This article offers the first comprehensive history of the development of mandatory disclosure rules for the cost of consumer credit. In contrast to prior studies, which begin with the creation of federal disclosure rules in 1968, this story starts with state-level laws that were drafted before World War I. By looking back over a longer time period, it reveals the challenges involved in defining “truth” in lending, and how the perceived purpose of a regulatory technique like mandatory disclosure may change over time. Although the modern APR disclosure metric has come to seem natural and inevitable, history shows that lenders and policymakers once hotly debated the design of disclosure rules, with each faction claiming the mantle of “truth.” Moreover, policymakers did not always view disclosure as a means to increase price competition, obviating the need for direct price controls. Disclosure was once a complement to usury laws, rather than a substitute.
1. S. 2755, 86th Cong. (1960).
2. Consumer Credit Labeling Bill: Hearings Before a Subcomm. of the Comm. on Banking and Currency, United States Senate, 88th Cong. 20–21 (1960) (Memorandum from Paul Douglas to Co-Sponsors of S. 2755) (hereafter Consumer Credit Labeling Bill Hearings ); Paul Douglas to Mr. Daniel Small, 24 March 1964, Folder: Truth in Lending 1964 January, Box 431, Paul H. Douglas Papers, Chicago History Museum (hereafter Douglas Papers).
3. Consumer Credit Labeling Bill Hearings (1960) at 1–2.
4. In essence, the APR is the total cost of borrowing a given sum of money for one year, expressed as a percentage of the outstanding loan balance.
5. S. 2755, 86th Cong. (1960).
6. S. 750, 88th Cong. (1963).
7. S. 5, 90th Cong. (1967).
8. State Usury Ceilings: Hearing Before the House Subcomm. on Financial Institutions Supervision, Regulation, and Insurance of the Committee on Banking, Finance, and Urban Affairs, 96th Cong. 149 (1979) (quoting Douglas’s 1969 statement on Uniform Consumer Credit Code), Paul H. Douglas, In the Fullness of Time: The Memoirs of Paul H. Douglas (New York, 1972).
9. For examples of studies beginning the history of mandatory lending disclosure rules with TILA, see Hosea H. Harvey, “Opening Schumer’s Box: The Empirical Foundations of Modern Consumer Finance Disclosure Law,” University of Michigan Journal of Law Reform 48 (2014): 69; Christopher L. Peterson, “Truth, Understanding, and High-Cost Consumer Credit: The Historical Context of the Truth in Lending Act,” Florida Law Review 55 (2003): 875–78. Although a few scholars have noted the absence of APR disclosures before TILA, none has explored the state-level discussions among lenders and policymakers about the various methods of cost disclosure that existed before TILA. See, e.g., Edward L. Rubin, “Legislative Methodology: Some Lessons from the Truth-in-Lending Act,” Georgetown Law Journal 80 (1991): 236; Christopher L. Peterson, “Federalism and Predatory Lending: Unmasking the Deregulatory Agenda,” Temple Law Review 78 (2005): 51; Thomas A. Durkin and Gregory E. Elliehausen, Truth in Lending: Theory, History, and a Way Forward (New York, 2011), 1–8; Peterson, “Truth, Understanding, and High-Cost Consumer Credit: The Historical Context of the Truth in Lending Act,” 875–76.
10. Zywicki, Todd, “The Consumer Financial Protection Bureau: Savior or Menace?,” George Washington Law Review 81 (2013): 868 (describing TILA as representative of a “new” regulatory approach and part of a “revolution”).
11. Historians do not share a singular understanding of TILA’s purpose. According to one scholar, TILA required disclosure for disclosure’s sake. Disclosure at first “represented a means for achieving an independently-defined goal,” but “became an independent, unchallengeable purpose through a failure of methodology.” Rubin, “Legislative Methodology, 285. According to others, Congress’s primary purpose was to promote “enhanced competition,” as stated in the law’s preamble. Thomas A. Durkin, Gregory Elliehausen, Michael E. Staten, and Todd J. Zywicki, Consumer Credit and the American Economy (Oxford, 2014), 470.
12. E.g., Eskridge, William N. Jr., “One Hundred Years of Ineptitude: The Need for Mortgage Rules Consonant with the Economic and Psychological Dynamics of the Home Sale and Loan Transaction,” Virginia Law Review 70 (1984): 1098–99 (describing the substitution of disclosure for price controls in the mortgage market).
13. On the “informed choice” understanding of how disclosure works, see Ryan Bubb, “TMI? Why the Optimal Architecture of Disclosure Remains TBD,” Michigan Law Review 113, no. 6 (2015): 1035; Todd J. Zywicki, “The Consumer Financial Protection Bureau and the Return of Paternalistic Command-and-Control Regulation,” Engage: The Journal of the Federalist Society Practice Groups 16 (July 2015): 49 (suggesting that there are disclosure rules that merely “enable informed consumer choice” without trying to “shape consumer behavior”).
