Senator PROXMIRE. So you're not saying that minimum charges are used more frequently by small retailers than large retailers? Mr. ZOROYA. I really don't know. I would assume that minimum charge in States where it is allowed, because in some States it is not, that it is a very fair charge. I think it was again shown this morning by Professor McAlister that the difference between the annual percentage rate applied to the balance, and the minimum charge, is very, very small. Senator PROXMIRE. Fine. Thank you very, very much. And once again, I apologize for the late hour, and you did a fine job of summarizing your statements. You made a very powerful case, and I'm sure that the committee will take all of this into consideration. Thank you. [Whereupon, at 1 p.m., the hearing was recessed.] APPENDIX Additional Statements and Data STATEMENT OF THE AMERICAN HOTEL AND MOTEL ASSOCIATION Mr. Chairman and Members of the Subcommittee, the American Hotel and Motel Association is a federation of hotel and model associations located in the fifty states, the District of Columbia, Puerto Rico, and the Virgin Islands, having a membership in excess of 7,730 hotels and motels containing in excess of 880,000 rentable rooms. The American Hotel and Motel Association maintains offices at 888 Seventh Avenue, New York City, and at 777 14th Street, N.W., Washington, D.C. We are using this opportunity to briefly express, for the record, the views of the hotel/motel industry regarding S. 914 and S. 1630, the fair credit billing bills. Specifically, we are concerned with the following sections: Section 161 (a) of both bills It is the Association's belief that "60 days" should be changed to "15 days." Fifteen days is ample time for the consumer to object to an incorrect billing while 60 days presents opportunities for fraud on creditors and opportunities for unjustified delay in paying indebtedness. The proposed bill would permit delaying payment 60 days by taking the maximum period to object to the billing, another 10 or more days while the creditor answers the objections and another 30 days allowance to pay the disputed bill. This is a total possible delay of 100 or more days for a claim without merit. The possibility for abuse is great. Section 161 (B) of both bills Since this subsection states that creditors must respond to consumers objection to billing "no later than two complete billing cycles of the creditor" (in no event later than 90 days), we recommend that both bills be amended to clearly state that creditors have 90 days to respond and omit the reference to billing cycles which, in our view, is an uncertain expression. Section 161 (B) (ii) first sentence of both bills We are concerned that the additional time allowed for settlement under this section in many instances, will make it impossible for creditors to furnish documentary evidence of indebtedness, such as restaurant checks. For instance, in our industry the records to document consumer's receipt of goods are maintained for generally no longer than 3 months because of the great bulk of such records and limited storage space. Section 161 (c) of both bills It is our impression that this subsection provides that no action shall be taken to collect from the time the consumer objects to the billing until 30 days after the creditor responds. However, if the creditor does send statements, he cannot restrict credit and he must indicate to the consumer that the amount need not be paid until the matter is resolved. We believe that this places an undue burden on creditors in the hotel/motel industry as many program accounts receivable to automatically send statements on past due accounts. AH&MA feels the consumer would be amply protected if the prohibited "action to collect" while the complaint is being resolved would be defined as "turning the account over for collection or bring legal action." Section 161 (d) of both bills This section provides for penalties for failure to comply with Sections 161 and 162, due to administrative slipups, in the amount of $100 in S. 914 and $50 in S. 1630. (397) AH&MA opposes the monetary penalties found in both bills and recommends an amendment which simply precludes a creditor from bringing suit or turning the account over for collection prior to complying completely with the law. Section 104 of 8. 1630 As we read this section, it appears to us that the "unless previously furnished" test found in P.L. 90-321, Section 127(b) (2) is completely emasculated. Apparently, Section 104 of S. 1630 will require that every billing statement reflect a brief identification of the goods or services purchased, even if such identification had been previously furnished. AH&MA strongly opposes this amendment. Our typical guest generally signs his bills in our restaurants, golf shops, novelty shops, etc.. and is provided at that time with a "brief description" of the goods and services purchased. Subsequently, we identify "the charge" using broad terms such as food, bar, etc., in our monthly statements, and so we can see no further need to provide an additional "brief description" at each billing period. AH&MA opposed a similar amendment to Section 127(b) (2) in testimony on November 5, 1971 before this subcommittee when it was holding hearings on S. 652, a bill introduced by Senator Proxmire. We note, that the Senator's new bill, S. 914. does not substantially change Section 127(b) (2) and we agree with him that present law is sufficient. Section 105(a) of 8. 