National Conference of Commissioners on Uniform State Laws: Financial report, dated January 17, 1969- Proposed "Freedom of Entry" amendments to Uniform Consumer Statement before the Judiciary Committee of the Massachusetts Letter to Betty Furness, dated October 2, 1968. Statement from Congressional Record, February 24, 1969, showing position of CUNA International on the Uniform Consumer Credit Pierce, Prof. William J., prepared statement--. President's Consumer Advisory Council, position statement on the Uni- Samuelson, Dr. Paul A., statement before the Committee of the Judiciary of the General Court of Massachusetts, supporting the Uniform Con- "Thirty-Six Percent Too Much? Too Little," editorial from the Kansas Consumer Credit Journal, summer 1967___ U.S. Savings and Loan League, comments on regulation Z Warren, Prof. William D., prepared statement_ "What You Ought to Do About Federal Reserve Regulation Z," pam- phlet issued by the Board of Governors of the Federal Reserve Board.. CONSUMER CREDIT REGULATIONS (Proposed Uniform Consumer Credit Code) TUESDAY, FEBRUARY 25, 1969 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CONSUMER AFFAIRS OF THE COMMITTEE ON BANKING AND CURRENCY, Washington, D.C. The subcommittee met, pursuant to notice, at 10: 10 a.m., in room 2128, Rayburn House Office Building, Hon. Leonor K. Sullivan (chairman of the subcommittee) presiding. Present: Representatives Sullivan, Stephens, Gonzalez, Minish, Hanna, Dwyer, Halpern, Williams, and Wylie. Also present: Charles B. Holstein, professional staff member; and James F. Doherty, counsel. Mrs. SULLIVAN. The subcommittee will come to order. The Subcommittee on Consumer Affairs today takes up for discussion and enlightenment a proposed model State law, the Uniform Consumer Credit Code. If adopted by any of the States, this code would supersede virtually all existing laws within that State on all aspects of consumer credit regulations, such as those designated as: Small loan acts, personal loan acts, consumer loan acts, and acts licensing personal loan lenders, sales finance companies and consumer finance companies; installment loan laws; retail installment sales acts, motor vehicle installment sales acts, all goods acts; revolving sales credit acts; revolving loan acts; truth-in-lending acts; home solicitation sales and loan acts; home improvement sales and loan acts; insurance premium financing acts; and acts imposing maximum charges for credit and general usury acts. In addition, the proposed Code would affect all State laws on residential and farm real estate transactions involving mortgages. Generally, a committee of the Congress would not concern itself directly with provisions of proposed State law unless they touch on, or prempt, or undermine, or otherwise affect Federal laws on the same subject, or unless they indicate the need for passage of new Federal laws. Except for residents of the District of Columbia, there are no Federal laws of general applicability comparable to the vast preponderance of matters involved in and covered by the Uniform Consumer Credit Code because, until very recently, Congress had considered all laws in this field as being exclusively of State interest. The enactment on May 29, 1968, of the Federal Consumer Credit Protection Act, Public Law 90-321, which originated in this subcommittee less than 2 years ago, changed all that. This new Federal law incorporates not only the Douglas truth-in-lending concept, but goes far beyond interest rate disclosure to include regulations of many aspects of consumer credit never included in the Douglas bill, including the advertising of consumer and mortgage credit, extortionate extensions of credit, restriction of garnishment, rescission of sales contracts under certain conditions, and so on-the first Federal laws of general applicability ever passed on these subjects. So, we no longer have a clear line of demarcation between areas of exclusively Federal and exclusively State concern in the consumer credit field. The Federal Consumer Credit Protection Act of 1968 injected Federal standards into some broad area of consumer credit previously regulated only by the States. This occurred at the same time that the National Conference of Commissioners on Uniform Laws had been in the process of trying to perfect a comprehensive Consumer Credit Code on which it had been working for 4 years. The Federal act we passed last year provides machinery by which individual States can obtain special exemption from specific provisions of the Federal law if they have State laws on those specific points which are at least equal to the Federal law in the degree of protection accorded consumers, and if there is adequate provision for enforcement of those State laws. Furthermore, where the State law in one or more particulars exceeds the consumer protection standards of the Federal law, such as on garnishment to use one example, the stronger protections of both the Federal and State law apply within that State, as long as the two laws are not in conflict. Thus, Pennsylvania, Florida, Texas, and other States which prohibit-or virtually prohibit-garnishment, and States which permit less of the worker's pay to be garnished than does the Federal law, are subject to the Federal law garnishment title only to the etxent that the Federal law provides some additional protection to an individual debtor that the State's own law does not. This is the backdrop against which we now want to examine the proposed Uniform Consumer Credit Code in these hearings. We are, of course, deeply interested as a Consumer Affairs Subcommittee in how well the proposed Code protects consumers in areas not covered by Federal law, but our main concern right now is the possible impact of this proposed State law on the Federal statute. We are also interested in pursuing the possibility of enacting amendments to the Federal law-legislation dealing with some of the matters covered so far only in State law. What we are looking at primarily is what this Code would do to the intent and spirit and scope of the Federal Consumer Credit Protection Act, particularly the titles dealing with truth-inlending, credit advertising, garnishment, and extortionate credit. There is a further aspect to our concern in this matter of State laws. Title IV of the Consumer Credit Protection Act created a National Commission on Consumer Finance to make a 2-year comprehensive investigation into