education, is deficient by the standards of the majority. The point is that with education, the information that is required to be disclosed, if it is disclosed, can be of material benefit to all individuals.) We should not deny that information to the members of the poor community.

To the best of my knowledge, no one associated with the drafting of the UCCC has offered any explanation as to why the coverage of its disclosure provisions is significantly narrower than the coverage of the Truth in Lending Act. While those associated with the drafting of the UCCC have promulgated more than a dozen law review articles lauding the UCCC, there has been no mention of the issue raised here.

The stated reason for promulgating the "November, 1968 Revised Final Draft" of the UCCC following promulgation of the July, 1968 "Final Draft" was to make the changes in the July, 1968 "Final Draft" that were necessary "to conform to Consumer Credit Protection Act Regulations."

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The required changes, at least in the area of disclosure, were not introduced into the November 1968 revised final draft. While section 6.104 (2) was added to require the State administrator to adopt regulations "not inconsistent" with regulation Z, those regulations would be ineffective to bind persons over whom the UCCC itself did not purport to include within its coverage.

The disparity between the coverage of the Truth-in-Lending Act and the coverage of the UCCC is still present. Section 103 of the Truth-in-Lending Act defines "credit sale" broadly to include "any sale with respect to which credit is extended or arranged by the seller," while section 1.204 of the UCCC still defines "credit sale" narrowly to exclude credit extended by anyone other than the seller. Similarly, the definition of "finance charge" in section 106 of the Truth-in-Lending Act and in section 226.4 of regulation Z includes all finance charges payable by or on behalf of the buyer to the seller or anyone in connection with the credit transaction, while section 2.109 of the UCCC would appear to be consistent with the other provisions of the UCCC and to exclude from the definition all charges payable by the debtor to a third-party financing agency.

There is a clue to the reason for the UCCC's treatment of the problems of multiple financing and financing that is arranged but not extended. That clue is found in a law review article just published in the Fordham Law Review for December 1968.5 The article is by one of the consultants to the Special Committee of the National Conference of Commissioners on Uniform State Laws which drafted the UCCC. The author is Carl Felsenfeld, and the article is entitled "Uniform, Uniformed, and Unitary Laws Regulating Consumer Credit."

While Mr. Felsenfeld approves of the UCCC, he does attempt an honest explanation for the distinction which the UCCC establishes and maintains at every point between extensions of credit by financing agencies on the one hand, and extensions of credit by sellers on the other. The fact is, of course, that sometimes the distinction is proper and sometimes it is not. Where the proceeds of a loan are used to purchase goods or services, there is little if any functional difference between credit extended by the seller to facilitate the sale and credit extended by a financing agency to facilitate it. The Truth-in-Lending Act recognizes this and takes it into account. As a general rule, it makes little difference under the Truth-in-Lending Act whether the credit in such a case is extended by the seller or a lender or both; in every case a full, meaningful disclosure must be made before any contractual obligation is created.

As explained above, however, the UCCC does not take these basic facts into account. Nowhere in the UCCC's provisions on sales (except with reference to consolidation) is there any mention of loans or the possibility that credit to facilitate the sale may be extended by a third party. Likewise, nowhere in the UCCC's provisions on loans is there any hint that loan proceeds are sometimes used to buy goods or services. Mr. Felsenfeld's explanation for this is the following:

"The CCPA is somewhat more direct in its unification of sales and loans. Most provisions of the CCPA are applicable to 'consumer credit transactions,' an undefined term, but clearly through its use of the word 'credit' including both sales and loans. As with the UCCC, the CCPA also makes distinctions between sales and loans. The CCPA distinctions were made, however, entirely for functional reasons and not because of special pressure group influence.""

+ Prefatory note to the July 1968 "Final Draft" of the UCCC.

537 Fordham Law Review 209 (1968).

37 Fordham Law Review 209, 239 (1968).

Without doubt, Mr. Felsenfeld's reference to the "special pressure group influence" which had a bearing on the UCCC's treatment of the subject under discussion, had to do with the fact that the drafting of the UCCC was and is in reality an operation of the finance companies that have financed the project. The UCCC's treatment of other subjects suggests strongly that financing agencies have indeed had a much stronger influence in determining the ultimate shape of the UCCC than have the lawyers and legal scholars including the UCCC's own reporters-draftsmen and others that have participated in the project.

