the consumer in circumstances in which, in fact, the consumer could hardly read much less understand and utilize in any informed decision making process. It must be said, that the consumer reached the point of overload long ago.

However, as a curious observation to the understandable and resultant confusion of the consumer, many observers have noted a sharp rise in Truth-in-Lending cases in the United States. Some reports have included figures that it has increased 500% in the last four years. In July of 1976 there was reported to be 2,200 Federal cases arising out of Truth-in-Lending litigation in the Federal District Courts. Further, there are a number of cases in State courts, both as original actions and counterclaims. addition, that federal figure does not include cases which are never filed but are settled before being filed. However, in Oklahoma we have not seen a sharp rise in Truth-in-Lending cases. As I understand it, the cases in the United States courts are concentrated in only three districts.

In

I have examined the various proposals which are before Congress suggesting methods to accomplish simplification of Truth-in-Lending. I am confident that Congress in its wisdom will find the proper combination of amendments to accomplish this needed revision. In general, however, I urge Congress to retain the language in the Act that provides that a State with substantially similar law and regulation may be granted an exemption and thereby maintain enforcement authority in this area. I am most impressed with Section 3 of Senate Bill 1312 concerning the inclusion of State Administrative authority over any creditors doing business in a

state that has been granted an exemption. It is recognized that notion is innovative and progressive. However, I feel that idea is extremely compatible with a realistic recognition of the realities concerning State and Federal administrative responsibilities and the future success of the credit industry.

It must also be observed that the main thrust of the proposals of the Federal Reserve Board through the staff draft of the bill to simplify certain provisions of the Truth-in-Lending Act is laudatory. It appears that, for the most part, the draft realistically puts forth concrete proposals as opposed to vauge and abstract notions of simplification.

In fact, my overall observation is that some aspects of each of the proposals before this committee contain desirable plans to achieve the original concept of key credit disclosures without seriously eroding the important consumer protections contained in the present statute and regulations. Certainly, there are those, even creditors, who favor no change at all. Some feel that they have now mastered the complexities of the regulations and that any attmept to simplify will result only in a new set of requirements which require substantial retraining and produce another period of

uncertainty.

One last observation must be made that is perhaps overlooked in the scramble to improve the situation. That is, concrete proposals should also be made to increase the instance of consumer awareness of the protections set out in the statute and regulaCertainly, a reduction in the number of disclosure information must have beneifcial results toward that goal; however,

tions.

much more need be done in the effort to educate the consumer in the economics of consumer credit.

Even an apparent awareness by consumers of credit rates charged does not necessarily mean that they make intelligent decisions. Our experience in Oklahoma with consumer education has been successful and productive. We have utilized every technique in the educational structure in the State so that the consumers have a better chance of having the marketplace information they need to make wise shopping decisions and to use it effectively. Congress should en

courage the development of innovative consumer education programs more relevant to the marketplace. As examples, Congress should support the development of improved curricula to prepare consumers

i

for participation in the marketplace. Federal agencies should continue their emphasis on adult education for low income consumers and develop useful programs for the elderly.

Perhaps then the original goal of key credit costs disclosure will have more meaning to the bewildered consumer. True and meaniful shopping for credit available in the marketplace may then become a reality.

Thank you.

Senator RIEGLE. Thank you. Mr. Connell.

STATEMENT OF LAWRENCE CONNELL, JR., BANK

COMMISSIONER, STATE OF CONNECTICUT

Mr. CONNELL. Senator, I would like to begin by responding to some of the remarks with respect to Mr. Clendenen of Connecticut. Mr. Clendenen is considered "Mr. Truth in Lending" in Connecticut, and V without question is the outstanding consumer lawyer in the State, respected by his peers in the bar, as his membership and chairmanship in the bar association reflects, respected by the consumer groups, with whom he has worked closely over the years, and respected by the banking industry, who is now consulting him for help in this area of consumer credit.

He understands and perceives in a most sophisticated fashion how the consumer should receive fairness under truth in lending in Connecticut and in general. I think his remarks with respect to the effect that the complex truth in lending disclosures in some part are greatly attributable to an insistence by creditors that they continue the obsolete and in some cases harsh and deceptive practices, has some merit.

