wo certified copies received and filed, and one such copy forwarded to the Commission on Official Legal Publications accordance with Section 4-172, as amended, of the General Statutes. One copy of all regulations for adoption, amendment or repeal, except emergency regulations, must be presented to the Attorney General for his determination of legal sufficiency. Section 4-169 of the General Statutes. Seventeen copies of all regulations for adoption, amendment or repeal, except emergency regulations, must be presented to the standing Legislative Regulation Review Committee for its approval. Section 4-170 of the General Statutes. Each regulation must be in the form intended for publication and must include the appropriate regulation section number and section heading. Section 4-172 of the General Statutes. Indicate by "(NEW)" in heading if new regulation. Amended regulations must contain new language in capital letters and. deleted language in brackets. Section 4-170 of the General Statutes. STATEMENT OF JOHN E. QUINN, SUPERINTENDENT, MAINE Mr. QUINN. Mr. Chairman, I will skip my written statement- Mr. QUINN. I will go directly to what I perceive to be the heart of the problem at this point. Section 15 of S. 1312 deals with the question of consumer education. In the truth-in-lending declaration of purpose we were told that competition among various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. The informed use of credit results for an awareness of the cost thereof by the consumer. What has been done, however, to effectuate that purpose? We all know that truth in lending has kept a number of Federal bureaucrats happily answering a myriad of technical questions, while creditors' lawyers have been kept busy thinking of complicated questions for the bureaucrats to answer. It has kept a set of lawyers happily suing creditors who may not have asked the bureaucrats the right question in the first place. What about the original intent of providing consumers with the tools necessary to shop for credit? Prior to 1969, if someone told you they charged 7 percent, you didn't know if it was an add-on, discount or the annual percentage rate. There was no way to compare the cost of credit. Truth in lending required everyone to express the cost of credit in a standardized recognizable form so that consumers would finally know what they were getting themselves into. Despite the millions of taxpayers' dollars spent to insure standardized credit cost disclosures, does anybody in this room seriously believe that widespread credit shopping has become a reality in America? We all know this is not the case. Something is missing. The Government has failed to supply consumers with the tools necessary to take full advantage of the tremendous potential for savings provided by standardized truth-in-lending disclosures. All of the waves of cold gray opinions and regulations manufactured by the Federal Reserve Board cannot hide the fact that the Board has exhibited a singular lack of appreciation for the common intelligence of our people in the area of credit shopping. The Federal bureaucracy has done virtually nothing to provide consumers with the basic information necessary for them to take full advantage of the truth-in-lending credit cost disclosures. This basic information about the comparison cost of credit is equally as important as the disclosures themselves. If a consumer is not concerned about the APR and the total finance charge until the loan disclosure statement is signed, then the disclosures are meaningless. Informed credit decisions take place in the home, not in front of a loan officer. We believe we have provided the consumers of Maine with this basic credit cost comparison information. This information is contained in the "DownEaster's Pocket Credit Guide." The guide describes how to shop for credit, but, more importantly, contains a series of easily read tables showing at a glance the actual cost of credit at a variety of interest rates and terms. This represents our attempt in Maine to appeal to the enlightened self-interest of our citizens. Whenever the availability of the credit guides is featured by State or national media, we are flooded with requests. Both Changing Times and Woman's Day magazines will inform their readers about the guide this summer. Fifty thousand copies have been distributed to Maine consumers. We have sold an additional 27,000 copies to consumers across the country. We have come to the conclusion that this is the type of information people want and need in order to take advantage of the potential savings offered by truth-in-lending disclosures. We did not copyright the Down Easter's Guide in hopes that others would take up the idea. Well, others have. We have just received word that the Armed Forces Information Office has ordered an initial printing of 120,000 copies for distribution to military personnel, and have requested bid information on 400,000 copies. Banks, newspapers, and credit unions across the country have reprinted the credit cost tables for their customers. However, the most obvious candidate for printing similar tables, the Federal Reserve Board, has shown little interest in this form of consumer education. Evidently they feel more comfortable with publications informing doctors and lawyers how to avoid the snares of the Equal Credit Opportunity Act. We are beginning to see the value of the credit cost tables in Maine, where credit shopping has become a reality. Rate consciousness has grown to the point that it has encouraged significant rate competition, particularly among the banking community. This has resulted in a growing volumn of consumer loan rate advertising which in turn has reinforced the increased awareness among borrowers of the benefits of credit shopping. Advertisements for new car loans at 814 percent to 834 percent APR are daily occurrences in many areas of Maine. The State's largest bank joined the bandwagon with a 1-year 74-percent personal interest loan. Competition is bringing about the development of simplified loan forms throughout the credit industry. It must become evident at some point that the task of consumer education to fulfill the promise of truth in lending is far too important to be left to the Federal Reserve Board. We are hopeful that the Congress will mandate a far more definitive and realistic approach in the future. With respect to the proposal set forth in section 15 of S. 1312, I can only suggest that the fluctuations of interest rates in a competitive market would render this approach wholly unrealistic. To go back and touch on a few brief points, section 4 of S. 1312 would prohibit creditors from imposing a finance charge in excess of the lower of the disclosed APR or the finance charge. We have been doing this in Maine since May of 1976, with what I believe is encouraging results. In 1976 27 creditors were ordered to make rebates based upon this opinion, advisory opinion. In 1977 we have uncovered to date only one creditor in violation of this opinion. I think this focusing of enforcement together with simplification in terms of lessening of liability on the creditor's part go a long ways toward eliminating the aura of "Catch-22," and allowing our State government to enforce the law, and also to eliminate the principal excuse of creditors for noncompliance with the law. Just two last brief comments. First dealing with S. 1501, which I consider to be the dream of every hard core creditor in the country. Section 7 of that bill dealing with the right of rescission and section 15 dealing with the choking off of State regulation of credit practices would, I believe, put a considerable restraint on the great strides that have been made in the State test tubes in this area. I think this is the fear of creditors, they see the possibilities, the potential for experimentation in the individual States and this particular potential is unsettling to them. From that standpoint I believe S. 1501 is their answer. I thank you for the opportunity to address the committee this morning. [The complete statement of Mr. Quinn follows:] I wish to thank Chairman Riegle for his invitation to testify before the Subcommittee this morning concerning the various proposals to simplify and reform Truth-In-Lending. Senate Bill #1312 submitted by Senator Proxmire offers a number of proposals which I believe may improve the existing law. Section 4 of Senator Proxmire's bill would prohibit creditors from imposing a finance charge in excess of the lower of the disclosed APR or the finance charge. If enacted and enforced, this provision would represent a substantial improvement in the federal law by focusing enforcement efforts upon these two primary disclosure elements. I base this belief upon our experience in Maine where we have imposed this same restriction since May 12, 1976. On that date, I issued an administrative ruling (a copy of which is attached to this statement) setting forth the Bureau of Consumer Protection's policy that charging a finance charge in excess of the lower of the disclosed Four seasons for Me. |