14. American Association of Small Loan Brokers, Yearbook (1917), 18.
15. John M. Glenn, Lilian Brandt, and F. Emerson Andrews, Russell Sage Foundation, 1907–1946 (New York, 1947), 11, 65–66, 145–46; Arthur H. Ham, “The Year’s Progress,” Bulletin of the National Federation of Remedial Loan Associations, 1915, 8. For explanations of why the Uniform Law was so widely adopted, see Elisabeth Anderson, “Experts, Ideas, and Policy Change: The Russell Sage Foundation and Small Loan Reform, 1909–1941,” Theory and Society 37, no. 3 (2008): 300–305; Timothy W. Guinnane, Bruce G. Carruthers, and Elisabeth Anderson, “An Unlikely Alliance: How Experts and Industry Transformed Consumer Credit Policy in the Early Twentieth Century U.S.,” Social Science History 39, no. 4 (Winter 2015): 591–94.
16. Chairman, American Association of Small Loan Brokers to Association Members, 10 January 1917, Folder 203, Box 26, Russell Sage Foundation records, Rockefeller Archive Center (hereafter RAC RSF).
17. Rolf Nugent (RSF) to Shelby Harrison (RSF), 14 October 1942, Folder 188, Box 24, RAC RSF.
18. For example, imagine a loan with a rate of charge stated as “6% discount plus fees.” For a $100 loan at a discount rate of 6 percent, plus a $2 fee, repaid over the course of a year, the borrower would receive $92 at the outset ($100 minus the $2 fee and $6 interest) and then pay down the principal of the loan a little each month. In total, he would pay $8 for the use of an average monthly balance of $46. In contrast, if the cost of this loan ($8) were instead expressed as a percentage of the average outstanding loan balance ($46), it would be more than twice as large—over 17 percent.
19. L. C. Harbison (Household Finance Corp.) to Arthur Ham (RSF), 27 December 1916, Folder 193, Box 25, RAC RSF.
22. Arthur Ham (RSF) to James Ferguson (St. Bartholomew’s Loan Association), 2 January 1917, Folder 193, Box 25, RAC RSF.
23. E.g., “Display Ad, Household Finance Corp.,” New York Times, 10 October, 1928, 37.
24. Speech by F. B. Hubachek, Consumer Credit Management Conference, Columbia University, Arden House, 18 February 1960, Folder 168: NCCUSL Correspondence 1965, 8 March, Box 17, Persia Campbell Papers, Manuscript Group Number 0011, Consumers Union, Yonkers, New York. See also Carl A. Dauten, The Consumer Finance Industry in a Dynamic Economy (St. Louis, 1959), 62.
25. C. W. Phelps, “How Should Interest Rates Be Stated?” Banking, April 1943, 44. Commercial banks did not lend small sums of money. Credit unions did, but they lent only to their members and there were few in existence in the United States before the 1920s. Once credit unions became more widespread, they were among the only other lenders to express their charges in the same terms as licensed lenders, in terms of a rate per month on a declining balance.
26. Pawnshops also made small loans, but they required borrowers to pledge an item of value as collateral for the loan and to leave the item with the pawnbroker. Pawnbroker regulations varied from state to state and some states, like New York, did require disclosure of the cost of credit on the borrowers’ pawn ticket in terms of an all-inclusive monthly rate. N.Y. Gen. Bus. Law §§44, 46 (1909). The Sage Foundation drafted a Uniform Pawnbroking Law in the 1920s but did not actively promote its adoption on a state-by-state basis. By 1935, the Uniform Pawnbroking Law was in operation in only four states. Draft of Uniform Pawnbroking Bill, 1922, Folder: 1922, Box 1, Russell Sage Foundation Records, Manuscript Division, Library of Congress (hereafter RSF LOC); Shelby M. Harrison (RSF) to Jeremiah Milbank (president, Provident Loan Society), 25 April 1935, Folder 186, Box 24, RAC RSF.
27. Mushinski, David and Phillips, Ronnie J., “The Role of Morris Plan Lending Institutions in Expanding Consumer Microcredit in the United States,” in Entrepreneurship in Emerging Domestic Markets, ed. Yago, Glenn, Barth, James R., and Zeidman, Betsy (New York, 2008), 122; Robinson, Louis N., “The Morris Plan,” American Economic Review 21, no. 2 (June 1931): 222.
28. Under the loan terms, the borrower received a lump sum of cash and repaid the lump sum at the end of the loan. Thus, technically, the borrower had use of the full cash sum for the entire life of the loan. At the same time, the borrower agreed to buy stock “certificates” from the bank and to pay for them in installments over time. The borrower would pay off the certificates over the life of the loan. At the end of the loan term, when the borrower had paid off the full purchase price of the stock certificates, he would then sell the certificates back to the bank and use the funds to repay the loan. As critics of the scheme noted, the borrower had use of only half of the full loan amount, on average, over the course of the loan term.
29. Technically, to maintain the legal fiction, these payments were not for repayment of the debt but were installment payments on the stock certificates the borrower purchased on credit.