If these same lawyers and legal scholars were permitted to continue in their efforts to formulate a neutral and unbiased consumer credit law that gave due recognition and weight to the legitimate interests of all parties to the consumer credit transaction, and were permitted to do so without the exercise of influence by any special interest groups, it is possible that an acceptable uniform consumer credit law might result.

The UCCC is, in its present form, unacceptable.

DEFICIENCY JUDGMENT

Another illustration of the failure of the UCCC to recognize a problem, to formulate a rational policy response, and then to draft a statute that implements that policy without undue influence by financially interested parties, is its treatment of the problem of the deficiency judgment.

But the failure, at least to recognize the problem and formulate a rational policy response, evidently is not that of the reporters-draftsmen of the UCCC.

Beginning in 1964, two legal scholars, Robert L. Jordan and William D. Warren, professors of law at the University of California, Los Angeles, began their service as reporters-draftsmen of the UCCC project. In May 1966, Professors Warren and Jordan published a law review article, entitled "Disclosure, of Finance Charges: A Rationale,” in which they dealt specifically with the problem of the deficiency judgment:

"Our experience indicates that the principal victim of the deficiencies in the consumer credit system is the person who gets too far into debt, who receives poor-quality goods or services, or who pays too much for the produce he receives. All too often all three elements are present at the same time when the buyer becomes involved with a disreputable seller. Typically, the victim is unsophisticated, uneducated, and foolish. He is often the person who is least able to benefit from detailed disclosure provisions. His problem is not one of credit charges but rather of credit itself. The use of credit makes it possible for someone to sell him goods and services which he would never buy for cash. Rarely is he cheated because he is overcharged for the credit itself; indeed, he often buys from a merchant who makes 'no charge for credit.'

"If the marginal consumer cannot be relied upon to avoid bad bargains, a more fruitful approach may be to take away from the creditor some of the weapons that make it possible for him to profit at the expense of the unwary. Frequently, an unscrupulous merchant will sell shoddy goods which are greatly overpriced. Normally, title is retained by the seller. If the buyer misses a payment or wants to withhold a payment because the goods are unsatisfactory, he is faced with the threat of repossession. If the creditor repossesses, he may sell the goods, perhaps to himself, at a small fraction of their original price. He may then get a judgment against the original buyer for the unpaid purchase price plus the expenses of the repossession and his attorney's fee. To collect his judgment the creditor may then garnish the buyer's wages, and an employee whose wages are garnished frequently loses his job. The buyer faced with the prospect of losing what he has already paid on the goods, the goods themselves, and perhaps his job, is more likely to pay the creditor even if it is an unjust debt and even if payment means sacrifice of necessaries for his family. Furthermore, the unavailability of legal assistance in cases of this kind leaves the buyer with many rights that go unvindicated.

"Creditors have many weapons available to them for bringing debtors to heel, and courts of law serve as inexpensive and efficient collection agencies. Thus, the unscrupulous may find it profitable to sell to the consumer who cannot afford to pay. However, if some of these weapons were taken from the creditor he may be

See also "Report of Special Committee on Retail Installment Sales, Consumer Credit, Small Loans, and Usury," p. 12 (Chicago: National Conference of Commissioners on Uniform State Laws, Aug. 2-7, 1965).

encouraged to ration credit. For example, of the creditor is not allowed to get a deficiency judgment or, what is more important, if he is not allowed to garnish the wages of someone earning no more than a living wage, it is more difficult for him to victimize the buyer. He will have to rely upon larger downpayments and upon collateral to secure the unpaid balance." 8 [Italics added.]

The problem is well-defined by Profs. Warren and Jordan and the solutions they offer seem wise. Moreover, there is another reason for abolishing the deficiency judgment that relates less to overpricing than to the resale procedure itself.

The resale procedure as applied to consumer goods is basically uneconomical This is manifested in the fact that the amount credited to the buyer's contract obligation by reason of the resale is at best substantially less than the fair market value of the property at the time of repossession. This is invariably the

case.

The reason why the resale procedure is uneconomical is that selling costs, including commissions, constitute such a large part of the fair market value of consumer goods. The result is that the defaulting buyer, including the nonmarginal buyer, is required to pay selling costs twice, first as part of the original sale price and again, in effect, in the form of either of a resale effected without selling costs and therefore at less than fair market value, or of a sale at fair market value in which selling costs have been sustained by the seller than deducted from the sale proceeds.

All the problems associated with the deficiency judgment would be solved if, as suggested by Profs. Jordan and Warren, the deficiency judgment were abolished. How, then, does the UCCC respond to the problem of the deficiency judgment?