I guess as we go forward we are balancing the frequency of the use of those practices versus an ability to encourage creditors to move toward a similar disclosure to get the objective of disclosure and understanding of the cost of credit. As I listened to him speak and as I thought through the other speakers' concerns, I think that as we go forward to simplify the truth in lending disclosures, there will probably have to be a parallel movement in terms of direct dealing with the unfair and deceptive credit practices that are now either traditional or will be conceived in the future. This can be done on a case-bycase basis under the Federal Trade Commission type statute on the Federal level, and the State FTC acts. We have been doing some of this in Connecticut under the Consumer Protection Division.

Third, his reference to the effective competition I think is a very valid one, and is a healthy sign. In Connecticut probably the harshest creditors are the second mortgage lenders, and we have attempted to blunt their effect by permitting competing lenders to engage in the second mortgage lending business on terms that are fairer to the con

sumer.

We are going to begin to see and have begun to see the movement of people to deal with those who are giving the fairer prices.

Lastly, in terms of the remarks with respect to the frequency of litigation by his firm, I would say that it is because of his respect in the consumer protection area that these cases have been referred to him. But I notice that the obligation to fully enforce the consumers' rights under the present truth in lending extends across the spectrum of the bar. I remember just a few months ago what I call a conservative lawyer, who was a former trust department attorney, who took a case after he retired in the public advocacy area, and came to me and said "I have a violation in truth in lending and I am going to have to insist that the creditor not pursue my client." That was an obligation he had.

So I don't think it is a matter of one aggressive attorney, I think it is an obligation across the bar in Connecticut.

Let me quickly go to these bills and touch on a few points in my written statement.

With respect to S. 1653, I think the only points I would like to make is a recognition under section 3 that the Federal Trade Commission procedures which were designed for cases really among businesses who could afford lengthy litigation and deal in complex economic problems, is probably not appropriate for consumer type issues.

I am pleased to see a simple administrative procedure to redress consumer situations, because they are not that complex and they require, because of the consumers inability to defend himself, a more expeditious procedure.

I would like to go directly to S. 1312, and commend the committee for its efforts on that bill, and echo Commissioner Greenwald's concern about the ability to reach the exemption over federally chartered institutions. I received just yesterday morning a letter from the Board of Governors of the Federal Reserve essentially indicating that the only roadblock to us being able to have a complete exemption over federally chartered institutions in Connecticut is the problem with the Federal agencies and their resistance to the examination by the State of Connecticut.

I guess you received testimony on this yesterday. I really believe that the present position of the Federal agency's outdated interpretation of the McCulloch principle of interferring with the Federal purpose. These are privately owned and privately managed banking institutions operating in the State and by coincidence under Federal charter and consumer protection is a local matter in Connecticut and has been conceded to be so by the Federal Reserve.

I believe your proposed amendment to the Truth-in-Lending Act is going to be vital for us to properly protect the citizens of Connecticut, and I hope that that section is adopted.

I would say that there is one slight technical amendment to that section that I would suggest. I believe it savs if a State has an exemption, it shall examine the federally chartered institutions. Possibly the word "may" is a little broader and looser and would be more effective in the sense that some State agencies might defer to the Federal agencies to conduct the examination. Just a slight amendment there I think would be proper.

There is an aspect of the exemption definition in the present law that I believe needs to be amended and that is that the present law requires the State law to be substantially similar. That has been interpreted to be identical. I believe this is somewhat obsolete language and that the subsequent consumer protection laws, such as equal credit opportunity, home mortgage disclosure, consumer leasing, use the terminology "subject to requirements substantially similar or give greater protection." And it would be worthwhile amending truth in lending to be consistent with the latter acts. I believe that would help a number of States who have been denied exemption because their laws are slightly different. This might also resolve some of the problems that Mr. Boyle indicated in terms of two different types of disclosure. The stronger one governs, obviously.

Mr. McCaffrey suggested this to me some time ago, so I have to give him credit for observing that aspect of the law.