30. Rolf Nugent (RSF) to Shelby Harrison (RSF), 27 April 1943, Folder 188, Box 24, RAC RSF.
31. Brief from Missouri Bankers Association on proposed legislation (House Bill 158), 27 April 1943, Folder 217, Box 28, RAC RSF; “6% is Not 11.7%” by R. B. Stewart, president, Miami Deposit Bank, Yellow Springs, Ohio, reprinted from Banking, April 1941, Folder 216, Box 28, RAC RSF; John Martin Chapman, Commercial Banks and Consumer Instalment Credit, 1940, 53.
32. Robinson, “The Morris Plan,” 229. Morris Plan banks were “compelled” to operate under the Uniform Law in Massachusetts and Pennsylvania. Ibid.
33. N.Y. Banking Law § 293 (1914).
34. N.Y. Laws of 1931, Ch. 490 (codified at N.Y. Banking Law 292 ). Additional amendments granted industrial banks most of the powers of state-chartered savings banks, including FDIC insurance and qualification for membership in a Federal Reserve Bank. N.Y. Laws of 1934, Ch. 500–511.
35. Robinson, “The Morris Plan,” 230.
36. Barbara A. Curran and American Bar Foundation, Trends in Consumer Credit Legislation (Chicago, 1965), 52–58.
37. Wallace Peter Mors, Consumer Credit Finance Charges: Rate Information and Quotation (National Bureau of Economic Research, 1965), 14–15 ; F. B. Hubachek, “The Drift toward a Consumer Credit Code,” University of Chicago Law Review 16 (1949): 622; Curran and American Bar Foundation, Trends in Consumer Credit Legislation, 69–75. New York was unusual in that, at one time, it required banks to express their maximum rate in terms of an all-inclusive rate. Mors, Consumer Credit Finance Charges, 54. But New York amended its law in 1957 to allow the rate to be stated in terms of a discount rate. N.Y. Laws of 1957, Ch. 597.
38. Mors, Consumer Credit Finance Charges, 9.
39. Ibid., 23–24.
40. Curran, Barbara A., “Legislative Controls as a Response to Consumer-Credit Problems,” Boston College Industrial and Commercial Law Review 8 (1967): 413.
41. E.g., McAnsh v. Blauner, 226 N.Y.S. 379 (1st Dep’t 1928).
42. Walter Schafer (Connecticut Assoc. of Personal Finance Companies) to Rolf Nugent (RSF), 17 October 1936, Folder: “U.S.L.L. General, 1936 (September thru Dec.) Rate of Interest Restatement,” Box 5, RSF LOC.
43. American Association of Personal Finance Companies, Minutes of the Hot Springs Conference, General Roundtable Session, 29 September 1936, Folder: “U.S.L.L. General, 1936 (September thru Dec.) Rate of Interest Restatement,” Box 5, RSF LOC (remarks of Thomas D. Griffin).
44. John Glenn (RSF) to B. F. Schlesinger (The Emporium, San Francisco), 21 August 1916, Folder 199, Box 26, RAC RSF.
45. John Glenn (RSF) to Julius Rosenwald (Sears Roebuck), 4 January 1917, Folder 190, Box 24, RAC RSF.
47. Clark Williams (president, Industrial Finance Corp.) to Robert W. deForest (RSF), Folder 191, Box 25, RAC RSF.
50. Rolf Nugent (RSF) to Shelby Harrison (RSF), 27 April 1943, Folder 188, Box 24, RAC RSF.
51. E.g., Charles F. Speare, “A Banker’s Stand: System of ‘Discount Plus’ Is Defended, Baltimore Sun, 1 July 1942, in Folder: Interest—Statement of Rate, Box 1, RSF LOC.
53. B. E. Henderson (president, Household Finance Corp.), “Charge on Small Instalment Loans to Consumers,” 2 April 1942, Folder 216, Box 28, RAC RSF.
56. William Trufant Foster (director, Pollack Foundation for Economic Research), “Clearly State the Rate,” Banking, February 1941, Folder 216, Box 28, RAC RSF.
57. B. E. Henderson (president, Household Finance Corp.), “Charge on Small Instalment Loans to Consumers,” 2 April 1942, Folder 216, Box 28, RAC RSF.
58. Rolf Nugent, “Why Not Candor in Small Bank Loans?” Survey Graphic, March 1943, Folder 216, Box 28, RAC RSF.
59. “Stating Rates on Instalment Loans,” Excerpts from Bulletin No. 38, American Bankers Association by Walter B. French, deputy manager, Consumer Credit Dept., Folder 216, Box 28, RAC RSF.
62. Brief from Missouri Bankers Association on proposed legislation (House Bill 158), 27 April 1943, Folder 217, Box 28, RAC RSF.