The UCCC would limit use of the deficiency judgment, but in the case of consumer credit sales only, and not loans, and then only if the cash price of the repossessed goods were $1,000 or less." Where the cash price of the goods exceeded $1,000, a deficiency claim would be permitted. Again, where the credit was granted in the form of a loan, the proceeds of which were used to buy goods in which the lender acquired a purchase money security interest, repossessions of the goods would not bar a claim for a deficiency. Again, where the credit was arranged but not extended by a seller who participated in the extension of credit by a third party financing agency related to the seller, repossession of the same or other goods in which the lender acquired a security interest would not bar a deficiency claim. In these respects, the UCCC fails to meet the requirements which Profs. Jordan and Warren have themselves proposed and which must be met in any modern consumer credit statute.

Two kinds of deficiency judgment prohibitions are already in effect in California. One of these relates to repossession following sales of consumer goods other than motor vehicles and provides, simply, that the holder of the consumer installment sale contract "may not recover the deficiency from the buyer or from anyone who has succeeded to the obligations of the buyer." 10 The other applying to residential real property has been in effect since the thirties and provides, again, simply:

"No deficiency judgment shall lie in any event after any sale of real property for failure of the purchaser to complete his contract of sale, or under a deed of trust, or mortgage, given to the vendor to secure payment of the balance of the purchase price of real property, or under a deed of trust, or mortgage, on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of such dwelling occupied, entirely or in part, by the purchaser. **

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One of the reasons for enacting legislation barring deficiency judgments on claims arising out of credit sales of residential real property in California was to limit recourse to the property itself, and thereby tie the price of the property more closely to its fair market value. The same reasoning applies to other consumer purchases including motor vehicles and all other consumer goods. As suggested by the UCCC reporters-draftsmen this would have the effect of curbing sales of overpriced merchandise. Prices would more closely reflect fair market values. No longer would the law doubly reward the seller of overpriced goods, permitting him to sell, repossess and resell the same merchandise again and again, and in addition recover successive deficiency judgments every time.

8 64 Michigan Law Review 1285, 1321-1322 (1966). UCCC, sec. 5.103.

10 California Civil Code, sec. 1812.5.

11 California Code of Civil Procedure, sec. 580b.

Since a measure barring deficiency judgments would affect mainly the seller who engaged in questionable credit transactions, it would seem advisable for all legitimate creditors to join with users of consumer credit in condemning the deficiency judgment. It has no place in a modern consumer credit market.

GARNISHMENT OF EARNINGS

The UCCC's treatment of wage garnishment cannot be evaluated in terms of "good" or "bad" without first considering the provisions on wage garnishment in the Federal Consumer Credit Protection Act.

Evaluation of the UCCC wage garnishment provisions is difficult for other reasons too. The policy considerations bearing on the problem of wage garnishment are far more complex than those pertaining to deficiency judgments and rate disclosure. In addition, the existing State statutes on wage garnishment are more significantly different from each other than in almost any other area of law affecting debtor-creditor relations. Finally, the terminology and procedure in any one State are themselves complicated; yet they also must be understood to evaluate the UCCC's treatment of wage garnishment.

The first question then is that of terminology. The meaning of the words "attachment," "execution," and "garnishment" should be understood. Both "attachment” and “execution” refer to seizure under due process of the property of a party against whom a claim has been made; this seizure is made by the Government, usually a deputy sheriff, acting for the creditor. The term "attachment" refers to a seizure made before a court judgment has been rendered; the function of the attachment procedure, historically, is to provide security for the satisfaction of any judgment that may be rendered, particularly against a defendant who is dissipating his assets or is about to flee the jurisdiction. The term "execution" refers to a seizure after judgment, for its enforcement.

The term "garnishment" refers to the use of either attachment, or execution, to reach property of the debtor which is in the possession of a third person; among such items of property may be wages payable to a debtor by his employerhence the term "wage garnishment."

The attachment, execution and garnishment procedures have the function of mobilizing government on behalf of creditors to seize wages and other property of debtors. The purpose is either to satisfy claims that a court has found to be valid and on which a judgment has been entered ("execution") or to create a reserve that can serve as security from which a claim that a court has not yet found to be valid can be satisfied, in the event that the court later finds the claim to be valid and renders a judgment thereon ("attachment").

The question of wage garnishment thus reduces itself to a question of public policy when, if ever, and under what conditions, if any, should government act to seize wages of debtors to satisfy claims of creditors.

