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1 mines adherence to the disclosure requirements of this Act 2 is not necessary to carry out the purpose of this Act.

3 (b) In the exercise of its powers under this section, 4 the Board shall request the views of other Federal agencies

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exercising regulatory functions with respect to creditors, or

any class of creditors, which are subject to the provisions of

7 this Act, and such agencies shall furnish such views upon

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EFFECT ON STATE LAWS

SEC. 6. (a) This Act shall not be construed to annul, or to exempt any creditor from complying with, the laws of

any State relating to the disclosure of information in con13 nection with credit transactions, except to the extent that 14 such laws are directly inconsistent with the provisions of 15 this Act.

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(b) The Board shall by regulation except from the requirements of this Act any credit transactions or class of 18 transactions which it determines are effectively regulated 19 under the laws of any State so as to require the disclosure 20 by the creditor of the same information as is required under 21 section 4 of this Act.

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PENALTIES

23 SEC. 7. (a) Any creditor who in connection with any 24 credit transaction fails to disclose to any person any infor25 mation in violation of this Act or any regulation issued

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1 thereunder shall be liable to such person in the amount of

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$100, or in an amount equal to twice the finance charge 3 required by such creditor in connection with such transac4 tion, whichever is the greater, except that such liability

5 shall not exceed $2,000 on any credit transaction. Action

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to recover such penalty may be brought by such person 7 within one year from the date of the occurrence of the viola8 tion, in any court of competent jurisdiction. In any action 9 under this subsection in which any person is entitled to a 10 recovery, the creditor shall be liable for reasonable attorneys' 11 fees and court costs as determined by the court. As used in 12 this subsection, the term "court of competent jurisdiction"

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means either any Federal court of competent jurisdiction

regardless of the amount in controversy or any State court of competent jurisdiction.

16 (b) Except as specified in subsection (a) of this sec17 tion, nothing contained in this Act or any regulation there18 under shall affect the validity or enforceability of any con

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tract or transaction.

(c) Any person who willfully violates any provision of 21 this Act or any regulation issued thereunder shall be fined

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not more than $5,000 or imprisoned not more than one year, or both.

(d) No punishment or penalty provided by this Act

25 shall apply to the United States, or any agency thereof, or

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1 to any State, any political subdivision thereof, or any agency

2 of any State or political subdivision.

3 (e) A final judgment hereafter rendered in any criminal
4 proceeding brought by or on behalf of the United States
5 under this Act to the effect that a defendant has willfully
6 violated this Act shall be prima facie evidence against such
7 defendant in an action or proceeding brought by any other
8 party against such defendant under this Act or by the
9 United States under this Act as to all matters respecting
10 which said judgment would be an estoppel as between the
11 parties thereto.

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SEC. 8. This Act shall become effective on January 1,

14 1963.

Senator DOUGLAS. I also ask unanimous consent that there be printed in the hearing at this point reports on S. 1740 which have been received from various Federal agencies.

I think it is fair to say that all of these governmental reports have favored the general purposes of the bill, although some of them make suggestions as to ways in which they believe the bill could be improved.

(The reports referred to follow :)

Hon. A. WILLIS ROBERTSON,

Chairman, Committee on Banking and Currency,
U.S. Senate, Washington, D.C.

TREASURY DEPARTMENT,

July 14, 1961.

DEAR MR. CHAIRMAN: Reference is made to your letter of April 28, 1961, in which you requested a report on S. 1740, a bill to assist in the promotion of economic stabilization by requiring the disclosure of finance charges in connection with extensions of credit.

The proposed legislation would require any person engaged in the business of extending credit to furnish to each person to whom credit is extended a clear statement in writing in accordance with the rules and regulations of the Board of Governors of the Federal Reserve System, setting forth the cash price, the downpayment, the service charges, the finance charges, and the interest expressed as a simple annual rate.

The Treasury Department is in accord with the stated purpose of the act to assure a full disclosure to a borrower of the cost of credit. Accordingly, this Department would have no objection to the enactment of legislation which would require such disclosure.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee and that enactment of legislation requiring adequate disclosure of finance charges would be consistent with the administration's objectives.

Sincerely yours,

ROBERT H. KNIGHT, General Counsel.

Hon. A. WILLIS ROBERTSON,

THE SECRETARY OF COMMERCE,
Washington, D.C., July 14, 1961.

Chairman, Committee on Banking and Currency,

8. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: This letter is in further reply to your request dated April 28, 1961, for the views of this Department with respect to S. 1740, a bill to assist in the promotion of economic stabilization by requiring the disclosure of finance charges in connection with extensions of credit.

Under this bill any person engaged in the business of extending credit would be required to furnish to each recipient of such credit, prior to consummation of the transaction, a written statement showing financial details including the net balance due after downpayment and trade-in, and any other charges, individually itemized. The cost of the credit extended would be expressed both in dollars and as a simple annual percentage of the outstanding principal obligation. The provisions of the bill would be implemented by regulations issued by the Board of Governors of the Federal Reserve System who would also be authorized to make limited exceptions. Civil penalties analogous to those often imposed under usury statutes are provided as well as criminal sanctions.

