e letters t o Members of Congress But those of you in the social work and related fieldk know who these people are and the problems they encounter

Can you help u s t o remove t h e cover of oblivion which hides the unseen suffering in t l ~ f sarea of conalrmer credit abuse so tha t the Senators who will soon be considering th is problem for the first t ime in a piece of national leglslation will be more aware of what we are talking about I n the House on the only test vote we had on garnishment on a Ilousubstantive section of the Title- we barely beat off the attack by a non-record vote of 101 to 98 Had this issue come to a rollcall I a m sure the margin of victory would have been much greater But i t is a new issue in the Senate-ancl only the col- lection agencies are being heflrd from on it over there

There are numerous ocher provisions of tile House bill which are new t3 Senate consicl- eration in connection with truth-la-lending or consumer credit protection legislation and 1 hope that thoee among you who are interested in the details and technical pro- visions will read the Congressional Reco~d for Janunrj- 30 and 31 dnd February 1 101 tle full debate on tlie bill CONSUhIERS nITrST REALIZE CREDIT IS EXPENSIVF

I n Lhe meantime however I urge you to c l s what you can to spread the word on the pl~ilosophy of the House hlll which is to strip away the inumbo-jumbo of technical legal terms which mean very precise things to the creditor and nothing whatsoever to the average consunler The consumer assumes tha t somebody il l his s ta te or Federil gov-ernment has laid out clenr and equitable rules for regulating tle credit lndustr and he further nssumes tha t if a percentzge rate is given i t is a inenningfu one But when he tries to figure ou t his actual rate on an actual transaction other than on real estate he fre- q-uently finds he cannot do so dnd thus blames himself for beizg poor in nnthe-matics Perhaps he is But that s not ttle rea- son he is having so much di8iculty under- standing what credit costs him Consumer credit is often deliberately planned t h a t way t o be lncomprehenlble to the customer Even real estate transactions are more con-fusing than they siould he or would 110

uncler H R 11601 Par t of t he fault lies i n the fac t t ha t we

grew up thinking 6 was a fair and rea-sonable rate of re turn on borrowed unoney 2nd we still tend to th ink t h a t is about the figure being charged We dont stop to think tha t the banks are paying 5 on some types of deposits and other savings institutions are paying more-and t h a t i t costs big busi-ness about 6 or more to borrow XIonev is expensive-it is now terribly expensive by any standard Yet when the sign says you can borrow from your credit union a t ap-proximately 614 how many people th ink t h a t is only a fraction of a percentage point higher than General Motors pays Or only 2 more than the bank pays you on a regular savings account

If and when m get a good consumer credit bill through Congress-and I hope i t is more when than ifM-those consumers who are interested enough to try to understand their credit costs and who wish to compare one form of credit offer with another (per-haps discovering i n the process t ha t i t is usually far better to use their own savings and pay on a 30-day or 90-day cash basis) they will iave the informatlon they need in order to make these computations

Bu t a lot of people wont bother 4nd its going to be your job-as consumerists-to educate them to do so The law will be only as effective as you and other intelligent motivated caring professional educators and sociologlsts make i t by stimulating the pub-

The members of this crrg~nlzatlon come from Federal agencies nat ional or-ganizations State a n d local go1rernmen-tal units in this area the school systems and privatebuaines It 14 Bn ouatmdlflggroup of profesaiotral people vitally inter-ested in the most basic problems of the community and I waa delighted to k able to meet with the members of Chis organization to discuss wmumer credit issues from the legislative standpoint

The workshop which began a t Y t m and did not adjourn until 4 pm re-vlewed such Issues as local laws on cl dit sources of credit education in the u of credit the psychological arid sociolo~lcal aspects of credit as well as the Consum- er Credit Protection Act passed by the House on February 1 Chairman of the ~vorkshop planning committee was Mrs Irene H Wolgamot president-elect of the District of Columbia Home Economics Association and assistant to the director of the Consumer and Food Economics Research Division Agricultural Research Service of the US Departmert of Agri- culture

Mr Speaker consumer credt is a val-uable economic tool which makes possi- ble the high level of consumr goods and services now available to lthe American people But the misuse-the abuse--of consumer credit is one of our most se- ~ ~ i o u sdomestic problems Congress can pass laws on this subject and so can the States But the problems will not be solved unless and until more groiips which have direct dealings with the low- income families in our communities emulate the Amerioan Home Economics Association and the local branches of thzt association in spotlighting the problems ~ncountelred by low-income families in the use of credit and devise programs to help educate more families on the pitfalls as well as the opportuni- ties in the use of credit

