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to both creditors and card holders at the time the Truth-in-Lending was first enforced.

There have been other instances, such as the airlines. I have reviewed a substantial number of airline credit forms. There was a flat negligence in drafting the Truth-in-Lending disclosures there. A small amount of recovery will result in a lack of class actions filed, or a large amount of recovery will result in a lack of certification of class actions necessary to serve as a deterrent.

Our feeling—and I would also appreciate the opportunity to comment on the more innovative suggestions that may be presented to this commitee--is that at the very least that this limitation, and we will insist on the 1-percent provision as well as the dollar limitation, be accompanied by a provision in S. 914 that the court shall not disallow a class action simply because of the substantial amounts of potential liability.

If S. 914 does impose some limitations, it also should provide that the amount in controversy should not be the grounds for denying certification of class action.

Senator PROXMIRE. Thank you very much, Mr. Silbergeld.

Let me take the last point you made first. As I understand it, the purpose of the class action suit is not to reward or enrich the consumers as much as it is to provide a meaningful, effective penalty so that you can get compliance, and even though the award to the consumer might be small, the fact is that all you need is one consumer and an attorney, and of course, he gets a piece of the action, in order to have what could be an effective system of enforcement that would buttress and supplement the FTC.

Mr. SILBERGELD. That is right. That is the purpose and we like that scheme and have in other legislation testified in favor of self-enforcement by consumers who are customer's rather than

Senator PROXMIRE. It is 50,000 or 1 percent of net worth. Doesn't that seem like a sufficient penalty to induce compliance?

Mr. SILBERGELD. That depends how large the class is. As the last witness pointed out, in one case that would have resulted in a recovery of 1 cent per member of the class.

Senator PROXMIRE. This could be a penalty that would vary from $50 to, in the case of the Bank of America, $10 billion.

Mr. SILBERGELD. This results in a Hobson's choice to consumers. You will not find in many cases consumers who are willing to sue at actual expense to themselves for a recovery of 1 cent of $1. The result is that you will not have any class actions. There are two problems.

Senator PROXMIRE. Presumably, consumers would rarely do it anyway for a $10 or $50 amount—even $50 is not much compensation.

What you have is the initiating force that would be the attorney, and the attorney, of course, bringing suit under these circumstances can bring suit up to $2 million and would have a real incentive for going ahead.

Mr. SILBERGELD. There are problems with that. The District of Columbia Circuit Court has recently ruled that a lawyer who serves as attorney in the case cannot bring a class action under the truth-inlending provision with himself as one of the members of the class. So, in effect

Senator PROXMIRE. That is true; he has to have an independent plaintiff.

Mr. SILBERGELD. That is right, and since he cannot be the client as well, he may be engaging in barratry in the suit. He is made a secondclass citizen, because he cannot be a plaintiff even though his rights have been violated under the Truth-in-Lending Act.

If nobody comes to him, under the canons of professional ethics, he is not supposed to go out and look for clients if he is to generate a fee in that case.

Senator PROXMIRE. You gave examples of billing, and in some cases the sales slips appear to have been falsified. Does this suggest to you that merchants are deliberately turning in false sales slips and collecting on them on the assumption that the consumer will not look at the bill?

Mr. SILBERGELD. That is the impression I have from looking at correspondence we received from a substantial number of subscribers to "Consumer Reports," and I would be pleased to provide some of that correspondence either for the record or for the committee's files as soon as I clear it with the people who corresponded. Some of them have also sent it to other public officials, and I could forward those promptly.

That is clearly our impression. The consumer states that, "That is not my signature." In one letter, the consumer pointed out the differences in handwriting between the signature on the tissue that he retained and the handwriting that appeared on the carbon that was submitted with the bill.

Senator PROXMIRE. Then you also had the difference in the number.

Mr. SILBERGELD. That is right. The serial number in one case was three serial numbers higher than the serial number on the tissue. In many cases, these tend to become quite amusing. People are billed in gasoline sales for a number of gallons that their automobiles won't hold. Dodge Dart, 20.8 gallons, for instance.

Apparently, what happens in many of these is that it is most easy to forge a number; a three is made to be an eight, for instance. On some of them, it is just a change in the amount.

Senator PROXMIRE. I used to have a car that had a 16-gallon tank, and three different times my charge was run up on the gas pump as more than 17 gallons, and in one place 18 gallons. That was a case of a crooked pump.

Mr. SILBERGELD. According to the details, a few of those might be, but some of them obviously are not. The ones in which the numbers have been changed might be a crooked pump. The ones in which the serial number on the carbon is three numbers higher are not.