The characterization of the issue in these terms is not meant to imply that society does not have a legitimate concern that legal debts be paid. But society also has a legitimate concern that the collection tools it fashions, and whose use it sanctions, do not cause undue distress and hardship, and in particular do not cause the community a loss that exceeds the creditor's gain. The issue, then, is how well wage garnishment serves these various competing interests.' To make that determination four distinctions should be recognized:

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(1) the distinction between "attachment" before judgment, and "execution" after judgment;

(2) the distinction between seizure (whether by attachment or execution) of assets of the debtor in his own possession (his car), and seizure by "garnishment" of assets in the hands of a third person (contents of a safe deposit box);

(3) the distinction between garnishment of tangible property of the debtor (contents of safe deposit box), and garnishment of his credits (bank deposits, wages, etc.); and

(4) the distinction between garnishment of different kinds of credits, for example, bank deposits, or wages.

12 Fortunately, there is an outstanding law review article on the whole question of wage garnishment. The article considers the problem from many points of view, and also outlines the treatment given to wage garnishment under the laws of each of the States: The article is entitled "Wage Garnishment in California: A Study and Recommendations" and was written by the Honorable George Brunn, judge of the municipal court for the Berkeley-Albany judicial district, Berkeley, Calif. The article, hereinafter cited as "Brunn," appears in 53 California Law Review 1214 (1965). Much of the material in this portion of the paper is taken directly from Judge Brunn's article.

If seizure of one category of the debtor's property, for example, his earnings, has the likelihood of causing more hardship or distress than seizure of another category, for example, his car, furniture, stocks, bonds, or bank deposits, then as a matter of public policy, government with good reason can decline to lend its power to the collection efforts of the creditor to seize property within that category or with equal reason can limit its involvement so as to strike a proper balance among its legitimate concerns.

All States have made this distinction and all of them give earnings a more favored treatment than other kinds of property subject to execution and attachment. This is usually accomplished by declaring all or a portion of a person's earnings "exempt" from garnishment.

The following excerpt from a 1965 report of the California Assembly Interim Judiciary Committee suggests the approach to wage garnishment that is manifested in the laws adopted by many State legislatures:

"[A] revision of the law which will increase the debtor's protection by way of exemption and which will make that protection more modern and equal will be of benefit to both debtors and creditors. This conclusion reflects the underlying fact that neither debtor nor creditor benefits when the debtor is financially crippled. A more powerful exemption law will help keep the debtor from sinking further into a financial abyss and losing his job. At the same time it will protect the creditors to the extent that it allows the debtor to keep going and to avoid bankruptcy. Incidental credit grantors such as doctors lawyers and small businessmen lose when a small loan company garnishes wages and causes the debtor to be fired or run for bankruptcy. A law with more exemption protection will encourage the commercial credit grantors to be more careful in choosing their credit risks. If the creditor will do this he will reduce his bad debt losses. This induced care may result in some reduction of overall credit granted but the reduction will probably be small and will be justified by the decrease in human misery caused by extreme credit problems. Finally an exemption law can be tailored to encourage the debtor to find a program which will help him to find his way out of a bad financial situation and into a better one." 13

We find however that the individual States differ significantly among themselves as to the amount of the wage exemption and the conditions under which it is available. As of 1965 more than a dozen States prohibited the prejudgment wage attachment under varying conditions while six States (Florida, Pennsylvania, Texas, South Dakota, North Carolina, and South Carolina) virtually prohibited all wage garnishments both before and after judgment. The remainder of the States exempted portions of a person's earnings ranging from a high of 90 percent of gross earnings to a low of $30 per month." The wage exemption in the 10 largest States for married persons earning $100 per week was in 1965: 15

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WAGE GARNISHMENT PROVISIONS OF FEDERAL CCPA

In enacting the wage garnishment provisions of the Federal Consumer Credit Protection Act, Congress highlighted some of the main reasons for a special treatment of the wage garnishment procedure.'

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"(1) The unrestricted garnishment of compensation due for personal services encourages the making of predatory extensions of credit. Such extensions of credit divert money into excessive credit payments and thereby hinder the production and flow of goods in interstate commerce.

13 Calif. Assembly Interim Comm. on Judiciary, Final Report 50 (Jan. 1965). 14 Brunn, at pp. 1250-1252.

15 Brunn, at p. 1223.

16 Federal CCPA, sec. 301.