S. 1740 was apparently designed to contribute to more public knowledge and understanding of the costs attendant upon credit use. The Department of Commerce is generally in accord with this purpose as it is aware that in some instances unwise financial commitments may be made by individuals because they do not fully know or appreciate the credit and other costs involved in delayed payment arrangements. Also, to achieve a good market-which this Department has a vital interest in promoting-we believe that both parties to a transaction should be equally well informed. Because proposals of this kind, if adopted, must operate in our highly complex, interdependent business economy, this Department particularly tries to assess them as to need and practicality, as well as impact on the economy in general, business operations, the volume of trade, costs and prices, etc.

It should be recognized that the drafting of legislation to cover the many different types of credit transactions is most difficult. We suggest, therefore, that consideration be given to limiting its scope to areas of relatively greatest need. For example, we question whether legislation evidently intended primarily to protect individual consumers should be applied to business firms. We are not aware of any need for Federal regulation of this kind over private business credit.

Also, we raise the question as to whether this legislation in its present form might be too difficult to apply to so-called revolving credit. This type of credit, only a few years in popular use, was designed to (1) allocate credit costs to the user, rather than spread them over all customers through the higher prices, (2) increase efficiency in handling the smaller, frequent credit sales and such types of bank loans as checks-on-credit and some bank-charge accounts, and (3) provide more rapid, convenient service to users.

While aggregate figures on the use of revolving credit are not available, it is a matter of common knowledge that department stores, variety stores, specialty stores, mail order firms, and other businesses have a large volume of trade with revolving credit customers. According to Federal Reserve economists, about one-half the outstandings owed on deferred payment plans at department stores and mail order firms at the end of 1960 was in revolving accounts.

The importance of retail trade to our economy is without question, and we urge, therefore, special consideration of the impact of S. 1740 on revolving credit and its useful role in family finance, business, and the economy as a whole. Also, of course, consideration should be given to the fact that S. 1740 would involve costly changes in business operating procedures generally.

We are aware that some question has been raised as to the proper administering agency, i.e., Federal Reserve or Federal Trade Commission. While we have no views on this particular matter, we believe that the provisions of section 5(a) authorizing the promulgation of rules and regulations and the determination of exceptions are not sufficiently broad or flexible to permit adequate consideration by whatever administering agency of the important kinds of problems that we have pointed out. In our opinion, it is proper and essential that legislation of this nature authorize the administering agency concerned to provide by regulation for any situation requiring special treatment or exception, consistent with the underlying legislative purpose. We have further noted the provision of section 5(b) requiring intragovernmental consultation in the administration of this legislation. We believe that provision should also be made for necessary trade and public consultation and hearings, as appropriate, by whatever agency is designated to exercise regulatory functions.

The Bureau of the Budget advises there is no objection to the submission of this report from the standpoint of the administration's program. Sincerely yours,

Hon. A. WILLIS ROBERTSON,

EDWARD GUDEMAN, Acting Secretary of Commerce.

U.S. DEPARTMENT OF JUSTICE,

OFFICE OF THE DEPUTY ATTORNEY GENERAL,

Washington, D.C., July 17, 1961.

Chairman, Committee on Banking and Currency,
U.S. Senate, Washington, D.C.

DEAR SENATOR: This is in response to your request for the views of the Depart ment of Justice on S. 1740, a bill to assist in the promotion of economic stabilization by requiring the disclosure of finance charges in connection with extensions of credit.

The bill would require any creditor to furnish a user of such credit, in advance, with a written statement setting forth: (1) the cash price of the goods or services to be purchased; (2) the amount, if any, to be credited as down payment and for trade-in; (3) the difference between (1) and (2), or the amount of the purchase price to be financed; (4) the charges, individually itemized, which are paid or are to be paid by the consumer of credit in connection with the transaction, but which are not incident to the extension of credit: (5) the total amount to be financed: (6) the finance charge (which includes "interest, fees, service charges, discounts, and such other charges incident to the extension of credit") expressed in terms of dollars and cents, and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

The bill, among other things, contains civil as well as criminal penalties and section 7(e) provides that a final judgment rendered in any criminal action brought by the United States under this proposed act "shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this act or by the United States⚫

The stated purpose of this proposed statute is "simply to require that the two indispensable measures of the price of credit be fully disclosed, the total dollar cost of a credit transaction; and the reduction of the price of credit to a common denominator--a common standard of yardstick: that is. In terms of an annual rate which enables every borrower to shop around and compare alternative credit prices" (Senator Douglas, one of the bill's sponsors-107 Daily Congressional Record 6414. Apr. 27, 1961).

The Department agrees in principal with the objectives of this legislation However, there are a number of questions presented by the language of the bill on which the Department would like to comment.

(1) The bill is not limited to business of an interstate character and it would seem appropriate for the measure to include legislative findings that the absence of disclosure by a creditor to a user constitutes a burden on interstate commerce. Power to regulate the extension of consumer credit presumably stems from the commerce clause of the Constitution (art. I, clause 3).

(2) Section 7, which sets forth the penalty provisions of the bill subsection (c), states that "any person who willfully violates any provision” shall be punished. This section would include failure or omission to furnish the statement

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