Under unanimous consent I submit the text of the remarks I made a t the ncrkshop on Saturday as follows

COsSUIER CREDIT AND LEGISLATION (Address by Congressman LEONORK SUL-

r1varr Democrat of St Louis Mo Chair- man S~thcommittee on Consumer Affairs House Committee 011 Banlring and Cur-rency a t Workshop on Consumer Credit in Family Financial Management spon-sored by DC Home Economics Assocla-Lion Saturday morning Idarch 2 1968 at Natfonal Education Association Bulld-icg Washington DC) Lleml-mrrs of Congress often dare to advise

other ptnple how to run their huhinesses or professicns wlthout always knowing too much abcut it and our vnly excuse for doing that is t Y whatever your professional fleld happens o he we usually have to pass lawg dealing with it or uffecting it If we stay in Congress long enough and keep our ears and eyes open and reed the fine print in the Commltce reports and listen to the debates and parcipate in our Committee work con- scientiously we carmot help but absorb some expertise on a lot of things-so much so that there js always the danger that we begin to thlnk we are experts in everything

A t this risk therefore of revealing a lack of humlity I would like to suggest that you consider doing something about the name of your professional group Economics i s a word whlch sczres most people who immediately think of incomprehensible discussions about the balance of payments deflcit the gold cover the rediscount rate the sum of the

EXTENSIONS OF REMARKS dlgite and the Rule of the 786 And home economlce to moet women I suspect mesnn leavning In hlgh school to sew B skirt which they would never conalder wearlng and memOrlzlng the starches cRtDOhydrates nod vitamlm

As a Member of Congress I have had many oppertunitim to work wlth home economists anCI learn about the Broader aspect of your work and I am deeply impressed by the range Of your interests and contributions I shall a l w ~ y sbe grateful to the professional people in the Mlssouri Extenslon Servlce for in-shnce In going to work on an assignment I nsked them to undertake early in my Con- gressional cnreer after the Department of Agriculture had hegun to distribute surplus food to the needy a t a time when I was in- stead trying to get a food stamp program through I ~ O M EECONOMISTS ARE REALLY CONSUMERISTS

I recelved no help whatsoever from the Department In those days for my food stamp proposal and slnce the surplus foods were available for dlstrlhution and were being dls-tributed I wanted to help the many unem- ployed people In my area whlch was then In a recession to get some advantage out of the foods availahle to them--corn menl flour powdered milk powdered eggs and lard were the main staples Of course those f d s could not provide either a nutritious or a satlsfy-ing diet but I discovered that many of the poor people getting these foods dla rot know how to to use them and certainly couldnt prepare tasty dlshes from them So I asked the Missouri Extension Servlce to help me and they developed some simple and practical recipes which were a tremendous help a t the tlme After that I turned to the people In your profession often because I found them to be intelligent nble and above all zn-volved Professor Rlchard L D Morse of Kan- sas State was one of OLU best witnesses on the consumer credit legislatlon just as one example That 1s why I was wlll~ng to give up a large share of the only free tlme I ever have to myself in a week-Saturday 1s Iny only time for any personal tasks-to meet wlth you and discuss our mutual interest in credlt problems

But as I said I think you should do some- thing about the word economics in your professional name Cons~derlng the scope of lour interests and activ~tiesI think you hould cons~der ~dentlfyirig your field as consunte tsnt and yourselves ns consumerists I know that those words dldnt always have favoraale connotations to everyone but I thlnk that nttltudes habe changed quite dramatically and in an environment where mankind IS constantly playing Russinn Roulette with its own survial consumerism means to me s l rnp l~ learning hotu to lzce I t IS not always a cxse of learning to live well elther Smog and cigarettes had water and bad fish and bad meat and had poultry s h x k and radiation hazards in the house- ~lold and on the job untested cosmetics for wh~ch the public becomes the guinea pigs- those are just some of the day-to-day hazards of keeping aive I know you are in- lolved n all of those ~ssues and many more

Although the subject of your discussions thns morning-consumer credit--is not gen- erally ~egarded as a lethal danger to the x ~ b l ~ chealth in the same way as the other Issues I mentioned I might say that we henrd much testimony in the hearings of my Subcommittee on Consumer Affairs on truth- In-lending legislation that the greedy over-use or the uninformed misuse-the abuse-of consumer credit frequently brlngs on family ragedies leading to physical and emo- tional ~llncss and even suicide

