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1/27/49
(Draft of Consumer Credit Bill)

A BJCLL
To regulate consumer instalment credit, to aid in the protection of interstate and foreign commerce and of the monetary, banking and credit structure
of the nation, and for other purposes.
Be it enaqted by the Senate and House of Representatives of
the United States of America in Congress assemble^ That the Federal
Reserve Act is amended by inserting therein the following new section 20A
between sections 20 and 21 thereof:
"SECTION 20A. CONSUMER INSTALMENT CREDIT
"(a) Purposes of Section,

For the reasons hereinafter enumerated

and in the light of which this section shall be interpreted and applied, the
use of instalment credit is affected with a national public interest which
makes it necessary to provide for appropriate regulation of such credit;
"Instalment credit is an important factor in financing the
purchase of large volumes of goods and services, particularly consumers1
durable goods, that move through the chamels of interstate commerce •
The terms and conditions on which instalment credit is available have
a direct and important effect on changes in the amount of such credit and
on the volume and timing of demand for, and flow in interstate commerce
of, not only consumers1 durable goods and related components and manufacturing equipment but also goods and services in general.




1/27/49

ALTERNATE PAGE 1
(For use if consumer credit provisions
are incorporated in a section of
another bill,)

See.

The Federal Reserve Act is emended by inserting therein

the following new section 20A, which shall not be subject to Title I of
the Economic Stability Act of 1949:
"SECTION 20A. CONSUMER WSTALL4ENT CREDIT
ff

(a) Purpose of Section.

For the reasons hereinafter enumerated

and in the light of which this section shall be interpreted and applied, the
use of instalment credit is affected with a national public interest which
makes it necessary to provide for appropriate regulation of such credit:
f!

Instalment credit is an important factor in financing the

purchase of large volumes of goods and services, particularly consumers1
durable goods, that move through the channels of interstate commerce•
The terms and conditions on which instalment credit is available have
a direct and important effect on changes in the amount of such credit and
on the volume and timing of demand for, and flow in interstate commerce
of, not only consumers1 durable goods and related components and manufacturing equipment but also goods and services in general.




- 2 "Because of the place of instalment credit in the national
econony, the nature of such credit and the purposes for which it is largely
used, (1) such credit has a tendency, it unregulated, to expand unduly in
certain periods and to contract unduly at other periods, and (2) such overexpansion and over-contraction are of material importance in causing and
intensifying excessive fluctuations and dislocations in national levels of
purchasing power, prices, credit and interstate commerce.
M

Both directly and through their impact on interstate commerce and

the national econoicy, excessive or untimely fluctuations in instalment
credit tend to interfere with the maintenance of high and stable levels of
production and employment, burden interstate and foreign commerce, interfere with the power of Congress to regulate the value of money, threaten
the stability of the nation's monetary, banking and credit structure, hamper
the Federal Reserve System in maintaining sound credit conditions, and
aggravate the causes of emergencies which put the Federal Government to great
expense and burden the national credit.
"The purposes of this section are to provide appropriate regulation
of instalment credit and thereby to aid in preventing, so far as practicable
by this means, excessive or untimely fluctuations of such credit and the
resulting national dangers and burdens mentioned above.
"(b) Definitions. ~ For the purposes of this section, unless the
context otherwise requires, the following terms shall have the following
meanings, but the Board of Governors of the Federal Reserve System
(hereinafter called the Board) may in its regulations further define




-3such terms and, in addition, may define technical, trade, and accounting terms, in so far as any such definitions are not inconsistent with
the provisions of this section:
"(1) fInstalment credit1 means credit which the obligor undertakes to repay in two or m o w payments, or as to which he undertakes to
make two or more payments or deposits usable to liquidate the credit, or
which has a similar purpose or effect: Provided, however, That it shall
not include (i) any credit to finance or refinance the construction or purchase of an entire residential or nonresidential building, (ii) any credit
extended to a business enterprise to finance the purchase of goods for resale, or (iii) any other credit extended to a business or agricultural
enterprise for any business QT agricultural purpose unless the credit is
secured by or is for the purpose of purchasing or carrying consumers1
durable goods*
"(2) 'Consumers1 durable goods1 means <\ny good which is durable
or semi-durable and is used or usable for personal, family, or household
purposes, and any service connected with the acquisition of any such good
or any interest therein•
"(3) 'Credit1 means any loan, advance, or discount; any condi-*
tional sale contract; any sale of property or services or contract of
such sale, either for present or future delivery, under which part or all
of the price is payable subsequent to the making of such sale or contract;
any rental-purchase contract, or any contract for the bailment or leasing
of property under which the bailee or lessee has the option of becoming
the owner thereof, obligates himself to pay as compensation a sum substantially