63. J. Glenn Donaldson (RSF) to Shelby Harrison (RSF), 23 July 1942, Folder 187, Box 24, RAC RSF.
64. Douglas joined the CAB in October 1933. “Profiteers Curb Due: Drive Launched Under N.R.A.,” Los Angeles Times, 10 October 1933. Years later, during the hearings on the Truth in Lending Act in 1962, Douglas said he drafted a code for “the personal loan industry and for installment selling” as “a member of the consumers’ advisory board of the NRA.” Truth in Lending—1962: Hearings Before a Subcomm. of the Comm. on Banking and Currency, United States Senate, 87th Cong. 101 (1962) (statement of Paul H. Douglas). He later stated, in April 1967, that he was on the “code authority for the credit industry” and that his proposal for a “simple annual rate” disclosure was rejected at a springtime meeting. Truth in Lending—1967: Hearings Before the Subcomm. on Financial Institutions of the Comm. on Banking and Currency, United States Senate, 90th Cong. 44 (1967) (statement of Paul H. Douglas) (hereafter Truth in Lending Hearings ). The licensed lenders trade association submitted a proposed code for the “personal finance industry” on 31 August 1933, before Douglas joined the CAB. The code was not approved before the NRA disbanded. I have found no records of code authority meetings for the personal finance industry.
65. John S. Bradway, “The Development of Regulation,” Annals of the American Academy of Political and Social Science 196 (1 March 1938): 184; William Trufant Foster and LeBaron R. Foster, “Rate Aspects of Instalment Legislation,” Law and Contemporary Problems 2 (1935): 193–94; “Clause in Code Urged to Show Finance Costs: Consumers Board Thinks Buyer Should Know of Credit Charge,” Washington Post, 2 November 1933.
66. Hawley, Ellis W., The New Deal and the Problem of Monopoly (Princeton, 1966), 56–57.
67. National Recovery Administration, Code of Fair Competition for the Retail Trade, No. 60 (approved 21 October 1933), at 8–9.
68. Wilbur Clayton Plummer, Sales Finance Companies and Their Credit Practices (New York, 1940), 232. The federal government enacted some wartime constraints on sales financing but did not require retailers to disclose the finance charge as a rate. Regulation W, 12 CFR 222.4(f)(5) (1941).
69. Donald Werner Scotton, “A Study of the Regulation of Consumer Instalment Credit” (PhD diss., University of Illinois at Urbana-Champaign, 1952), 200. The FTC feared that consumers were likely to mistake the discount rate for the equivalent annual rate (the finance charge in dollars divided by the “annual equivalent effective principal in the hands of the instalment buyer”). Wallace P. Mors, “State Regulation of Retail Instalment Financing-Progress and Problems I,” Journal of Business of the University of Chicago 23, no. 4 (1 October 1950): 213.
70. Mors, “State Regulation of Retail Instalment Financing-Progress and Problems I,” 213 n. 45 (noting the “equivalent annual rate” is a term borrowed from the FTC).
71. Ibid. at 214. E.g., Ford Motor Co., 30 F.T.C. 49-64 (1939), aff’d 120 F. 2d 175 (4th Cir 1941). The agency also later issued trade-practice rules requiring the disclosure of certain loan terms in credit automobile sales. Trade Practice Conference Rule Relating to the Sale and Financing of Motor Vehicles, 16 C.F.R. § 197 (1951); “Protection of Automobile Installment Buyers: The FTC Steps In,” Yale Law Journal 61 (1952): 724–25. The FTC’s jurisdiction did not extend to banks, however. Banks were free to engage in the very same practices that the FTC found deceptive when used by car dealers. Rolf Nugent, “I’m for a frank interest charge,” Retailing, 8 March 1937, Folder “Interest—Statement of Rate,” Box 1, RSF LOC.
72. The “rate statement reform group” included Sage Foundation officials, William T. and LeBaron R. Foster of the Pollak Foundation, Evans Clark of the Twentieth Century Fund, the “National Educational Association, the General Federation of Women’s Clubs, the American Legion, the Farm Federation Bureau, the American Federation of Labor, the League of Women Voters, and the Congress of Parents and Teachers.” Mors, “State Regulation of Retail Instalment Financing-Progress and Problems I,” 212 n. 43. “Preliminary Draft of a Uniform Law to Regulate Instalment Selling,” 1 November 1940, Folder 217, Box 28, RAC RSF. Shelby Harrison, “Memo of Information Requested by Trustees’ Committee on Small Loan Question,” 28 April 1943, Folder 216, Box 28, RAC RSF. Shelby Harrison (RSF) to Leon Henderson (SEC), 4 June 1940, Folder 187, Box 24, RAC RSF.
73. Hubachek, F. B., “Progress and Problems in Regulation of Consumer Credit,” Law and Contemporary Problems 19, no. 1 (1954): 10.
74. For demands that sale finance use the Uniform Law method, see, e.g., “Note, Usury Statutes and Instalment Sales,” Yale Law Journal 48 (1939): 1105; J. Glenn Donaldson, “An Analysis of Retail Installment Sales Legislation,” Rocky Mountain Law Review 19 (1947): 139. Mors, “State Regulation of Retail Instalment Financing-Progress and Problems I,” 207–12; Scotton, “A Study of the Regulation of Consumer Instalment Credit,” 174.