the entire field of consumer credit and to recommend any additional legislation which might be needed to protect consumers in many of the areas which are also covered in the proposed Uniform State Code. Has sufficient research gone into this issue to enable the State to act knowledgeably at this time? There is now a drive under way in nearly all of the State legislatures to enact the proposed Uniform Code this year. One of the major reasons give by the proponents of the Code for rush action in the legislatures is that such a step would enable the States which do so to preempt the truth-in-lending field before the Federal law takes effect July 1. It is not likely that this would happen. The Board of Governors of the Federal Reserve System has not yet issued its regulations on the standards which would be followed in exempting any class of consumer credit transaction in any State from the Federal law. But we do have the flat statement from the Board that the Code, as it now stands, would not lead to automatic exemption from Federal truth-in-lending in any States which adopts it. We will have further testimony on this at a subsequent hearing when Vice Chairman J. L. Robertson of the Federal Reserve will appear before us to discuss the Federal Reserve's regulation Z just issued this month to implement Federal truth in lending. Nevertheless, I know that some proponents of the Uniform Code in some State legislatures are calling for immediate consideration and passage of the Code on the grounds that the States must act before July 1 because the Federal truth-in-lending law requires some action by the States. This is not the case. These hearings should help to make that point clear, so that none of the State legislatures is stampeded into passing a very broad, very comprehensive, very detailed, very complex State law without full and proper consideration and without a complete understanding of what the proposed Code would do to existing State laws on consumer credit regulation. I said recently in a speech which discussed this issue that, in some States, the proposed Code might be a significant step forward from very poor laws in consumer protection, while in many others it would be a long step backward from their present credit laws to safeguard the consumer interest. I think this should be documented for each State before its legislature acts on this matter. Our witnesses today and tomorrow are recognized experts on consumer credit legislation-both State and Federal. Today's witnesses were suggested by the Consumer Federation of America, an organization which represents a great number of consumer oriented national and State organizations. The Consumer Federation of America strongly opposes the proposed Uniform Code. Tomorrow, our witnesses will represent drafters of the Code, the National Conference of Commissioners on Uniform State Laws, a 90-year-old, highly regarded organization created by the States themselves to research and prepare uniform State laws on highly complex issues. Out of these hearings, we will develop a record which will be helpful to the legislatures and to the public in the consideration of the proposed Code; but essentially, as I said before and as I again emphasize, our main purpose is to study the impact of this Code on existing Federal law, and on the possible development of new Federal laws. As the hearing progresses, I will offer for inclusion in the record various relevant documents, statements, and other material. For the time being we will incorporate into the record by reference the Proposed Uniform Consumer Credit Code which all members of the subcommittee have before them, and will print the text in full. It will be essential to the understanding of the printed testimony to have the text of the Code printed as part of the hearings. (The text of the Uniform Consumer Credit Code may be found on p. 221.) Before proceeding, do any members of the subcommittee wish to make an opening statement? Mrs. Dwyer? Mrs. DWYER. No. Mrs. SULLIVAN. Mr. Gonzalez? Mr. GONZALEZ. No. Mrs. SULLIVAN. Mr. Minish? Mr. MINISH. No. Mrs. SULLIVAN. Then, we will now call our witnesses, and I see they have already gathered at the witness table as a panel. We welcome Mrs. Erma Angevine, executive director of the Consumer Federation of America, an outstanding leader in the consumer field, who was an excellent witness before this subcommittee on H.R. 11601 in August 1967, when she appeared as a spokesman of the Women's Division of the National Rural Electric Cooperatives Association and contributed enormously to our understanding of the problems of rural households in the consumer credit field. Mrs. Angevine is now the executive director of a national organization headed by the Reverend Robert J. McEwen, of the Economic Department of Boston College, who also testified before us in 1967. Mrs. Angevine, we will ask you first to introduce your panel and then call them in whatever sequence you prefer to discuss the various specific aspects of this issue. We have asked that the individual presentations be held to not more than 10 minutes each. We will include the entire text of each prepared statement in the printed record, but_we want at this time only the highlights without the detailed technical or legalistic discourses. The technical details are in the prepared statements, and we have those. And in the questioning, we intend to delve into those details. If you will now proceed, Mrs. Angevine, to introduce your colleagues and tell us something of their background and then have them make their oral statements. STATEMENT OF ERMA ANGEVINE, EXECUTIVE DIRECTOR, CONSUMER FEDERATION OF AMERICA Mrs. ANGEVINE. Thank you. I am glad to be here to represent the Consumer Federation of America. The Consumer Federation of America is an organization of 136 local, State, and National organizations in 37 States and the District of Columbia. Our board of directors has members representing 17 different States, and one of our board members is a State senator. I wanted to clarify that, so that you would understand we are not opposed to State laws. As a matter of fact, our leadership is largely from different States. I am accompanied today by three experts, and I think in all fairness to one of them, I should point out he joined us only this morning. We have Richard Elbrecht, who is a legal aid society attorney from San Jose, Calif., who edited a compendium on the Code for the Con |