equivalent to or in excess of the value thereof, or has the right to have
all or part of the payments required Xy such contract applied to the
purchase price of such property or similar property; any opticn, demand*
lien, pledge or similar claim against, or for the delivery of property
or moneyj any purchase, discount, or other acquisition of, or any credit
upon the security of, any obligation or claim arising out of any of the
foregoing; and any transaction or series of transactions having a similar
purpose or effect.
1
1

(4) !Person1 means any individual, partnership, association,

business trust, corporation, or unincorporated organization; and, except
that the criminal penalties shall not be applicable thereto, it includes
the United States, any State or subdivision thereof, and any agency or
instrumentality of one or more such authorities*
1
1

(c) Regulations. - The Board of Governors of the Federal Reserve

System is authorized from time to time by regulation to prescribe maximum
maturities, minimum down payments, maximum loan values, and amounts and
intervals of payments, for such kind or kinds of instalment credit as it
may in the judgment of the Board be necessary to regulate in order to
prevent or reduce excessive QT untimely use of or fluctuations in such
credit. Such regulations may classify transactions and may apply different
maximum maturities, minimum down payments, maximum loan values, or amounts
and intervals of payments thereto* Such regulations may contain such
administrative provisions as in the judgment of the Board are reasonably
necessary in order to effectuate the purposes of this section or to
prevent evasions thereof*




-5w

In prescribing such regulations, including changes from time

to time to take account of changing conditions, the Board shall consider,
among other factors, (1) the level and trend of instalment credit and the
various kinds thereof, (2) the effect of fluctuations iri such credit upon
(i) the purchasing power of consumers and (ii) the demand for and the
production of consumers1 durable and other goods which move in interstate
commerce, and (3) the need in the national economy for the maintenance of
sound credit conditions.
(d) ComplianceyRecords• Reports. - No person engaged as principal,
agent, broker, or otherwise, whether .or not in connection with the selling
of goods or any other business, in the business of extending or maintaining
instalment credit, or of refinancing purchasing, selling, discounting, or
lending on, any obligation arising out of any such credit, shall extend or
maintain any credit, or renew, revise, consolidate, refinance, purchase, sell,
discount, or lend on, any obligation, in contravention of any regulation
prescribed by the Board pursuant to this section. Every person so engaged in
such business shall make, keep, and preserve for such periods, such accounts,
correspondence, memoranda, papers, books, and other records, and make such
reports, under oath or otherwise, as the Board may by regulation require as
necessary or appropriate in order to effectuate the purposes of this section;
and such accounts, correspondence, memoranda, papers, books, and other records
shall be subject at any time or from time to time to such reasonable periodic,
special, or other examinations by examiners or other representatives of the
Board as the Board may deem necessaiy or appropriate in order to effectuate
the purposes of this section.
1 e
1

( ) Penalties. -. Any person who wilfully violates any provision

of this section or any regulation thereunder the observance of which is required



-6under the terms of this section shall be deemed guilty of a misdemeanor and
upon conviction thereof shall be fined not more than $5>000, or imprisoned
not more than one year, or both} but no person shall be subject to imprisonment under this section for the violation of any regulation if he proves that
he had no actual knowledge of such regulation.
fl

(f) Investigations« Enforcement^ Administration. - All the

present provisions of sections 21 and 27 of the Securities Exchange Act of
1934> as amended (relating to investigations, injunctions, jurisdictions, and
other matters), shall be as fully applicable with respect to the exercise by
the Board of its functions under this section as they are now applicable with
respect to the exercise by the Securities and Exchange Commission of its
functions under that Act, and the Board shall have the same powers in the
exercise of its functions under this section as the Commission now has under
sections 21 and 27 of that Act. In order to aid in effectuating the purposes
of this sectiop, the Board by regulation may require transactions or persons
or classes thereof subjept to this section to be registered or licensed; and,
after notice and opportunity for hearing> ttye Board may suspend any such
registration or license for violation of this section or any regulation prescribed by the Board pursuant to this section. In administering this section,
the Board may act through its duly designated representatives and may utilize
the services of the Federal Reserve Banks and any other agencies, Federal
or State, which are available and appropriate.

1/27/49