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but would not cover statements which contain false and inaccurate information. It is suggested that subsection (c) be so enlarged.

(3) It may be desirable to restrict the coverage of subsection (e) of section 7 supra) to private persons and to eliminate the United States therefrom. It is a general principal that a prior criminal conviction will estop (res judicata) in favor of the Government in a subsequent civil proceeding brought by the Government as to questions distinctly put in issue and directly determined by the criminal prosecution. Without subsection (e) any conviction for violation under & 1740 would constitute conclusive evidence that such a violation occurred in a subsequent parallel civil suit brought under the proposed act by the Goverament. However, since subsection (e) provides inter alia that final judgLent in any criminal proceeding would constitute prima facie evidence of the nes, the Government's position could be weakened by possibly converting what would be conclusive evidence into merely prima facie evidence.

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

Hon. A. WILLIS ROBERTSON,

BYRON R. WHITE, Deputy Attorney General.

U.S. DEPARTMENT OF LABOR,
OFFICE OF THE SECRETARY,
Washington, July 24, 1961.

hairman, Committee on Banking and Currency,

US. Senate, Washington, D.C.

DEAR SENATOR ROBERTSON: This is in further reply to your request for our ❤mments on S. 1740, a bill to assist in the promotion of economic stabilization by requiring the disclosure of finance charges in connection with the extensions of credit.

The proposed legislation would benefit the users of credit, most of whom are wage earners, in a number of important ways. It would undoubtedly be helpful to the consumer buying on credit to be shown, clearly and without haggling, a purchase agreement itemized as called for in the bill. This would call the attention of consumers to the significance of credit in their total expenses, thereby encouraging them to seek better interest rates and stimulating competition among enders and those extending retail credit.

Disclosure controls would also have a desirable effect on the national economy. Sare consumers would see their total interest costs in full perspective, they Wold tend to make their purchasing more timely from the standpoint of the siness cycle.

A salutary effect would also be exerted on vendors if it is made difficult to de excessive charges. This would assist in eliminating unfair competition ertain lenders based upon the inability of borrowers to determine what the costs are without the disclosure required by this bill.

The Department of Labor feels that the objectives of stimulating price comtion and improving credit practices are extremely important ones and should included in the declaration of purposes along with the objective of economic abilization.

The Department of Labor favors the objective of a clear statement of interest and other major charges involved in substantial consumer purchases on credit proposed in this legislation. Your committee may wish to elicit public infrmation from the agencies having expertise on this subject as to how this bjective may best be achieved and as to the scope and contents of the proposed gislation.

The Bureau of the Budget advises that it has no objection to the presentation this report and that the enactment of legislation requiring the adequate disure of finance charges would be consistent with the administration's obPetites.

Yours sincerely,

ARTHUR J. GOLDBERG,
Secretary of Labor.

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 Department 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

but would not cover statements which contain false and inaccurate information. It is suggested that subsection (c) be so enlarged.

(3) It may be desirable to restrict the coverage of subsection (e) of section 7 supra) to private persons and to eliminate the United States therefrom. It is a general principal that a prior criminal conviction will estop (res judicata) in favor of the Government in a subsequent civil proceeding brought by the Government as to questions distinctly put in issue and directly determined by the criminal prosecution. Without subsection (e) any conviction for violation under 8. 1740 would constitute conclusive evidence that such a violation occurred in & subsequent parallel civil suit brought under the proposed act by the Government. However, since subsection (e) provides inter alia that final judgment in any criminal proceeding would constitute prima facie evidence of the issues, the Government's position could be weakened by possibly converting what would be conclusive evidence into merely prima facie evidence.

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

Hon. A. WILLIS ROBERTSON,

BYRON R. WHITE, Deputy Attorney General.

U.S. DEPARTMENT OF LABOR,
OFFICE OF THE SECRETARY,
Washington, July 24, 1961.

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

DEAR SENATOR ROBERTSON: This is in further reply to your request for our comments on S. 1740, a bill to assist in the promotion of economic stabilization by requiring the disclosure of finance charges in connection with the extensions of credit.

The proposed legislation would benefit the users of credit, most of whom are wage earners, in a number of important ways. It would undoubtedly be helpful to the consumer buying on credit to be shown, clearly and without haggling, a purchase agreement itemized as called for in the bill. This would call the attention of consumers to the significance of credit in their total expenses, thereby encouraging them to seek better interest rates and stimulating competition among lenders and those extending retail credit.

Disclosure controls would also have a desirable effect on the national economy. Since consumers would see their total interest costs in full perspective, they would tend to make their purchasing more timely from the standpoint of the business cycle.

A salutary effect would also be exerted on vendors if it is made difficult to bide excessive charges. This would assist in eliminating unfair competition by certain lenders based upon the inability of borrowers to determine what the real costs are without the disclosure required by this bill.

The Department of Labor feels that the objectives of stimulating price competition and improving credit practices are extremely important ones and should be included in the declaration of purposes along with the objective of economic stabilization.

The Department of Labor favors the objective of a clear statement of interest and other major charges involved in substantial consumer purchases on credit as proposed in this legislation. Your committee may wish to elicit public information from the agencies having expertise on this subject as to how this objective may best be achieved and as to the scope and contents of the proposed legislation.

The Bureau of the Budget advises that it has no objection to the presentation of this report and that the enactment of legislation requiring the adequate disclosure of finance charges would be consistent with the administration's objectives.

Yours sincerely,

ARTHUR J. Goldberg,
Secretary of Labor.

