Senator PROXMIRE. Thank you very much. Mr. KEENEY. Senator, next will be Mr. Leonard Gay, vice president of Haverty Furniture Co., and representing the National Home Furnishing Association. Senator PROXMIRE. Fine. Mr. Gay. Mr. GAY. Mr. Proxmire, I would like, if I may, to read the brief summary that I have here. I think it will take only about 6 minutes. Senator PROXMIRE. You say it will take 6 minutes? Mr. GAY. Yes, sir. Mr. Chairman, as you have requested, in the interest of time, I shall summarize the key points of my statement. I'm appearing today as a representative of the National Home Furnishings Association, a nationwide trade association of approximately 10,000 home furnishing retailers. I am accompanied by NHFA director of national affairs, Sheldon I. London, and also by Dan Walters, general credit manager of Haverty Furniture Co., Atlanta, Ga. Nearly every home furnishings retailer offers some form of credit plan for financing home furnishings purchases. Over 80 percent of all home furnishings purchases are made on credit, so you can readily understand our interest in this legislation. In 1971, we appeared before this committee and supported the prompt resolution of credit billing errors. We do so again today, and note with satisfaction that certain recommendations made by NHFA, namely those dealing with the length of the billing period and the identification of transactions are now incorporated in both S. 914 and S. 1630. It is regrettable, however, that Congress did not pass many of these vital consumer safeguards in 1972. We submit that a similar impasse could possibly result if the Congress again attempts to force credit grantors to use a particular type of credit plan or require a particular method of applying finance charges. Briefly, I would like to identify several of the basic concerns that both S. 914 and S. 1630 have generated among home furnishings retailers. RETROACTIVE FINANCE CHARGES In the home furnishings industry, the finance charge on revolving credit plans has typically been applied on the opening or previous balance. Section 167 of S. 914 would outlaw the use of the previous balance method of applying finance charges and would force home furnishings retailers to use the adjusted balance method. During our last appearance, we dealt with a hypothetical calculation of finance charges determined by the previous balance and adjusted balance methods to help to make our point that the cost to the consumer was nearly identical using the two methods. We are delighted this time that we don't have to create any examples which could be rightly called self-serving, rather the committee can depend on data collected from literally millions of credit transactions in vari ous States. We are satisfied that this empirical data that you have heard today has proved our point. NHFA is opposed, therefore, to provisions of S. 914 that would prohibit the use of any particular method of calculating finance charges. PROHIBITION OF MINIMUM FINANCE CHARGES The Truth-in-Lending regulations require that monthly statements be sent to all revolving charge account customers with an outstanding balance of $1 or more. This provision has forced retail-creditors to prepare and mail statements to customers whose outstanding balance is very small. We do not agree with the statement that the minimum monthly finance charge is a "device for charging lower income customers a higher rate of interest." It is no more than a method to have small balances owed by the customer paid promptly. There is no reason for us to penalize our large active accounts by imposing a minimum finance charge. Furniture is not an everyday purchase, it is a big-ticket item, and we do not understand why Congress would want to force all credit customers to pay a minimum finance charge. Section 168 (a) (2) of S. 914 explicitly recognizes that the minimum finance charge does assist in the collection of small balances from recalcitrant consumers. We do a disservice to credit customers to deceive them into thinking that credit doesn't cost. It is a gross distortion of the basic thrust of the Truth-in-Lending law to go beyond total disclosures of credit costs to dictating what the merchants must or must not charge. The competitive market place is the best control on charges for credit. NHFA supports, therefore, the provisions of the Truth-in-Lending law that permits the use of the 50-cent minimum monthly charges when full disclosure of the minimum is given to the customer. CREDIT ADVERTISING We welcome the change of disclosure requirements for credit advertising contained in S. 1630. Within the first year of the Truth-inLending law, NHFA voiced its concern in a letter to the Federal Reserve Board to the effect that credit advertising requirements were so onerous that credit advertising had virtually disappeared. What is especially noteworthy of the recommended changes in credit advertising is the clear effort by the sponsors to treat uniformly, to the extent possible, revolving and installment credit plans. This evenhanded approach is one that NHFA has always supported. ADDITIONAL DISCLOSURE FOR CREDIT INSURANCE S. 1630 includes in section 216 a recommendation contained in the report of the National Commission on Consumer Finance that would require disclosure of credit life and accident and health insurance charges both in dollar amount and as an annual percentage rate. The new disclosure burdens on retailing in terms of printing new sales contracts and monthly statements, would not be accompanied by corresponding benefit to the consumer. It is always important that we weigh the costs of recommended changes and this is an example in which there are excessive costs compared to the consumer benefits. Presently, our credit customers may choose to have credit insurance, and the absolute dollar cost is disclosed at the time of the transaction. The cost is relatively little and the translation of this cost to an APR— annual percentage rate-would be more confusing that it would be helpful. In short, there is abundant disclosure under the present law. In summary, NHFA: 1. Supports the prompt resolution of credit billing errors; 2. Opposes the provision that would prohibit the use of the previous balance method, or any other method of calculating finance charges; 3. Supports provisions of the Truth in Lending law that permit 50 cent monthly minimum charges, and opposes provisions that would severely limit the use of minimum finance charges; 4. Supports liberalizing all credit advertising disclosure requirements to insure the shopping function for credit; 5. Opposes the additional disclosure of the annual percentage rate requirements for credit life and accident and health insurance. Mr. Chairman, we appreciate the opportunity to appear before you and your committee. [The complete statement of Mr. Gay follows:] Statement on "Fair Credit Billing Act" Subcommittee on Consumer Credit Committee on Banking, Housing & Urban Affairs My name is Leonard Gay. I am appearing today as a representative of the National Home Furnishings Association, a nationwide trade association of approximately 10,000 home furnishings retailers. I am a director of NHFA and serve as Chairman of its Governmental Affairs Committee. I am also Vice President and Treasurer of Haverty Furniture Companies, Inc., of Atlanta, Georgia, a regional chain of 60 home furnishings stores in 10 Southern and Southwestern states. Nearly every home furnishings retailer offers some form of credit plan for financing home furnishings purchases, either revolving (open end) credit or installment (other than open end) credit. Over 80% of all home furnishings purchases are made on credit. In this context, it is readily understandable that NHFA has maintained a long-time interest in credit legislation. We testified before this committee and the House committee during the Truth in Lending hearings in 1967, and we are proud of the role NHFA has played keeping members informed of regulatory changes since the enactment of the law. We really wish that there could have been a joint meeting before your Committee of the retailers' panel together with the public/consumer witnesses whom we serve everyday, for you see our interests are not adversary. In our opinion, good consumer relations is simply good business. The Committee is considering two bills, S. 914 and S. 1630. Both deal, in part, with a legitimate concern, the prompt resolution of credit billing errors. In 1971, we appeared before this committee and supported these remedial measures. We do so again today, and note with satisfaction that certain recommendations made |