75. American Association of Personal Finance Companies, Minutes of the Hot Springs Conference, General Roundtable Session, 29 September 1936, Folder: “U.S.L.L. General, 1936 (September thru Dec.) Rate of Interest Restatement,” Box 5, RSF LOC (remarks of Thomas D. Griffin); Rolf Nugent (RSF) to Shelby Harrison (RSF), 14 October 1942, Folder 188, Box 24, RAC RSF.
76. Hubachek, “Progress and Problems in Regulation of Consumer Credit,” 7. Shelby Harrison (RSF), Memo of Information Requested by Trustees’ Committee on Small Loan Question, 28 April 1943, Folder 216, Box 28, RAC RSF; Secretary-Treasurer of RSF to William Henry Beatty (Alabama House of Representatives), 27 June 1951, Folder 190, Box 24, RAC RSF.
77. Wisconsin Bankers Association to RSF Trustees, 28 May 1943, Folder 216, Box 28, RSF RAC (objecting to foundation’s support for a uniform bank lending law); John Glenn (RSF) to RSF Board of Trustees, 21 April 1943, Folder 217, Box 28, RSF RAC. On the foundation’s reorganization, see Alice O’Connor, Social Science for What? Philanthropy and the Social Question in a World Turned Rightside Up (New York, 2007), 48; Stanton Wheeler, “The Commitment to Social Science: A Case Study of Organizational Innovation,” in Social Science in the Making: Essays on the Russell Sage Foundation, 1907–1972, ed. David C. Hammack and Stanton Wheeler (New York, 1994), 132.
78. Kamp, Allen R., “Uptown Act: A History of the Uniform Commercial Code: 1940–49,” SMU Law Review 51 (1998): 343.
79. Rubin, “Legislative Methodology,” 243 (noting that Paul Douglas knew there was “no established constituency for ‘consumer credit labeling’” in 1960).
80. Curran and American Bar Foundation, Trends in Consumer Credit Legislation, 95–96, 293–300 (chart 17).
81. N.Y. Pers. Prop. Law §303, §404 (1957).
82. The most common form of revolving consumer credit today is the credit card, but revolving accounts in the 1960s were more commonly offered by retailers such as department stores. In a traditional installment sale, the borrower would agree to repay the amount borrowed, plus the finance charge, over a set period of time in regular weekly or monthly payments. In contrast, a borrower using revolving credit could pay off the loan in a lump sum, or could “revolve” a balance from month to month. The lender would then assess a monthly “service” or finance charge on the debt that remained outstanding at the end of each monthly cycle. New York, the first state to regulate revolving credit, required revolving creditors to disclose the dollar amount of their service charge in the borrower’s monthly account statement, and limited the maximum charge to 1.5 percent per month for balances up to $500, and 1 percent for balances above that amount. N.Y. Pers. Prop. Law §413(3) (1957).
83. Foster and Foster, “Rate Aspects of Instalment Legislation,” 195; Robert L. Jordan and William D. Warren, “Disclosure of Finance Charges: A Rationale,” Michigan Law Review 64 (1966): 1292.
84. Grant Gilmore and Allan Axelrod, “Chattel Security: I,” Yale Law Journal 57 (1948): 545. Mary B. Tarcher, “Protecting the Instalment Buyer,” Legal Aid Review 55, no. 2 (1957): 12.
85. Gilmore and Axelrod, “Chattel Security: I,” 547.
86. Rubin, “Legislative Methodology,” 242.
87. Ibid., 242 n. 38.
88. 72 Stat. 325 (1958).
89. Rubin, “Legislative Methodology,” 242–43.
90. S. 2755, 86th Cong. (1960).
91. Rubin, “Legislative Methodology,” 242–43.
92. Consumer Credit Labeling Bill Hearings (1960) at 2.
93. Paul Douglas to R. L. Mullins (The Independent Bankers Assoc.), 2 August 1961, Folder: Misc. Correspondence 1961, Box 1300, Douglas Papers.
94. Paul Douglas to Co-Sponsors of S.1740, Re: Proposed Changes to in S. 1740, 1 May 1962, Folder: Douglas correspondence—1962, Box 1303, Douglas Papers.
95. Paul Douglas to Kenneth Johnson, 22 June 1964; Paul Douglas to William Clark (Illinois attorney general), 22 June 1964; both in Folder: Truth in Lending June 1964, Box 431, Douglas Papers.
96. Paul Douglas to Karen Krinick (Jewish Community Council, Newark, N.J.), 1 September 1966, Folder: Truth in Lending Third Folder 1964, Box 431, Douglas Papers.
97. Rubin, “Legislative Methodology,” 281.
99. E.g., Jackson R. Collins, “The Meaning of Interest: Reality—Not Semantics,” Personal Finance Law Quarterly Report 14 (Summer 1960): 105.
100. Consumer Credit Labeling Bill Hearings (1960) at 408, 452–55.
101. Rubin, “Legislative Methodology,” 246.
102. A. Willis Robertson to Paul Douglas, 12 December 1961, Folder: Douglas Correspondence 1961, Box 1299, Douglas Papers. Kennedy also delivered a special message to Congress in 1962 that identified four basic consumer rights, including the right to be informed. John F. Kennedy, Special Message to the Congress on Protecting the Consumer Interest (15 March 1962), available at The American Presidency Project, http://www.presidency.ucsb.edu. Lyndon B. Johnson continued Kennedy’s support for consumer protection, after Kennedy’s assassination in 1963.