1630 and Section 104(a) of S. 914 We have serious reservations with the requirement that creditors semiannually provide obligors with a statement of the latters rights under the law. It appears unnecessary to us for two reasons: (1) if a consumer feels he is being improperly charged, experience shows he needs no help in writing about his problem; and (2) the fact that we remind him about his rights under the law may create a psychological picture in his mind that businessmen are per se bad. It is our impression that if a law to correct billing errors is passed, then the public should be educated to that fact through the media as is the case with most other laws. Section 210 of S. 914 AH&MA is opposed to any attempt which would remove the "business purpose" exemption now contained in Section 104(1) of the Truth-in-Lending Act from its present application to Sections 132, 133 and 134 of the Act. Since Title I of the Consumer Protection Act provides in Section 104 that certain transactions, namely, credit transactions involving extensions of credit for business or commercial purposes, are exempt from coverage, we see no compelling need at this time for the Congress to change the law. Our reason is based on the fact that the above noted transactions involve an extension of credit to "non-consumers." Clearly, this class of obligor was never intended to be benefited by the Truth-in-Lending Act as was the case of an "individual" consumer. The Senate Committee on Banking, Housing and Urban Affairs is scheduled to mark up the Fair Credit Billing Acts (S.914, S.1630) next Wednesday, June 27. The United States Savings and Loan League filed a statement on May 31, 1973, with the Consumer Credit Subcommittee in which we advocated that the limitation on class action suits under the Truth-in-Lending Act be limited to a maximum civil liability of $25,000. We also recommended that the limitation of 1% of the creditor's net worth be struck from the bill. After observing additional testimony and listening to the Subcommittee dialogue regarding class action suits, we now suggest that the overall limit on civil liability be set at $50,000 as presently found in $208 of S.914. We continue to recommend, however, that the 1% of creditor's net worth be eliminated. The $50,000 limitation ought to be sufficient compensation under normal circumstances if a class action suit is necessary and its complaint sustained. At the same time, we trust that this figure will not encourage the filing of such suits just for the sake of bringing them. We would like to express our appreciation to the members of the Consumer Credit Subcommittee and to the full Senate Banking Committee for their collective efforts in attempting to improve the language of today's Truth-in-Lending Act. Sincerely, /va 96-687-73-27 Stephen Slipher THE AMERICAN HOME - THE SAFEGUARD OF AMERICAN LIBERTIES WASHINGTON OFFICE · SUITE 1004 / 1101-17TH STREET, N.W. · WASHINGTON, D.C. 20036 / Phone: 833-3036 The American Dental Association representing over 100,000 individual member dentists would like to take this opportunity to comment on the more-than-four installment provisions of the two Fair Credit Billing Acts now before the Committee, S. 1630 introduced by the Chairman, Senator Sparkman and S. 914 introduced by Senator Proxmire. When Regulation Z of the Truth in Lending Act went into effect on July 1, 1969, the Association expressed its concern to the Federal Trade Commission that payments made in more-than-four installments to dentists and other health care providers would be unnecessarily included. The Association's contention supported by the great weight of public understanding was that credit arrangements extended to patients receiving dental treatment did not ordinarily include any hidden financing costs. Therefore, to presume that credit arrangements for the purchase of consumer goods and services always include an invisible financial factor for the privilege of paying in several installments is an unwarranted presumption; at least as to the provision of dental care. An appeal to the Federal Trade Commission in late 1969 produced a soundly reasoned administrative finding that excluded certain dental credit arrangements. The Commission staff ruled that under the more-than-four installment regulation where a patient was billed a monthly treatment charge of (x) number of dollars |