THE CREDIT ADDICTALSO NEEDS HELP A N D GUIDANCE

I have been talking for years about credit addicts to whom easy credit seems to be as allergic and as compelling as whlsky to

the alcoholic or nclrbotics M the junkies The merchants who knowingly cater to the hopelees and helpless credlt addict are guilty of a t least a moral offense and 1 hope that when the Consumer Credit Protection Act beromm law their oppmtunitiea for ex-plbitfng thfs aisease-like weakness will R e i n some way modifled or restricted but I truly doubt t h ~ tMI1 hrrppen

Certaitrly ft wont happen unless we keep in the Anal version of the legisrlrttfoa the pro- vlslons of the House bfll restrlctlng the use of gnrnlshment for garnishment is the main tool of the predatory creditor

But credit addiction like nlcol~ollsm and narcotics nddlction Is a problem which laws alone cannot solve Education in the dangers and pitfalls which exist for the nd- dlct seems to have only limited success Nevertheless we must try in every way we onn-tlrrough laws and through education-to help the potential victim avoid or over-come 1x1s problem Full disclosure of the real cost8 of all types of consumer credlt as re- qulred in my bill would provide the neces- sary information a consumer should have in order to he able to use credlt In an informed and intelligent manner But for those or whom excessive use of credlt regardless of the consequences has become Its own way of life the fact that he 1s paying 36 or even 10O0 or more for credit wlll not deter the credit addict from satisfying an exotic want today by pledging to pay an unconscionable or impossible tribute owing and due in some future tomorrow But to the extent that your work and your civic or church activlties hrln you lnto contact with these unfortu- nate victlms of the flaunting on Pvery hand of Amerlcnn matertai abundance all of you can help countless individunls and famiiics to recognize the traps and dangers and to exercifie some absolutely essentlal restraint IrIOST CONSUIIZESS T R Y TO USE CREDIT PROPERLY

Too much of what everyone wants hut can- nct always afford is made available to those who cnn aKord i t least-offered temptlngiy Like cnndy to a child-and taklng the profit ollt of this kind of oversell Is almost im-possrble as long as foolish or Uneducated people bedazzled by the glitter of merchan- dise they dont need and cant afford will sign anything and accept any terms to ob- tain ~ t

I have made a particular p ~ l n t of that fact-enlphaslzing ~t perhaps too much here today-ln order to put In some perspective the purposes and the l imltat lo~~s of the kind of leplslatlon vre van pass in Congress and In the State legislatures to d c ~ l wlth credlt a h u ~ e s

While of only lmited help Lo the credl ~ d d i c t this eqlslntion can he of vital assst- atice to the ast ~rfajorltycf consumers viho ack only P fair dPal in the nnrketplace who lntend to pay their debts and will do so llnder even the most ciiftcult conditions and clrcumstnces hut who are utterl- con- fused ~ h o u t the true cost of credit and completely frustrated In trying to use t h ~ s magic device in 2n informed manner Even the most respectable of credlt-grantl~g firms and institutions have llad to disguise t5e actual late of interest being charged for mot Iorms af credit

Let me el-~e you cne speclfic example of that-rlght in the Congress of the United Statee This 15 no scandal but a cnse of golng along with the pattern of the w1loe credlt econcmy

I select it as an example only because it shcws that the very best of lnstit~tioils for extending credit on the best terms generallp available Is guilty of using terminoloqy whlch confuses rather than informs the borrouver Under the COll~unler Credlt Pro- tection Act now In Senate-House Confer-ence this prscLe will eventuallp end but ln the meantime I hope that in this pnrtlc- ular Instance It will end Immediately

X

EXTENSIONS OF REMARKS ANNUAL RATE BIYCLOSURE IS ESSENT1AL

referring fo s notice o n t h e hiiiietin board of the Congressional EmplOyCe8 Fed- eral Credit Union My Cllairmsll on the Ho~tse Committee o n Banking and Currency Congressman Wright Patrnnn of Texas who hfls done more than any American to help make the credit union movement Successful in providing membership group8 with ability t o i~e lptiaemseive6 and each 0tner i n fIiiancia1 matters often describe6 tlle credlt union as being second only to the church fia nn instrument for community goad And I am rtn enthusiastic supporter of credit un - ions too