Hon. A. WILLIS ROBERTSON,

DEPARTMENT OF AGRICULTURE,
OFFICE OF THE SECRETARY,
Washington, July 12, 1961.

Chairman, Committee on Banking and Currency,
U.S. Senate.

DEAR SENATOR ROBERTSON: This is in reply to your letter of April 28, 1961, requesting a report on S. 1740, a bill to assist in the promotion of economic stabilization by requiring disclosure of finance charges in connection with extensions of credit.

This Department approves the purposes of this "Truth in Lending Act." Undoubtedly many farmers, as well as others, are uninformed or even misled as to the cost of much of the credit they use. Few people are able to compute the interest-rate equivalent of the cost of installment credits. We believe that it is desirable, as a matter of public policy, that users of credit be provided with a practicable means of comparing the costs of credit available from various

sources.

Because the Board of Governors of the Federal Reserve System would be responsible for prescribing the rules and regulations required under this bill, we make only the following comments on its specific provisions. First, the wording of section 4 is clearly applicable to time purchases of goods but some additions or changes may be needed to make it applicable to loan transactions. Second, for computing an annual interest-rate equivalent of the finance charge as provided in paragraph 7 of section 4, a choice must be made among alternative methods, all of which are complex for most people. Your committee may be interested in the enclosed article on this subject which was prepared several years ago in this Department. We believe that a major problem in carrying out legislation as proposed in this bill will be the development of a simple method of computation that can readily be applied.

The Bureau of the Budget advises that the enactment of this proposed legislation would be consistent with the administration's objectives.

Sincerely yours,

ORVILLE L. FREEMAN, Secretary.

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

July 18, 1961.

Hon. A. WILLIS ROBERTSON,

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

DEAR MR. CHAIRMAN: This letter is in response to your request of April 28, 1961, for 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 bill would provide, among other things, that any creditor engaged in the business of extending credit (including any person who as a regular business practice makes loans or sells or rents property or services on a time credit or installment basis, either as principal or as agent) who, as an incident to the extension of credit, requires the payment of finance charges shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth the details of the transaction, including the finance charge expressed in dollars and cents and 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.

We are heartily in accord with the general purposes of the bill. The requirements of this bill which would assure the expression of cost of credit in terms which provide a uniform basis for comparison, would clearly coincide with the objectives of the Federal Credit Union Act which is administered by the Bureau of Federal Credit Unions in this Department. In fact when Congress was considering the first Federal credit union bill which was enacted in 1934, great emphasis was given to the objectives of permitting credit union members to borrow money for provident purposes at reasonable rates of interest and thus turn interest overcharges into cash buying power, and of educating credit union members in matters relating to the sane and conservative management of their own money.

From the beginning the Federal Credit Union Act has specified "rates of interest not exceeding 1 percent per month on unpaid balances, inclusive of all charges incident to making the loan." Accordingly, the provisions of this bill for a full disclosure of the cost in the terms prescribed by the bill would not be a burden for Federal credit unions.

We believe that the agency which would have the direct responsibility for administration would be better able to express views relative to that phase and we would defer to their judgment.

We are advised by the Bureau of the Budget that there is no objection to the presentation of this report and that enactment of legislation requiring adequate disclosure of finance charges would be consistent with the administration's objectives.

Sincerely yours,

WILBUR J. COHEN,
Assistant Secretary.

THE CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISERS,
Washington, July 14, 1961.

Hon. WILLIS ROBERTSON,
Chairman, U.S. Senate Committee on Banking and Currency,
Senate Office Building, Washington, D.C.

DEAR SENATOR: This in in response to your request for the views of the Council of 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. This bill would require the Board of Governors of the Federal Reserve System to prescribe the rules and regulations necessary to insure that creditors set forth in writing to all persons to whom their credit is extended the following information: the delivered price of the property to be acquired; downpayment and/or trade-in credits; the difference between the above amounts; other transactions charges not incident to the extension of credit; the total amount to be financed; the finance charges; and "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 core of the bill lies in the last of the above requirements. For greater clarity, we would like to suggest that this clause be changed to read "the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the average outstanding unpaid balance of the obligation."

Passage of this bill will contribute to the promotion of economic stabilization by increasing borrowers' awareness of the cost of credit and, particularly, of variations in the cost of credit. Current monetary and credit policy will be be made more effective: in times of boom and inflation, rises in interest charges will be more easily perceived by borrowers; in periods of relative recession, borrowers will be made aware of the more favorable terms on which credit is then available.

However, the contribution that this bill would make to economic stabilization is not stated clearly in the "Declaration of Purpose." To avoid misinterpretation of the bill as suggesting that the total volume of consumer credit outstanding is at all times excessive and is destabilizing simply because of its size, we would like to suggest that the first two sentences of section 2 be changed to read as follows: "The Congress finds and declares that economic stabilization is threatened by the untimely use of credit for the acquisition of property and services. The untimely use of credit results frequently from a lack of awareness of the cost thereof to the user."

The role of information in the marketplace is a vital one. A free market can function properly only on the basis of an informed public capable of wisely choosing between alternatives. Measures to increase the flow of market information are not only consistent with the proper operation of a free market economy, they are essential to it.

This bill seeks to require the dislosure of information about the cost of credit. The bewildering variety of credit charges with which borrowers are now faced makes it extremely desirable that there be available to them a yardstick with which they can compare alternative methods and sources of financing. By this means, abuses can be reduced, and borrowers will be better able to act as com

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