103. A. Willis Robertson to Paul Douglas, 12 December 1961, Folder: Douglas Correspondence 1961, Box 1299, Douglas Papers; A. Willis Robertson to Paul Douglas, 1 December 1962, Folder: Douglas correspondence—1962, Box 1303, Douglas Papers.
104. “This Proposal Shortchanges Your Customers,” Nation’s Business, March 1963.
105. Peter Greenough, “‘Truth-in-Lending’ Impractical,” Boston Globe, 24 January 1964, Folder 5, Box 407, Series 2, Wallace F. Bennett Papers (MSS 20), Brigham Young University (hereafter Bennett Papers).
106. Wallace F. Bennett to David W. Salmon (St. Louis), 11 March 1963, Folder 9, Box 304, Series 2, Bennett Papers.
108. Truth in Lending Hearings (1967) at 285 (statement of William J. Pierce, chairman, Executive Comm., Nat’l Conference of Commissioners on Uniform State Laws); M. R. Neifeld, “Dollars, Sense, and Interest Rates,” Banking 59, no. 12 (June 1967): 60.
109. Wallace F. Bennett to David W. Salmon, 11 March 1963 (St. Louis), Folder 9, Box 304, Series 2, Bennett Papers.
110. E.g., Harry W. Krotz Jr. (treasurer, J. W. Robinson Co.) to Wallace F. Bennett, 9 April 1963, Folder 9, Box 304, Series 2, Bennett Papers; “Modified ‘Truth’ Bill Starts on Its Way,” Banking 60, no. 2 (August 1967): 64.
111. Wallace F. Bennett to Belva Barlow (Salt Lake City), 25 March 1963, Folder 9, Box 304, Series 2, Bennett Papers.
112. Truth in Lending—1963–64: Hearings Before a Subcomm. of the Comm. on Banking and Currency, United States Senate, 88th Cong. 1108 (1964) (testimony of Richard F. Vancil, Harvard Business School, on behalf of the Boston Retail Trade Board) (hereafter Truth in Lending Hearings [1963–64]).
113. Truth in Lending Hearings (1967) at 204 (statement of William M. Batten, chairman of the board, J. C. Penney Co., complaining that APR disclosure rules “prevent us from stating the truth to our customers”); Neifeld, “Dollars, Sense, and Interest Rates,” 60.
114. Walter F. Carey (president, Chamber of Commerce of the United States) to Wallace F. Bennett, 25 June 1964, Folder 24, Box 307, Series 2, Bennett Papers.
115. Statement by Senator Wallace F. Bennett Regarding S. 750 (sent to Utah State AFL-CIO, 5 December 1963, Folder 9, Box 304, Series 2, Bennett Papers.
116. Driscoll, Peter J., “Securing the Guarantees of Consumer Credit Legislation,” Notre Dame Lawyer 44 (1969): 574.
117. Truth in Lending Hearings (1963–64) at 1048 (statement of Walter D. Malcolm, president, Nat’l Conference of Commissioners on Uniform State Laws). See also Truth in Lending Hearings (1967) at 289 (statement of William J. Pierce, chairman, Executive Comm., Nat’l Conference of Commissioners on Uniform State Laws).
118. Truth in Lending Hearings (1967) at 405 (statement of J. O. Elmer of Wells Fargo, on behalf of the American Bankers Association); Thomas W. Miles, “Truth and Truth-in-Lending; What the Proxmire Bills Calls For,” Banking 59, no. 12 (June 1967): 22–24. In response, the drafters amended TILA to make clear that APR was not the same as “interest” under state usury laws.
119. Wallace F. Bennett to Fred Auerbach (Auerbach’s Department Store, Salt Lake City), 26 June 1964, Folder 24, Box 307, Series 2, Bennett Papers.
120. John C. Hazen (National Retail Merchants Association, VP-Govt) to Joseph T. Meek (president, Illinois Retail Merchants Association), 19 November 1963, Folder 9, Box 304, Series 2, Bennett Papers.
121. See, e.g., Rosemary Conforti to Paul Douglas, 8 July 1966, Folder: Folder: Truth in Lending Third Folder 1964, Box 431; Mrs. Elmer Sculley (Belleville, Ill.) to Paul Douglas, 1 November 1966, Folder: Truth in Lending Third Folder 1964, Box 431; Dorothy Ruff (Pasadena) to Paul Douglas, 28 July 1961, Folder: Douglas Correspondence 1961, Box 1299; Daniel Sullivan to Paul Douglas, 31 August 1966, Folder: Truth in Lending Third Folder 1964, Box 431; all in Douglas Papers.
122. Omri Ben-Shahar and Carl Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure (Princeton, 2014), 140. The same types of complaints surfaced when the New York attorney general held a hearing a few years later, in 1967, to rally support for a state version of truth in lending. Public Hearing Re: Truth in Lending, before Louis J. Lefkowitz, 27 November 1967.