Most credlt unions make loans to their members for l a month On secured loans i t is often less Of course 1 I month 011 the unpaid balnnce is a n actual rate of 12h a year This is the way i t should be expressed This is the way the House truth-in-leucling bill would require i t to be expressed-ilot just for credit unions of course but for all consumer credit lenders or sellers Annual percentage rate disclosure has ~lways been tlie heart of the t rn th in lending idea first proposed in legislative form by former Senn- tor Paul H Douglas of Illinois eight years ago And the credit unlons I might add s ~ ~ p p o r tthe concept Bu t they do not practice i t themselves--not y e t n o t generally and the reason as we brought ou t in the llear- ings on my bill is t ha t if the credit unions expressed their rate on a n annual basis of 12 while every other credit institution was using ~rtontllly rates or the add-on or dls-count or other method of hiding the real rate the low credit unlon rate would sound fan- tastically higher thnn everyone elses EVEN THE BEST O F CREDIT 1NSTITUTlONS USE

CONFITSING T E R M S

And tha t brings me to the notice on the Congressional Employees Federal Credit Un- ion bulletin board which advertises tha t a t 1 interest a month on the unpaid balance a $75000 loan repayable in 12 months a t $68 00 a month (exccpt for the twelfth lnonth when the balance is less tl1ul $68001 costs ony $4875 in interest The interest the no- tice adcis and I quote ecll~~Is out to ap-proximtely 612 per annum And a n illus- tration given on tho leaflet proves this 61 times $75000 equas 841175

Well I hope elrerone here realizes tha t the rate referred to in his illustration ns 61 per innuin is llot tlle t rue interest rate but rathcr the so-culled acicl-on rate computed on the origillal amoLu11 not on the ~lnpaicl balance as if you had the use of the full Si5000 for 12 months instead of just one month The 171tcrcst mi(per ntltllLtn in filct is lllnost double that g ive~ lin the illustrn- tion-or 12percent l i rncs the monthy rate of 1 on the unparcl bnlri~ce-rather than 615 0

Another illustratiol1 on tlie same bulletin board notice describes what is actually a 9 per year interest rate on a secured loan IS having a n interest charge which equals out t3 0111~4 8 per annuln

Please let me repeat t ha t in using this illustration I am not singling out the Con- gressional Employees Federal Credit Union for doing something a w f ~ l They are follow- i ~ l g exactly the practice of the banks and other onsumer credit institutions in citing as interest rates ratcs which are con-structed on a basis other than the actual or acturial rate Furthermore If nlembers of a credit union are getting this confusing in- formntiorl from a n insti tution they them-selves own md other legitimate lenders also use this subterfuge to make the rate apmar about half of its real size you can imagine what kind of misinformation including com- pletely false inforn~ation consumers often receive from the fringe and gyp elements in the consumer credlt industry

STUONG CONSUMER CUEBIT PROTECTIOH ACT NOT YET ENACTED

Professor Morse has done n remarknbie job i n educating those in the fumfly economics field to the intricate technicalities of con-srlmer credlt terminology and deceptionampand the henrtnga of my Bubcommittee I believe have broadly expanded public awareness i n this field Based on the overwlielmlng p m a g e In the House on February 1of XR 11601 tlie Consumer Credit Protection Act many peQ-pIe now assume the bnttle hasbeen won and we are inevitably going to end up shortly with n strong all-inclus~ve and very effective law on consumer credlt

I a m not a t all convinced tha t such opti- inlsm is justified The Senate passed a bill last July by a vote of 92 to 0 which is only a partial truth-in-lending b i l l -one wlth great gaping loopholes through which a trenien-dous volume of consumer credit transactions can easily be channelled Only one of the five Senators on the Conference Committee has indicated general support for the Strong version of the legislation passed by the House

The Senate bill does not apply to the ad- vertising of credit I t provides no machinery for administrative enforcement-the individ-ual victimized consumer would have to ini- t iate his own law suit to obtain reclress There is not a viord in the Senate blll dealing wit11 the cruel device of garnishment as used in many states by predatory credit outlits preying on the gullible p r and hounding them to what I call economic death-that is clown the path of g~rrnlshment followed by joblessness and then bankruptcy as the only way out