Senator PROXMIRE. Fair credibility provides the consumer with a remedy if they examine their bill. Can you think of any way that these consumers who do not examine their bills closely can be protected against fraudulent charges by the merchant?

All of us get bills at the beginning of the month which are small, and few of us give time and attention to these smaller bills.

Mr. SILBERGELD. Provisions regarding identification of transaction provide that an actual carbon of the receipt, or in case of mail orders, I suppose, the order, be included in the bill rather than just a printout identification by the department store.

That, of course, I think, protects the consumer about as much as I can imagine he can be protected, although I am open to suggestions.

The problem is that it practically requires that the consumer treat his consumer credit transactions in the same manner of detail and precision and recordkeeping as a businessman would treat his invoices, and for many consumers, this becomes a real bother. They may have six, seven, or eight credit accounts, and they may take them, throw the bills away once they recognize their signature. They may stuff them in a drawer. But to sit down, even once a month, and spend an evening doing your credit contracts makes you a professional consumer. Many do not want to be that.

Senator ProxMIRE. I would say it is a tiny minority of consumers who take the receipts and compare them and make sure things check out.

Mr. SILBERGELD. If they do not, they run the risk.

Senator PROXMIRE. Has the volume of complaints Consumers Union has been getting, have they increased, decreased, or remained the same?

Mr. SILBERGELD. I do not have a measure of that over a long period of time. When I asked our Mount Vernon headquarters office for all of the credit transactions complaints that we had had, I asked them for the date since my testimony on S. 652, and in that, I would say there were at least 35, perhaps 40 letters, and some of those contained complaints about not one, but several transactions with, in some cases, two or three creditors.

Some consumers had saved up, or overlooked some problems until they come to the point where they could not hold it back, and then complained to us about two or three creditors at once.

Senator PROXMIRE. What segment of the industry produces the most complaints?

Mr. SILBERGELD. I would say that travel and entertainment cards and gasoline company cards.

Senator PROXMIRE. Will you check that and determine whether these complaints have been rising or falling?

Mr. SILBERGELD. Yes.
[The information follows:)

CONSUMERS UNION,

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

Urban Affairs, U.S. Senate, Washington, D.O. DEAR MR. CHAIRMAN : During my testimony on S914, the Fair Credit Billing Act, you asked me to find out for the record whether complaints to Consumers Union regarding credit card problems have been increasing or decreasing over the past few years. I cannot provide exact figures, partly because our records do not distinguish between complaints and inquiries, but our librarian, who reads and classifies subscriber letters for our records, indicates that the number of credit card complaints has remained fairly constant over the period of the past five years. Therefore, I conclude that there has been no drastic improvement in this problem, although some companies may have improved their individual performance. Sincerely,

MARK SILBERGELD. Senator PROXMIRE. You say that you would like to see no geographic limitations at all. Other witnesses have criticized the statewide geographic limitation. But if some kind of geographic limitation is adopted, and I know you do not want one, do you think it should be based on metropolitan areas rather than State boundaries?

Mr. SILBERGELD. I think that is an absolute must if this provision is to have a substantial meaning. In fact, not to do that would be a form of discrimination. The people in East St. Louis frequently shop, prefer to shop in St. Louis, and go across the State line to shop in downtown St. Louis, could not use the available defenses, while the people of St. Paul who go across the city line to shop in Minneapolis, because there is no State line there, and because they are close metropolitan areas, could avail themselves of defenses.

This convenience of going anywhere in the metropolitan area is one of the major attractions of holding a credit card, especially one that is issued by somebody other than an individual retailer, which will permit you to go anywhere in the metropolitan area, and shop at a very substantial number of vendors. To draw the line according to State lines rather than in the natural metropolitan shopping area would be very difficult.

I think that the standard metropolitan statistical areas would in most cases be a fairly complete list to start with.

Senator PROXMIRE. I just have one other question.

I am not sure I follow your suggestion to go further than the undelivered merchandise provisions of S. 914. Could you amplify that recommendation?

Mr. SILBERGELD. Yes. I want to correct that. I confused the disparity of language between the first and last clauses of that provision. The first clause talks about a situation where the customer alleges that the merchandise was not delivered in accordance with the agreement at the time of the transaction.

The second part of the clause talks about the creditor's responsibility to determine whether the goods were delivered at all.

Senator PROXMIRE. So, you support the language as it is?

Mr. SILBERGELD. Yes, I do. It takes care of the flower shop problem we were talking about.

Senator PROXMIRE. Thank you, very much; Mr. Silbergeld.

The committee will stand in recess until tomorrow morning at 10 o'clock and will reconvene in this room.

[Whereupon, at 11:45 a.m., the hearing was adjourned, to reconvene at 10 a.m., on Wednesday, May 23, 1973.]