123. Wallace F. Bennett to Harley Gillman (Orem, Utah), 3 December 1963, Folder 9, Box 304, Series 2, Bennett Papers; Rubin, “Legislative Methodology,” 281.
124. Alfred A. Buerger, “The Uniform Law Commissioners’ Consumer Credit Project,” Personal Finance Law Quarterly Report 19, no. 2 (Spring 1965): 47.
125. Wallace F. Bennett to Norman Diamond, Esq. (Arnold, Fortas and Porter), 14 November 1963, Folder 9, Box 304, Series 2, Bennett Papers.
126. Rubin, “Legislative Methodology,” 251.
127. Truth in Lending Act, S.5, 90th Cong. (1967).
128. Rubin, “Legislative Methodology,” 251–52.
129. Truth in Lending Hearings (1967) at 223–24 (testimony of Paul C. Menton, Massachusetts House of Representatives). But note that the Massachusetts law specified a different method for calculating the annual finance charge. Albert W. Driver Jr., “The New Massachusetts Retail Installment Sales Act Requires Service Charge to Be Stated as a Simple Annual Rate,” Personal Finance Law Quarterly Report 20, no. 3 (1966): 111; Robert W. Johnson, “The New Legislative Finance Charges: Disclosure, Freedom of Entry, and Rate Ceilings,” Law and Contemporary Problems 33 (1968): 676 (quoting report).
130. Sylvia Porter, “Truth in Lending Movement Grows,” Milwaukee Sentinel, 7 July 1966, reprinted in Cong. Rec. 14409-10 (11 July 1966).
131. Truth in Lending—1967, S. Rep. No. 90-392, at 10, 23–24.
132. Consumer Credit Protection Act, H.R. 11601, 90th Cong. (1967).
133. P.L. 90-321.
134. Paul Douglas to R. L. Mullins (The Independent Bankers Assoc.), 2 August 1961, Folder: Misc. Correspondence 1961, Box 1300, Douglas Papers.
135. TILA specified this tolerance for “credit transactions payable in substantially equal installments when the creditor determines the total finance charge on the basis of a single add-on, discount, periodic, or other rate, and the rate is converted into an annual percentage rate under procedures prescribed by the Board.” P.L. 90-321, sec. 107(c). The Federal Reserve Board’s implementing regulation, Regulation Z, provided for the same low error tolerance for other loans. 12 C.F.R. 226.5 (1969).
136. P.L. 90-321.
137. Elizabeth Renuart and Diane E. Thompson, “The Truth, the Whole Truth, and Nothing but the Truth: Fulfilling the Promise of Truth in Lending,” Yale Journal on Regulation 25 (2008): 186.
138. P.L. 90-321, sec. 111.
139. TILA was adopted as Title I of the Consumer Credit Protection Act. Other titles of the act added additional protections, including limits on the maximum amount of a worker’s wages that could be garnished. P.L. 90-321, sec. 303 (Title III).
140. See, e.g., Robert L. Jordan, “Consumer Credit: Some of the Major Problem Areas in Modern Consumer Credit Statutes,” Personal Finance Law Quarterly Report 20, no. 1 (1965): 13; Consumer Credit Protection Act, Part 1: Hearings on H.R. 11601 Before the Subcomm. on Consumer Affairs of the H. Comm. on Banking & Currency, 90th Cong. 242 (1967) (statement of Hon. R. Sargent Shriver, director, Office of Econ. Opportunity); Consumer Credit and the Poor: Hearings on the Federal Trade Commission Report on Credit Practices Before the Subcomm. on Fin. Insts. of the S. Comm. on Banking & Currency, 90th Cong. 10 (1968) (statement of Paul Rand Dixon, chairman, FTC); Jordan and Warren, “Disclosure of Finance Charges,” 1320; Robert L. Jordan and William D. Warren, “A Proposed Uniform Code for Consumer Credit,” B.C. Indus. & Com. L. Rev. 8 (1967): 449; Homer Kripke, “Gesture and Reality in Consumer Credit Reform,” New York University Law Review 44 (1969): 2–13.
141. William C. Whitford, “The Functions of Disclosure Regulation in Consumer Transactions,” Wisconsin Law Review (1973): 414 (reviewing studies of TILA’s impact).
142. Ralph J. Rohner, “Truth in Lending ‘Simplified’: Simplified?” New York University Law Review 56 (1981): 1020.
143. William D. Warren, “Consumer Credit Law: Rates, Costs, and Benefits,” Stanford Law Review 27 (1975): 962.
144. Consumer Credit Regulations (Truth-in-Lending Regulations) Part 2: Hearings Before the Subcomm. on Consumer Affairs of the Comm. on Banking and Currency, House of Representatives, 91st Cong. 377 (1969) (Statement of Hon. J. L. Robertson, Federal Reserve Board).
145. Peter Millones, “‘Truth in Lending’ Begins with a Suit: Harlem Store Sued on Day Truth-in-Lending Law Takes Effect,” New York Times, 2 July 1969, 1; “Harlem Store Sued Right After Start of Consumer Law: NAACP, Local Unit Send Aide to Buy TV Set, Then Charge Violation of Truth-in-Lending,” Wall Street Journal, 2 July 1969, 8.