MANY DIFFERENCES 1N HOUSE A N D

SENATE 61LL5

The Sennte blll establishes a privileged sanctuary for a11 transactions in which the credit charge is less than $1000-that would mean almost any consumer credit sale or loan up to about 8110 The creditor in such n transaction would 113t he required to s ta te any ra t e a t all even though he could he charging percentage rates in the hundreds compared to the four to six percent the same consumer now reccives on his savings And Lherc is another privileged sanctuary in the Senate bill for department store revoiving credit-under the Senate bill the rate could be stated merely as r monthly rate of say l ~ rather than a t the true rate of 18 per year

The Hmse bill I am proud to say recog- nized the dangers in these omissions and loopholes I t was probably the most compre- hensive consumer credit bill ever introduced in the C3ngress and it is certninly the strong- est one ever pssed by either House But we face a blttle-a real bnttle-to retain i ts E E F ~ tia1 fea t~l resin Cnnfererce

All Senators and most House Members are being deluged with mail attacking Title I1 of the bill dealing with garnishment This Title restricts garnishment to only 10 of a workers pay over $30 n week We also pro- hibit the firing of a worker because of a single garnishment This does not go nearly as far as Pennsylvania Texas or Florida and several other states have gone in protecting the wage-earner against the tragic conse-quences of harsh garnlshnlent laws But the collection agencies and some of their clients and associates are frenziedly predicting the e n d of consumer credit in this country if we pass a law restricting garnishment to mod- erate and reasonable levels They dont ex-plain llow credit has managed to exist in states which prohibit garnishment entirely

G A R N I S H M E N T TITLE IN J E O P A R D Y

The peoplc who suffer from repeated gar-nishments usually as a result of deliberate overselI by unscrupulous merchants-yes t ha t is the thrust of the testimony we re-ceived on this from highly respected Federal Court bailkruptcp referees who have made

a study of this problem-those people I re-peat who suffer from this contemporary form of debtors prison do not d t e letters t o Members of Congress But those of you in the social work and related fieldk know who these people are and the problems they encounter

Can you help u s t o remove t h e cover of oblivion which hides the unseen suffering in t l ~ f sarea of conalrmer credit abuse so tha t the Senators who will soon be considering th is problem for the first t ime in a piece of national leglslation will be more aware of what we are talking about I n the House on the only test vote we had on garnishment on a Ilousubstantive section of the Title- we barely beat off the attack by a non-record vote of 101 to 98 Had this issue come to a rollcall I a m sure the margin of victory would have been much greater But i t is a new issue in the Senate-ancl only the col- lection agencies are being heflrd from on it over there

There are numerous ocher provisions of tile House bill which are new t3 Senate consicl- eration in connection with truth-la-lending or consumer credit protection legislation and 1 hope that thoee among you who are interested in the details and technical pro- visions will read the Congressional Reco~d for Janunrj- 30 and 31 dnd February 1 101 tle full debate on tlie bill CONSUhIERS nITrST REALIZE CREDIT IS EXPENSIVF

I n Lhe meantime however I urge you to c l s what you can to spread the word on the pl~ilosophy of the House hlll which is to strip away the inumbo-jumbo of technical legal terms which mean very precise things to the creditor and nothing whatsoever to the average consunler The consumer assumes tha t somebody il l his s ta te or Federil gov-ernment has laid out clenr and equitable rules for regulating tle credit lndustr and he further nssumes tha t if a percentzge rate is given i t is a inenningfu one But when he tries to figure ou t his actual rate on an actual transaction other than on real estate he fre- q-uently finds he cannot do so dnd thus blames himself for beizg poor in nnthe-matics Perhaps he is But that s not ttle rea- son he is having so much di8iculty under- standing what credit costs him Consumer credit is often deliberately planned t h a t way t o be lncomprehenlble to the customer Even real estate transactions are more con-fusing than they siould he or would 110

uncler H R 11601 Par t of t he fault lies i n the fac t t ha t we

grew up thinking 6 was a fair and rea-sonable rate of re turn on borrowed unoney 2nd we still tend to th ink t h a t is about the figure being charged We dont stop to think tha t the banks are paying 5 on some types of deposits and other savings institutions are paying more-and t h a t i t costs big busi-ness about 6 or more to borrow XIonev is expensive-it is now terribly expensive by any standard Yet when the sign says you can borrow from your credit union a t ap-proximately 614 how many people th ink t h a t is only a fraction of a percentage point higher than General Motors pays Or only 2 more than the bank pays you on a regular savings account