[The complete statement of Mr. Silbergeld follows:]

STATEMENT OF MARK SILBERGELD, ATTORNEY, CONSUMERS UNION, WASHINGTON

OFFICE

Mr. Chairman and members of the Subcommittee, Consumers Union is indeed pleased that you have called upon us to present our views on this important consumer legislation. Credit billing has been an irritating issue for many consumers. It is an issue which is reported on frequently in Consumer Reports, either through editorial comment or in the form of readers' letters. It is just one more area where there is a need for government regulation because the business community has not voluntarily come to grips with the problem in a satisfactory manner. Before I present the information and views which are directly relevant to your consideration of these bills, let me provide briefly the background of Consumers Union,

Consumers Union of U.S., Inc., is a nonprofit membership organization chartered in 1936 under the laws of the State of New York to provide information and counsel to consumers about the management of family expenditures. The organization's financial support comes from the more than 2 million subscribers and newsstand readers of our magazine, Consumer Reports. We accept no support from any commercial organization. The magazine carries no advertising. Besides testing and reporting test results on products, Consumer Reports publishes general information for consumers on health, medicine, product safety, the economics of the marketplace, and the legislative, judicial and regulatory activities of the government affecting consumer welfare.

I should mention also that I am one of four attorneys in Consumers Union's Washington Office. I served at the Federal Trade Commission for five years, and during part of that time I was in the Division of Consumer Credit, administering the Truth-in-Lending and Fair Credit Reporting acts. Subsequent to that, and just prior to joining Consumers Union, I worked with Ralph Nader for fifteen months, during which time I testified before this Subcommittee on S. 652, the predecessor bill to S. 914.

Essential provisions of S. 914 and S. 1630 govern the responsibility of creditors to acknowledge, investigate and respond promptly to customer complaints which allege billing errors. When I testified on S. 652 some nineteen months ago, I related a personal experience regarding the difficulties of adjusting a billing problem with Central Charge. I have since found that experiencing the problem once does not much improve one's chances of avoiding further billing problems. Since then, I have encountered at least two instances of difficulty in getting creditors to respond to written complaints regaining billing errors.

In one instance, it took several months for Raleighs, of Washington, D.C., to cease billing me for defective merchandise which I had returned, although I transmitted several notes and requested that my account be closed. In the other, Cities Service Oil Co. ("Citgo"), working unwittingly with the Postal Service, which failed to forward my bills from an old address, managed to overlook a change of address notice and then threatened to send representatives to collect my credit cards—at the old address. A much embarrassed company credit representative straightened out the matter very promptly-after I sent copies of my complaint about their handling of the matter to "Senator Proxmire, a member of the Senate Banking Committee who has insatiable fascination with the foibles of creditors who cannot manage their computer systems.” Only the threat of Congressional exposure took my letters to the company out of the computerized system and into human hands.

Consumers Union receives numerous complaints describing the failures of creditors to handle billing errors satisfactorily. These include failure to acknowledge or correct erroneous billings, failure to enter credits for accumulated finance charges imposed on erroneous billings, billings for goods not purchased or received, an increasing number of billings based on sales tickets which customers allege to be forged or altered, rude dunning letters, and cancellation of credit privileges for failure to pay amounts already pointed out to the creditor as having been erroneously billed. The customers in many cases were physicians, architects, business executives or others whose educational levels would seem to indicate adequate ability to cope with the normal situation, yet their efforts were not frequently successful. Less sophisticated credit customers would seem to have an even smaller chance of prompt, satisfactory adjustment of their accounts.

The Vice President of a New York computer software firm was erroneously charged for a television set. While trying to remove the charge for this item, he was also charged for $180 worth of airline tickets he had purchased and then cancelled. Charges for both items were eventually removed from his Diners Club bill, but twenty-nine months after the first error, he was still unsuccessful in seeking to have the accumulated finance charges on these items credited. The company, in the meanwhile, was threatening his credit standing for failure to pay the unowed finance charges.

The experience of a physician in Tennessee went a step further. His Humble Oil (now Exxon) credit privileges were cancelled over a disputed $2.78. He was an infrequent user of his card, and when he received a bill for a single purchase of $2.78 he wrote to the company to ask why it was not set off against a credit balance for the same amount which was still pending in his account. Despite his inquiries, the doctor explains to Consumers Union, he received five billings for the purchase, plus finance charges and :

"... three letters of increasingly severe tone, the last one revoking my credit cards and cancelling my account, while an earlier [letter] implied damage to

my credit rating if I did not pay immediately ..." Five months after the first billing, he still had no explanation.

A midwestern university professor refused to pay $15.00 in renewal of his American Express cards because the renewal card had not arrived, although a

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