14. Please place an "x" on one line below to show the approximate yearly income of your entire household before taxes, including all salaries and other income. 17. On the average, how many times a month do you and others in your household use credit cards or credit accounts? Less than 5 times a month 5-9 times a month 10-14 times a month 15-19 times a month 20 or more times a month 18. In an average month, how much do you usually charge on all of your credit cards? $. 19. Do you have a telephone? Yes No 20. Have any of the credit card bills sent to you in the past year by the following types of credit card issuers contained mistakes? 21. Are there any billing practices of credit card issuers that you would like to see changed? Yes No If yes, please explain 22. When you decide to pay only part of your balance on your department store credit account, what is the annual percentage rate of finance charge (APR), per year? Senator PROXMIRE. Thank you very, very much. Our next witness is an old friend of the chairman, Mr. Arthur Wood, the chairman of the board of Sears, Roebuck. I have known Mr. Wood for longer than I think he would like me to say. STATEMENT OF ARTHUR M. WOOD, CHAIRMAN OF THE BOARD, SEARS, ROEBUCK & CO., ACCOMPANIED BY LLOYD MCCLELLAND, SECRETARY AND GENERAL COUNSEL, AND H. R. LIVELY, MEMBER OF GENERAL CREDIT OFFICE Mr. WOOD. Not at all, Senator. Senator PROXMIRE. Forty years at least. Mr. WOOD. I think we both still think young, I hope. [Discussion off the record.] Senator PROXMIRE. You didn't even need transplants to look young, either. Mr. WOOD. You and I know it is hereditary. [Discussion off the record.] Senator PROXMIRE. Go right ahead. Mr. Wood. Thank you, Senator Proxmire, Senator Bennett. I would like to introduce my colleagues, Lloyd McClelland, who is vice president and general counsel of Sears, and Randy Lively, who is a member of our general credit department in Chicago. It is a privilege to appear before you, and I appreciate this opportunity to speak briefly with respect to S. 914, and S. 1630. We at Sears feel that the need for this type of legislation is diminishing. Responsible remedial action by the business community, including Sears is, in our judgment, eliminating the need for legislatively mandated recourse for billing error complaints. A bit of historical perspective on whether there is a need for billing complaint legislation, and I would like to review the specific provisions of the two bills then. During the latter part of the 1960's, we had a number of billing error problems, and attention was focused on billing practices of creditors. There were a number of reasons why billing error problems aroused the ire of the public and were being aired in the public forum. A new segment of the credit card industry, the bank credit card, was in the throes of becoming established and at the same time established creditors had to turn to the use of computers in order to contain escalating costs, and to keep pace with the growing demand for credit. The computer, rather than being hailed as a very fast billing machine, was shrouded in an aura of mystery and was castigated from every quarter as a villainous device. In reality, it was only one of people willing to use a new and better tools. Certainly, the transition was difficult for both the companies involved and their customers. While these conversions were handled in a very professional manner at Sears, we were not immune from mechanical problems or some frayed relationships with our customers. During this transitory period, we all heard horror stories emanating from consumer encounters with various segments of the consumer credit industry. It is understandable that there was reason to chide and to seek correction of what appeared to be a disregard by business for the customers' billing problems. In 1972, the Senate passed a bill designed to require creditors to respond promptly to inquiries from their customers and to correct any errors found to exist. However, the bill moved no further during the 92d Congress. As business continues its efforts to correct internal problems, the degree and extent of billing error problems has significantly decreased. It is our experience that there are fewer problems and complaints today than there were just 1 years ago. It is my firm belief that the business community will continue to act responsibly, and that by this time in 1974, the need for legislation will be even less than it is now. We do recognize that there will always be an element in the business community which operates on the fringe of ethical practice. Despite the fact that the vast majority of creditors provides efficient and accurate billing services, we recognize the responsibility of Congress to evaluate the necessity for regulation in order to control marginal credit operators. Our principal concern, quite frankly, is that the increased. regulation may lessen competition among creditors and inflate credit costs unrealistically. Legislation should direct itself to the correction of abuses, but at the same time, it should not impose restrictions on commerce which unnecessarily add to the cost of doing business. Nor should it have the effect of narrowing or eliminating choices available to the consumer. We hope, therefore, that if it is the judgment of this committee that a law is necessary, the legislative process will fully develop and be responsible to all of the consequences of the pending bills. We have carefully reviewed both S. 914 and S. 1630 and find they are similar in a number of their provisions. Both bills provide for semiannual notice to the consumer of his credit billing rights. Anyone in favor of full disclosure-as we have been historically-must be sympathetic to such provisions. However, requiring such disclosures on a semiannual or even an annual basis would again represent a cost out of proportion to the benefits to be gained by consumers. I refer you to exhibit I for analysis of these costs. Senator PROXMIRE. Without objection, that exhibit and the other exhibits will be printed in the record. [The exhibits are reprinted as follows:] 96-687 - 73 - 22 SEARS, ROEBUCK AND CO. EXHIBIT II REVOLVING CHARGE ACCOUNT AND SECURITY AGREEMENT I agree to the following regarding all purchases made on my A. I will pay the entire New Balance within 30 days of the (a) The Average Daily Balance is determined by divid- (b) The Balance Outstanding for each day of the (2) FINANCE CHARGE will be determined by applying (3) When the Average Daily Balance for a monthly billing period is $33.00 or less, the FINANCE CHARGE for that billing period, at Sears option, will be 50¢ Instead of the amount computed above. (4) No Finance Charge will be assessed: (a) In a monthly billing period during which there was (b) In a monthly billing period during which payments (c) On unpaid Finance Charge; or (d) On purchases during the monthly billing period in (5) I will pay the deferred payment price for all pur- If the New Balance is: The Minimum Payment will be: I have the option of paying more than the minimum (6) if I fail to pay any Minimum Payment when due, Sears 2. I agree that the Finance Charge and other credit terms will 3. Sears is authorized to investigate my credit record and report to proper persons and Bureaus my performance of this agreement. 4. Sears walves the right to retain or to acquire any lien aris- NOTICE TO BUYER: (1) DO NOT SIGN THIS RECEIPT OF A COPY OF THIS SECURITY 10097-610 Rev. 9/72 FOR COMPANY USE ONLY |