If and when m get a good consumer credit bill through Congress-and I hope i t is more when than ifM-those consumers who are interested enough to try to understand their credit costs and who wish to compare one form of credit offer with another (per-haps discovering i n the process t ha t i t is usually far better to use their own savings and pay on a 30-day or 90-day cash basis) they will iave the informatlon they need in order to make these computations

Bu t a lot of people wont bother 4nd its going to be your job-as consumerists-to educate them to do so The law will be only as effective as you and other intelligent motivated caring professional educators and sociologlsts make i t by stimulating the pub-

X

EXTENSIONS OF REMARKS ANNUAL RATE BIYCLOSURE IS ESSENT1AL

referring fo s notice o n t h e hiiiietin board of the Congressional EmplOyCe8 Fed- eral Credit Union My Cllairmsll on the Ho~tse Committee o n Banking and Currency Congressman Wright Patrnnn of Texas who hfls done more than any American to help make the credit union movement Successful in providing membership group8 with ability t o i~e lptiaemseive6 and each 0tner i n fIiiancia1 matters often describe6 tlle credlt union as being second only to the church fia nn instrument for community goad And I am rtn enthusiastic supporter of credit un - ions too

Most credlt unions make loans to their members for l a month On secured loans i t is often less Of course 1 I month 011 the unpaid balnnce is a n actual rate of 12h a year This is the way i t should be expressed This is the way the House truth-in-leucling bill would require i t to be expressed-ilot just for credit unions of course but for all consumer credit lenders or sellers Annual percentage rate disclosure has ~lways been tlie heart of the t rn th in lending idea first proposed in legislative form by former Senn- tor Paul H Douglas of Illinois eight years ago And the credit unlons I might add s ~ ~ p p o r tthe concept Bu t they do not practice i t themselves--not y e t n o t generally and the reason as we brought ou t in the llear- ings on my bill is t ha t if the credit unions expressed their rate on a n annual basis of 12 while every other credit institution was using ~rtontllly rates or the add-on or dls-count or other method of hiding the real rate the low credit unlon rate would sound fan- tastically higher thnn everyone elses EVEN THE BEST O F CREDIT 1NSTITUTlONS USE

CONFITSING T E R M S

And tha t brings me to the notice on the Congressional Employees Federal Credit Un- ion bulletin board which advertises tha t a t 1 interest a month on the unpaid balance a $75000 loan repayable in 12 months a t $68 00 a month (exccpt for the twelfth lnonth when the balance is less tl1ul $68001 costs ony $4875 in interest The interest the no- tice adcis and I quote ecll~~Is out to ap-proximtely 612 per annum And a n illus- tration given on tho leaflet proves this 61 times $75000 equas 841175

Well I hope elrerone here realizes tha t the rate referred to in his illustration ns 61 per innuin is llot tlle t rue interest rate but rathcr the so-culled acicl-on rate computed on the origillal amoLu11 not on the ~lnpaicl balance as if you had the use of the full Si5000 for 12 months instead of just one month The 171tcrcst mi(per ntltllLtn in filct is lllnost double that g ive~ lin the illustrn- tion-or 12percent l i rncs the monthy rate of 1 on the unparcl bnlri~ce-rather than 615 0

Another illustratiol1 on tlie same bulletin board notice describes what is actually a 9 per year interest rate on a secured loan IS having a n interest charge which equals out t3 0111~4 8 per annuln

Please let me repeat t ha t in using this illustration I am not singling out the Con- gressional Employees Federal Credit Union for doing something a w f ~ l They are follow- i ~ l g exactly the practice of the banks and other onsumer credit institutions in citing as interest rates ratcs which are con-structed on a basis other than the actual or acturial rate Furthermore If nlembers of a credit union are getting this confusing in- formntiorl from a n insti tution they them-selves own md other legitimate lenders also use this subterfuge to make the rate apmar about half of its real size you can imagine what kind of misinformation including com- pletely false inforn~ation consumers often receive from the fringe and gyp elements in the consumer credlt industry

STUONG CONSUMER CUEBIT PROTECTIOH ACT NOT YET ENACTED

Professor Morse has done n remarknbie job i n educating those in the fumfly economics field to the intricate technicalities of con-srlmer credlt terminology and deceptionampand the henrtnga of my Bubcommittee I believe have broadly expanded public awareness i n this field Based on the overwlielmlng p m a g e In the House on February 1of XR 11601 tlie Consumer Credit Protection Act many peQ-pIe now assume the bnttle hasbeen won and we are inevitably going to end up shortly with n strong all-inclus~ve and very effective law on consumer credlt

