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that these types of suits should be subject to class action status and each factual pattern must be looked at. To deny the courts the discretion that they have to date and in fact have not abused

Senator PROXMIRE. We are not denying the discretion. We are just reducing the size of the penalty so that it would be more realistic and more practical to have it enforced, and there would be an understanding on the part of both creditors and customers that they have got something in it with some teeth.

Mr. BLUESTONE. And reducing the effects so that the companies could account for violations of the law as a mere cost of doing business.

Ms. KESSLER. I think, by the way, Senator, if you focus on the legitimate concerns, the cost of bringing the lawsuits, that there is a different way of getting at that problem. What are we getting after is to get creditors to stop practices contrary to Truth in Lending. The issue is not merely just making a private lawsuit the only viable way to do it and perhaps one of the ways for the committee to consider is to give injunctive relief powers to the enforcement agencies so that you do not have to rely on the private litigant to bring the suit, and indeed, the private litigant is not going to bring the suit if there are not class action possibilities.

Senator PROXMIRE. What has been your experience in Truth-inLending, and in how many cases has the court granted class action status, and in how many cases has it been denied ?

Ms. KESSLER. We were referred to statistics only with respect to Truth-in-Lending, and those were about 60 percent against certification and 40 percent for certification. In other areas apart from Truth. in-Lending, I am really not sure I could respond to that, because there are so many cases brought all over the country on that.

You might be interested to know that the Commerce Committee has undertaken and I do not know what stage they are at-really a monumental study of class action litigation, and they sent out extremely detailed questionnaires to many, many trial lawyers through out the country, and they may have

Senator PROXMIRE. I am sorry to interrupt, but I understood you earlier to say that there was only a 10 percent

Ms. KESSLER. Under Truth-in-Lending.
Senator PROXMIRE. Two or three out of 30.

Ms. KESSLER. My comment then was addressed only to Truth-inLending.

Senator PROXMIRE. That is all I am asking about.

Ms. KESSLER. I am sorry. I think, however, that was wrong. The statistics that the Federal Reserve Board cited were higher than 10 percent.

Mr. BLUESTONE. It was my estimate in looking at the figures here

Senator ProXMIRE. Will you doublecheck that and correct your remarks and let us know?

Ms. KESSLER. Yes.

Senator PROXMIRE. You have criticized the provisions of S. 914 which requires the credit card transaction take place in the same State in which the card issuer maintains a place of business. I think your arguments are well taken. However, one of the problems we have in this committee is the almost emotional fear retailers have of big banks. For example, now, New Jersey retailers contend they would be policed by the large New York banks which have issued credit cards to New Jersey consumers.

Likewise, New Jersey bankers claim they have no way of checking into the reliability of New York merchants. Whatever the merits of these arguments, they were forcefully argued, whereas the committee heard little from New Jersey consumers.

Can you produce a strong statement from the New Jersey Consumers League to help us with this

argument? Ms. KESSLER. We can certainly consult with the New Jersey chapter of CFA, and I think it would not be difficult to get you a statement that addresses itself to that particular aspect of the problem. We would be glad to do that. [The information follows:]

BERLIN, ROISMAN, AND KESSLER,

Washington, D.C., May 31, 1973. Senator WILLIAM PROXMIRE, Chairman, Consumer Credit Subcommittee of the Committee on Banking,

Housing and Urban Affairs, U.S. Senate, New Senate Office Building,

Washington, D.C. DEAR SENATOR PROXMIRE: In response to your inquiry at the Subcommittee hearing of May 22, 1973, concerning the certification of class action suits alleging violation of the Truth-in-Lending Act, I believe no more thorough quantitative review is available than that found in footnote 13 of the most recent Annual Report on the Truth-in-Lending Act by the Federal Reserves Board. It is there revealed that of 21 suits filed seeking a class recovery for a purported Truth-inLending Act violation, 13 cases were certified to proceed as proper class actions while 8 cases were denied class status. Of course, the issue of certification of a class is wholly distinct from a determination of liability and a decision entitling the class to recovery.

I hope these statistics are helpful to you.

Again, thank you very much for presenting Consumer Federation of America with the opportunity to testify before your Subcommittee on the Fair Credit Billing Act proposals currently under consideration. Sincerely,

GLADYS KESSLER. Senator PROXMIRE. That would be very helpful. I want to thank both of you very, very

much. Again, you have been most helpful. I cannot tell you how much I appreciate having witnesses come on who represent the consumers, who are articulate and informed and have done a lot of work on it. Usually, consumers—we are all consumers but we are amorphous, inarticulate, disorganized, and we get run over. I think you have gone a long way this morning toward providing some of the best representation and testimony on the side of consumers that I have heard in a long time. Thank you very, very much.

Ms. KESSLER. Thank you very much, Senator.
Mr. BLUESTONE. Thank you, Senator.

Senator PROXMIRE. Our next witness is Mr. Fairfax Leary, of the University of Pennsylvania.

STATEMENT OF FAIRFAX LEARY, VISITING PROFESSOR OF LAW,

UNIVERSITY OF PENNSYLVANIA, ACCOMPANIED BY NINA SEGRÈ

Senator PROXMIRE. You have a detailed statement here and a fine statement. I wish we had the entire morning just to have you give us your statement, but it is something that would take a long time, so I

would appreciate it if you could condense it, and the entire statement will be printed in the record (see p. 149).

Mr. LEARY. Mr. Chairman, I am accompanied by Ms. Segrè, who has been a great help to me in preparing this

statement.
Senator PROXMIRE. How do you spell the last name?
Ms. SEGRÈ. S-e-g-r-è.
Senator PROXMIRE. Thank you.

Mr. LEARY. Mr. Chairman, I will cover approximately four points from the prepared statement.

The first point is on the matter which we call holder in due course, and one of the things I want to point out is that while originally credit cards fell into two categories, the so-called card issued by the company that sold the goods, such as the gasoline credit card, and the other card was the third-party credit card. The distinction between the two is blurring considerably. I attached a couple of copies of solicitations to my statement, and I now have a few more which I would like to submit for the record, because my duplicator would not duplicate them. There is a recent solicitation I received from American Express to purchase insurance with the reply card going back to the insurance company and not to American Express, but it is an affiliates. The searchlight and other things are Gulf Oil Co., and, by the Bank Americard, I was solicited to buy the Encyclopaedia Britannica direct from the publisher.

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