(ii) the amount of the charge if it is required to be included in the amount of the credit service charge (paragraph (c) of subsection (2) of Section 2.202), and the resulting amount and percentage rate are disclosed as required by this Part;

(i) amount financed (sum of amounts stated in paragraphs (d), (e), (f), (g) subparagraph (i), (h);

Reply of Sponsors. See the proposed amendment to Section 2.202. Further, even if the policy reflected in these amendments were accepted, there is no need to disclose an insurance charge separately if it is included in the finance charge and the total does not exceed the maximum rate.

SECTION 3.202— Add new paragraph (2)(c):

(c) with respect to all insurance not included within paragraph (a) or paragraph (b), if the charge for insurance is added to and included in the loan finance charge otherwise permitted by this Part, and if the resulting amount and percentage rate of the loan finance charge are disclosed as required by the provisions on disclosure and advertising (Part 3).

Reply of Sponsors. See the Reply of Sponsors to the proposed amendment to Section 2.202.

SECTION 3.306

Amend paragraphs (2)(d) and (f) to read as follows:

(d) brief description of insurance to be provided or paid for by the lender including the type and the amount of the coverages, and if a separate charge is made

(i) the amount of the charge if it is not required to be included in the amount of the loan finance charge (paragraphs (a) and (b) of subsection (2) of Section 3.202), or

(ii) the amount of the charge if it is required to be included in the amount of the loan finance charge (paragraph (c) of subsection (2) of Section 3.202), and the resulting amount and percentage rate are disclosed as required by this Part;

(f) amount of principal (sum of amounts stated in paragraphs (a), (b), (c), (d) subparagraph (i), and (e);

Reply of Sponsors. See the Reply of Sponsors to the proposed amendment to Section 2.306.

5. MISCELLANEOUS PROPOSED AMENDMENTS

SECTION 3.513

Substitute the following new section:

(1) No licensee shall conduct the business of making loans under this Part within any office, suite, room or place of business in which any other business is solicited or engaged in or in association or conjunction with any other business, unless authority to do so is given by the Administrator. Upon recept of written application for authority to do so, the Administrator shall investigate the facts and, if he finds that the character of the licensee and the nature of the other business warrant belief that conduct of the other business would not conceal or facilitate violation or evasion of this Act or of rules lawfully made under this Act, he shall make an order granting the authority. If he shall not so find he shall make an order denying the authority.

(2) No licensee shall conduct the business of making loans under any name, or at any place of business within this State, other than stated in the license.

Reply of Sponsors. Subsection (1) embodies the same substantive principle as the Code section, but by requiring a prior grant of authority places the burden of proof on the licensee, throws the weight of bureaucratic inertia against the licensee, and increases the discrimination against licensees as compared with competing lenders. Subsection (2) implements the restrictive policy embodied in proposed new Section 3.503.

SECTION 5.103-Insert after "goods" in subsections (2) and (3) · “other than a motor vehicle”.

Reply of Sponsors. This section, restricting deficiency judgments in consumer credit sales where the cash price is $1,000 or less, has been controversial. Consumer representatives have demanded such restrictions, and some states have enacted them. Used-car sales are perhaps the principal type of sale in which abuses have been reported. The amendment would exempt used-car sales from the restrictions. If the principle of the section is accepted, used-car sales should be the last type of sale to be exempted.

SECTION 6.201

Change first line to read:

This Part applies to a person engaged in this State in the business of making consumer

Reply of Sponsors. The amendment adds the words "engaged in the business of," doubtless for the purpose of clarification, but it is unnecessary. The definition of "consumer credit sale" in Section 2.104 is limited to credit granted by a person "who regularly engages as a seller in credit transactions of the same kind." Similar limitations are found in the definitions of "consumer lease" (Section 2.106) and "consumer loan" (Section 3.104).

6. CONCLUSIONS

For the reasons noted, the Sponsors consider that the above suggested amendments fail to recognize major shifts in credit practices already in existence and which undoubtedly will accelerate in the future; are basically unsound in principle; would materially injure if not destroy the integrated structure of the Code; are not in the public interest; and should be rejected by any state legislature to whom the amendments are presented.

The Commonwealth of Massachusetts

Commission on Uniform State Laws

ROBERT BRAUCHER
WALTER D. MALCOLM

EDWARD L. SCHWARTZ

January 29, 1969

Statement of the Massachusetts Commissioners on Uniform State Laws in Support of House 778 Before the Judiciary Committee of the Massachusetts Legislature January 29, 1969

The Uniform Consumer Credit Code incorporated in House 778 provides for important and, at the same time, highly complex legislation. It is proposed uniform legislation drafted by the National Conference of Commissioners on Uniform State Laws and is the result of not less than five years of concentrated study and effort by a Special Committee, a substantial staff of draftsmen and experts, and advice from numerous advisors and consultants drawn both from consumer-oriented and industry-oriented people.

House 778 and the Code, generally, is sufficiently long, complex and involved that neither we nor anyone else supporting the Bill will attempt to summarize the entire bill at the Hearing on January 29. Rather, the Massachusetts Commissioners will attempt to inform the Committee about the bill with a number of papers which we shall briefly describe and hand to you at the close of the Commissioners' presentation. From these papers we shall read one or two statements of significant witnesses and groups because they are important but not too lengthy.

Aside from these papers, we shall discuss in this statement a few matters of basic importance of which you should be aware. House 778 and corresponding bills that will be considered in more than 20 states this year involve an important matter of state versus Federal jurisdiction. Until the year 1968, jurisdiction over and control of substantially all aspects of

consumer credit have rested with the several states. Numerous statutes of many kinds have been enacted in every one of the 50 states during the last 60-year period and consumer credit has also been materially affected by general usury statutes in 48 of the 50 states, which general usury statutes run back as far as 1660 in the several colonies. In addition, a very substantial body of case law has developed for 150 years or more, all on the basis and underlying assumption that limitations on the cost of money and consumer credit, generally, were a matter of state law.

However, notwithstanding this consistent record of state jurisdiction, in 1968 the Federal Congress enacted a bill which, when it takes effect on July 1, 1969, will transfer to the Federal Government the disclosure and garnishment aspects of consumer credit. In approximate terms, disclosure and garnishment constitute probably 25% of the entire field of consumer credit. The statute to which we refer is Public Law 90-321 enacted by the 90th Congress and signed by the President on May 29, 1968 and referred to generally as the Consumer Credit Protection Act. Stated in other terms, on July 1, 1969, unless the several states adopt possible courses of action, the Federal Government will preempt approximately 25% of the entire field of consumer credit, which preemption will, in net effect, deprive the states of an equal amount of jurisdiction.

The Congress, as a whole, including many of the sponsors of this Federal legislation, were entirely aware of this preemption issue, were seriously disturbed by it and took tangible and specific steps to minimize it. These steps were in the form of specific provisions of the Federal Act. Section 111 of Title I of the Federal Act reads, in part, as follows:

"§111. Effect on other laws

(a) This title does not annul, alter, or affect, or exempt any creditor from complying with, the laws of any State relating to the disclosure of information in connection with credit transactions, except to the extent that those laws are inconsistent with the provisions of this title or regulations thereunder, and then only to the extent of the inconsistency.

(b) This title does not otherwise annul, alter or affect in any manner the meaning, scope or applicability of the laws of any State, including, but not limited to, laws relating to the types, amounts or rates of charges, or any element or elements of charges, permissible under such laws in connection with the extension or use of credit, nor does this title extend the applicability of those laws to any class of persons or transactions to which they would not otherwise apply."