I a m not a t all convinced tha t such opti- inlsm is justified The Senate passed a bill last July by a vote of 92 to 0 which is only a partial truth-in-lending b i l l -one wlth great gaping loopholes through which a trenien-dous volume of consumer credit transactions can easily be channelled Only one of the five Senators on the Conference Committee has indicated general support for the Strong version of the legislation passed by the House

The Senate bill does not apply to the ad- vertising of credit I t provides no machinery for administrative enforcement-the individ-ual victimized consumer would have to ini- t iate his own law suit to obtain reclress There is not a viord in the Senate blll dealing wit11 the cruel device of garnishment as used in many states by predatory credit outlits preying on the gullible p r and hounding them to what I call economic death-that is clown the path of g~rrnlshment followed by joblessness and then bankruptcy as the only way out

MANY DIFFERENCES 1N HOUSE A N D

SENATE 61LL5

The Sennte blll establishes a privileged sanctuary for a11 transactions in which the credit charge is less than $1000-that would mean almost any consumer credit sale or loan up to about 8110 The creditor in such n transaction would 113t he required to s ta te any ra t e a t all even though he could he charging percentage rates in the hundreds compared to the four to six percent the same consumer now reccives on his savings And Lherc is another privileged sanctuary in the Senate bill for department store revoiving credit-under the Senate bill the rate could be stated merely as r monthly rate of say l ~ rather than a t the true rate of 18 per year

The Hmse bill I am proud to say recog- nized the dangers in these omissions and loopholes I t was probably the most compre- hensive consumer credit bill ever introduced in the C3ngress and it is certninly the strong- est one ever pssed by either House But we face a blttle-a real bnttle-to retain i ts E E F ~ tia1 fea t~l resin Cnnfererce

All Senators and most House Members are being deluged with mail attacking Title I1 of the bill dealing with garnishment This Title restricts garnishment to only 10 of a workers pay over $30 n week We also pro- hibit the firing of a worker because of a single garnishment This does not go nearly as far as Pennsylvania Texas or Florida and several other states have gone in protecting the wage-earner against the tragic conse-quences of harsh garnlshnlent laws But the collection agencies and some of their clients and associates are frenziedly predicting the e n d of consumer credit in this country if we pass a law restricting garnishment to mod- erate and reasonable levels They dont ex-plain llow credit has managed to exist in states which prohibit garnishment entirely

G A R N I S H M E N T TITLE IN J E O P A R D Y

The peoplc who suffer from repeated gar-nishments usually as a result of deliberate overselI by unscrupulous merchants-yes t ha t is the thrust of the testimony we re-ceived on this from highly respected Federal Court bailkruptcp referees who have made

a study of this problem-those people I re-peat who suffer from this contemporary form of debtors prison do not d t e letters t o Members of Congress But those of you in the social work and related fieldk know who these people are and the problems they encounter

Can you help u s t o remove t h e cover of oblivion which hides the unseen suffering in t l ~ f sarea of conalrmer credit abuse so tha t the Senators who will soon be considering th is problem for the first t ime in a piece of national leglslation will be more aware of what we are talking about I n the House on the only test vote we had on garnishment on a Ilousubstantive section of the Title- we barely beat off the attack by a non-record vote of 101 to 98 Had this issue come to a rollcall I a m sure the margin of victory would have been much greater But i t is a new issue in the Senate-ancl only the col- lection agencies are being heflrd from on it over there

There are numerous ocher provisions of tile House bill which are new t3 Senate consicl- eration in connection with truth-la-lending or consumer credit protection legislation and 1 hope that thoee among you who are interested in the details and technical pro- visions will read the Congressional Reco~d for Janunrj- 30 and 31 dnd February 1 101 tle full debate on tlie bill CONSUhIERS nITrST REALIZE CREDIT IS EXPENSIVF

