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This brings me to my chief concern in S. 914

specifically section

167 which would require most retailers who offer revolving accounts to change the methods they use for computing finance charges. If the retailers in Maine are forced to use the so-called adjusted balance method which S. 914 apparently attempts to require, it will have the effect of reducing the charges made by the retailer for credit. It costs money for the retailer to prepare and mail bills to his customers, keep books, finance his receivables, pay collection cost, etc. These costs are paid only with money either as a finance charge or from the sale of merchandise. Thus, if this Senate bill is passed and the retailers of

received from customers

Maine are forced to change their method of computing finance charges, it will result in reduced finance charge income and force retailers to recover their costs elsewhere

either by increasing prices or reducing services.

The last section I want to comment on is the one entitled "Prohi

bition of Minimum Finance Charges". Like legislating the methods retailers can use to assess finance charges, telling us we cannot use a minimum charge is another form of federal rate regulation and an infringement on the varying competitive environment in which retailers operate in the several states. Minimum finance charges are important to the small retailer who must recover the costs of providing the service of billing customers each month. There are fixed costs which are not covered by 1% on balances of $10.00 or $15.00.

Mr. Chairman, this concludes my remarks on the proposed bills. I hope you will be mindful of the small retailer and the competitive retail environment when you consider this legislation. I especially implore you to remove the two sections that prohibit minimum charges and legislate the methods we use to assess financial charges.

Mr. KEENEY. I would like to introduce Laura Sternkopf, who is our representative from the State of Delaware, and possibly Laura can

summarize her comments.

MS. STERNKOPF. Senator Proxmire, I don't know whether I can summarize my statement, which is 10 minutes, because it essentially tells the story of our store from start to finish, so to speak.

It ends up with four specific objections we would have to the legislation.

Now, if I could read it, it's 10 minutes; if not, perhaps give the four objections we have.

Senator PROXMIRE. Why don't you do that.

Ms. STERNKOPF. Give the four specifics?
Senator PROXMIRE. That would be fine.

Ms. STERNKOPF. Fine.

In addition to feeling that further legislation is not necessary in this area, we object to the following specific provisions of one or both of the bills before the subcommittee:

1. Semiannual disclosures of credit billing rights: For the reasons. cited above we fell that this is totally unnecessary, costly to the retailer, and gives the customer a psychological picture of the merchant as the ogre always to be wary of. It's as if we all must wear the scarlet letter for the abuses of the few.

2. Limitations on methods of computing finance charges: So long as Truth in Lending legislation requires retailers to specify, and even highlight, the details of computing finance charges, we feel this is sufficient for the consumer's needs. To try to make every retailer conform to a single method, we feel, is unfair to the retailer. He loses another option he has: first, in terms of recovering his considerable financial investment in extending credit; second, in terms of his individual billing equipment and its capability of making involved computations; and third, his flexibility to offer a different plan than his competitors, incidentally giving the consumer the opportunity to comparison shop.

3. Prohibition of minimum finance charge: As covered in the body of this presentation, we take the position that the minimum finance charge is a legitimate charge the merchant must make to help defray the considerable cost of preparing and mailing statements. The Truth in Lending Act recognizes the fairness of the minimum finance charge.

The cost to the individual customer of the minimum is so minuscule that we do not believe it is of any significance to him at all, whereas prohibiting this charge will hurt the retailer substantially. The 50-cent minimum is a fair charge, and we believe most consumers accept it as such.

4. Requirement to mail statements within 14 days of billing period: Although we feel that this is a reasonable requirement in most cases, we do not feel that legislation is required.

Our first reason is that we, as creditors, have a powerful incentive to get our bills to our customers as quickly as possible-and that is, we want payment as quickly as possible. Any delay in billing plays havoc with our cash flow, which, as in any business, must be watched closely. After all, we lose discounts if we cannot pay our bills on time.

Our second reason is the rigidity of the 14-day period, given the nature of retailing. There are one, two, even three extremely heavy seasonal months which require processing two or three times the average workload, and though we make every effort to be timely in our billing during these months, we simply cannot guarantee to meet such a deadline. Any such strain on our labor and facilities, or an unforeseen catastrophe such as a major computer breakdown, can delay the billing.

Our own experience has been good, in terms of meeting the proposed deadline. However, we do not think it fair to penalize us on the few occasions when extenuating circumstances might force us to be late.

In conclusion, members of the subcommittee, I hope that you will give consideration to the points I have presented here with respect not only to the position of the consumer in today's society, but also the position of the retailer, who comes in all sizes and shapes. Thank you.

[The complete statement of Ms. Sternkopf follows.]

Statement of

LAURA STERNKOPF, TREASURER

JAMES T. MULLIN & SONS

On Behalf of

THE AMERICAN RETAIL FEDERATION

To The

SUBCOMMITTEE ON CONSUMER CREDIT

Concerning The

FAIR CREDIT BILLING ACT

(S. 914 S. 1630)

May 22, 1973

AMERICAN RETAIL FEDERATION

1616 H Street, N. W. Washington, D. C. 20006

Mr. Chairman, Members of the Sub-Committee.

My name is Laura Sternkopf.

I'm Treasurer of Jas. T. Mullin & Sons,

a Wilmington, Delaware firm in business since 1862. We operate four retail clothing stores, and offer charge accounts to our customers.

I would like to tell you what our experience has been with regard to the extension of retail credit. Our sales volume is in the area of two to four million dollars annually, which categorizes us as a mediumsized retailer. At the present time approximately two-thirds of our sales are Mullins Charge Account sales. We are perhaps an anachronism in that we have not formally converted our Charge Plan from a Straight 30-Day Account to a Revolving Charge Plan, although we are currently in the process of doing so. Nor do we impose a finance charge on balances, until they are over sixty days old, and we do not impose a minimum finance charge. This, too, we plan to change when we convert to a Revolving Type plan, and I would like to explain why.

Ours has been a classic case of "make haste slowly", to the point, unfortunately, of failing to keep up with the times. Our stores offer quality clothing, and our customers are, by and large, knowledgeable and sophisticated. Many of them tend to be older persons who are resistant to change.

They are also wonderfully loyal, and we, at Mullins have adhered to the doctrine for more than a hundred years that the "customer is king". Nevertheless, in order to survive, both in the

area of economical operating procedures, and in the area of attracting our share of the newer, younger, and less wealthy market we have had to change.

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