The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F ederal reserve Bank OF DALLAS 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, R. R. GILBERT President This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL TRADE COMMISSION Washington 25, D. C. Office of Information Ex-6800, Ext. 335 PRESS RELEASE For Release in MORNING NEWSPAPERS of Monday, June 13, 1949. FEDERAL TRADE COMMISSION CALLS TRADE PRACTICE CONFERENCE ON AUTOMOBILE “ PACKING” AND RELATED PRACTICES 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.