I n Lhe meantime however I urge you to c l s what you can to spread the word on the pl~ilosophy of the House hlll which is to strip away the inumbo-jumbo of technical legal terms which mean very precise things to the creditor and nothing whatsoever to the average consunler The consumer assumes tha t somebody il l his s ta te or Federil gov-ernment has laid out clenr and equitable rules for regulating tle credit lndustr and he further nssumes tha t if a percentzge rate is given i t is a inenningfu one But when he tries to figure ou t his actual rate on an actual transaction other than on real estate he fre- q-uently finds he cannot do so dnd thus blames himself for beizg poor in nnthe-matics Perhaps he is But that s not ttle rea- son he is having so much di8iculty under- standing what credit costs him Consumer credit is often deliberately planned t h a t way t o be lncomprehenlble to the customer Even real estate transactions are more con-fusing than they siould he or would 110

uncler H R 11601 Par t of t he fault lies i n the fac t t ha t we

grew up thinking 6 was a fair and rea-sonable rate of re turn on borrowed unoney 2nd we still tend to th ink t h a t is about the figure being charged We dont stop to think tha t the banks are paying 5 on some types of deposits and other savings institutions are paying more-and t h a t i t costs big busi-ness about 6 or more to borrow XIonev is expensive-it is now terribly expensive by any standard Yet when the sign says you can borrow from your credit union a t ap-proximately 614 how many people th ink t h a t is only a fraction of a percentage point higher than General Motors pays Or only 2 more than the bank pays you on a regular savings account

If and when m get a good consumer credit bill through Congress-and I hope i t is more when than ifM-those consumers who are interested enough to try to understand their credit costs and who wish to compare one form of credit offer with another (per-haps discovering i n the process t ha t i t is usually far better to use their own savings and pay on a 30-day or 90-day cash basis) they will iave the informatlon they need in order to make these computations

Bu t a lot of people wont bother 4nd its going to be your job-as consumerists-to educate them to do so The law will be only as effective as you and other intelligent motivated caring professional educators and sociologlsts make i t by stimulating the pub-

llc to defend ltseli against exploitation and deception

1know you will do your best

Tires Discounted uae of Aceideats

Ncrthwestern

TUTE STUDY INDICATES

EXTENSIONS OF REMARKS

least 9984 percent perlod coped succe 60000flat tlres on

possible t o interview t victlms nor t o locate tires involved a

Drivers often blam dents on non-

Drlvers appear to h1ame about two-and-one-haf tlrnes a s n1lny accidents on tire disablements is are justifitd 3nker said Toll- way police ~ccepted about two ou t of three of the drivers exp lnna t io r~~ in t he surrfey

Bu t intensive follow-up study by Baker showed t h a t a nlinimum of 5 percent and n nlaxiinum of 15 perccnt lf the vehicles wlth a lint tire after an ccidcnt could h~ye had I flnt tire before the acc1dnt

And from our dnta Were is no reason t o helieve tha t accidents fol owing tire disablc- n ~ e n t s are more severe llan other motor-vehicle accidents on the T )llu7ay Baker sald

Despite the fllll fencilig of the Tollway nimnls contributed to rlore than twlce a s innny ~ccidents s f lat ti~esStray deer con- tibuted to 42 ncciclcnts covs to 30 horses to two and n pig t o one

Of 1746 cars inspected a t Tollwny service areas in Northwesterns sudy 607 1348 per-cen t ) had one or more tres vrllich failed to meet miilinlum s ta te nnc tire industry rec-ommended inspection stalidards for infintion load tread wenr cracks and blisters

Nearly 6 percent of he tires inspected

Rd WRS CO-

c~uthoredby G Declan will he published later

areas during fall 1966

t o go flat include

ItBely togo flat as 1039 In or more 4 timer ns likely

Rear ttres 64 pe flat tires sor- veyed by the S t a t d Baker were

Blowouts were nc more llkely t o cause accldenLs than flats

Two-ply tires wltll four-ply ratlngs were no more likely t han other tires to be in- volved i n nccldents

The new s tudy c )nfirnled Eakers Im-

single-vrhlcle acciden s during 1964 on U S 66 a comblnation lirnited-access and non-llnlited-access express road conilectm~ Chi-cago and Los Angelcs

He f o t ~ n d thnt tlres mere reported to have contrilgtuted to 11 prcent of the single-vehicle nccidents Thls figure was clerived from quescionn~ires illed o ~ t t by coopera-t ing higllwny patrol lilvestigators wlthout any actunl exnnl innt~gtn of tlres after accl- dents Insprction of the actunl tires u-ould probnhly have led to a lower figure in t h e route 66 study Baker said

Elementary and Sec Education Act

HONPETER 7 RODINO JR O F NF JERSEY