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F ederal reserve Bank

Dallas, Texas, July 27, 1949

To Member Banks in the
Eleventh Federal Reserve District:
There is reproduced on the reverse side of this letter a press statement
issued by the Federal Trade Commission concerning a trade practice con­
ference to be held in Washington on September 15, 1949. This conference
is being called by the Federal Trade Commission for the purpose of estab­
lishing trade practice rules intended to eliminate so-called “packing” prac­
tices in the installment sale and financing of automobiles.
The Commission considers that these and related practices which have
been brought to its attention by members of Congress, Better Business
Bureaus, and the public generally are of nationwide significance and war­
rant the initiation of corrective steps through the medium of a trade prac­
tice conference. The Commission has invited to participate in the Septem­
ber 15 conference, automobile dealers, financing organizations, automobile
manufacturers, and other groups concerned with the practices in question.
Since banks constitute a significant factor in the purchase of automobile
paper, the Commission desires that banks, as well as other financing insti­
tutions, participate and cooperate at the conference. The Board of Gov­
ernors of the Federal Reserve System believes that the opportunity to
participate in the conference will be of interest to many member banks and
that they may be able to make helpful contributions toward the attainment
of a uniform approach to the problem and a healthier competitive situation
for all concerned.

Yours very truly,

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (

Washington 25, D. C.
Office of Information
Ex-6800, Ext. 335


For Release in MORNING NEWSPAPERS of Monday, June 13, 1949.

The Federal Trade Commission will call trade practice conference proceedings to
eliminate and prevent deceptive “ packing” practices in the sale, and in the financing, of
automobiles purchased on the installment payment plan.
Automobile dealers, financing organizations, automobile manufacturers and other
interested groups concerned with the problem will be invited to participate in a trade
practice conference in Washington, September 15, under the supervision of Lowell B.
Mason, Acting Chairman of the Commission.
Acting on its own motion, the Commission authorized the conference proceedings
after complaints from members of Congress, Better Business Bureaus and automobile
purchasers indicated the “ packing” of sale and installment contracts whereby fictitious
amounts or overcharges are deceptively concealed from the purchaser, a practice said to
prevail on a nationwide scale.
Wrongful aspects of the practice relate to the deceptive means by which the “ pack”
is accomplished through the concealment of facts from the buyer. It appears that the
most effective means of eliminating concealed overcharges is the establishment of trade
practice rules requiring that prospective car buyers, before they enter into an automobile
purchase contract, be given an itemized breakdown of all items making up the total of the
amount to be paid by the buyer under the contract, and the listing separately of finance
and insurance charges. Thus the purchaser will know in advance the amount to be paid
for each item for which a charge is made.
It is claimed that the concealment of the nature, size and extent of the overcharge
in the monthly payments, by lumping finance charges and insurance, or otherwise, in the
contract constitutes a concealment of a material fact. Many dealers in several cities have
realized the importance of adequately informing the purchaser so that there will be full
disclosure of all the material facts to the buyer. In a number of large cities the auto­
mobile dealers have endorsed the program of revealing all the items making up the con­
tract cost and have agreed in the interest of discouraging unfair practices to make avail­
able to the automobile buyer information to which he is clearly entitled.
The September 15 conference will afford all segments of the industry concerned an
opportunity to work out their problems in a friendly, cooperative proceeding, where the
best thoughts of all are pooled free from compulsion, and to bring about, in cooperation
with the Commission, the formulation of rules directed to the prevention of “ packing” and
related practices in the sale and financing of automobiles.
At the conference, members of the industry may propose such rules as they deem
desirable and all matters presented will be considered and discussed, and the viewpoints
of everyone who seeks to express an opinion on the subject duly recorded and considered.
Before the Commission finally approves any rules, a draft of the proposed rules will
be made available to all affected or interested parties and they will be given an oppor­
tunity to present their views and suggestions thereon at a subsequent hearing.

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102