146. Mark Pettit Jr., “Representing Consumer Defendants in Debt Collection Actions: The Disclosure Defense Game,” Texas Law Review 59 (1981): 279.
147. Ibid., 291.
148. Ibid., 260 (quoting Jonathan M. Landers, “Some Reflections on Truth in Lending,” University of Illinois Law Forum : 686).
149. Congress also amended the law in 1974 to cut back the damages available for class actions. Pub. L. No. 93-495. The Truth-in-Lending Simplification and Reform Act was part of the larger Depository Institutions Deregulation and Monetary Control Act, Pub. L. No. 96-221. The change did stem the tide of litigation. Griffith L. Garwood, “Federal Consumer Financial Regulation: In the Eye of the Deregulation Storm,” Business Lawyer 39 (1984): 1297.
150. “Regulation of Consumer Credit: The Credit Card and the State Legislature,” Yale Law Journal 73 (1964): 887. At the time TILA was adopted, the volume of credit outstanding on bank-issued credit cards was small, $828 million. Gillian Garcia, “Credit Cards: An Interdisciplinary Survey,” Journal of Consumer Research 6, no. 4 (1980): 328 (1967 data).
151. Garcia, “Credit Cards,” 328. This number includes cards issued by retailers and gas stations, “travel and entertainment” cards like Diner’s Club and American Express, as well as general purpose cards issued by banks belonging to either the Visa or MasterCard payment networks.
152. Donald H. Maffly and Alex C. McDonald, “The Tripartite Credit Card Transaction: A Legal Infant,” California Law Review 48 (1960): 459. “Regulation of Consumer Credit: The Credit Card and the State Legislature,” 886. John J. Wheatley and Guy G. Gordon, “Regulating the Price of Consumer Credit,” Journal of Marketing 35, no. 4 (1 October 1971): 21.
153. Lawrence G. Goldberg, “The Effect of State Banking Regulations on Bank Credit Card Use: Comment,” Journal of Money, Credit and Banking 7, no. 1 (February 1975): 108 (table of state interest-rate limits).
154. E.g., Usury Lending Limits: Hearing on S. 1988 Before the S. Comm. on Banking, Housing, and Urban Affairs, 96th Cong. 226–70 (1979) (report by the United States League of Savings Associations, “Usury Ceilings: The Threat to Housing”).
155. Alfred E. Kahn, The Economics of Regulation: Principles and Institutions (New York, 1970); George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2, no. 1 (1971): 3–21.
156. 439 U.S. 299 (1978).
157. Pub. L. 96-221, sec. 501. States could opt out of federal mortgage rate preemption before 1 April 1983. Thirteen states have opted out, plus Puerto Rico. See National Consumer Law Center, Mortgage Lending (2d ed., 2014), sec. 8.3.6. The Alternative Mortgage Transaction Parity Act of 1982 further preempted the application of state laws limiting mortgage terms, and also allowed for states to opt out. Five states did. See ibid. at sec. 8.5.3. National Consumer Law Center, Consumer Credit Regulation (2012), sec. 220.127.116.11.2.
158. Pub. L. 96-221, sec. 521. States were also allowed to opt out of the provision granting state-chartered federally insured banks the same ability as national banks to “export” their home-state interest rates. Two did.
159. James J. White, “The Usury Trompe L’Oeil,” South Carolina Law Review 51 (2000): 454 n. 65 (listing states that amended their usury laws).
160. Swayze, David S. and Ripsom, David B., “The Delaware Banking Revolution: Are Expanded Powers Next?” Delaware Journal of Corporate Law 13 (1988): 42.
161. On the “ricochet effects” of these laws, see National Consumer Law Center, Consumer Credit Regulation (2012), sec. 3.6.5.
162. White, “The Usury Trompe L’Oeil,” 445.
163. Paul L. Joskow and Roger G. Noll, “Regulation in Theory and Practice: An Overview,” in Studies in Public Regulation, ed. Gary Fromm, 1981, 42; Howard Beales, Richard Craswell, and Steven C. Salop, “The Efficient Regulation of Consumer Information,” Journal of Law & Economics 24, no. 3 (1981): 513–14, 522–31.
164. Milton Friedman, Episode 7: Who Protects the Consumer? Free to Choose (PBS television broadcast, aired 11 January 1980), http://www.freetochoose.tv/ftc80.php.
165. Special Committee on Retail Installment Sales, Consumer Credit, Small Loans and Usury, Report to the National Conference of Commissioners on Uniform State Laws at Its Annual Conference Meeting in Its Seventy-Fourth Year, in Hollywood, Fla., 2–7 August 1965, at 19.
166. For a similar observation about the 1913 creation of the Federal Reserve System, which “decisively moved monetary politics out of the center of political discourse, where it had been for much of the nineteenth century,” see Sven Beckert, The Monied Metropolis: New York City and the Consolidation of the American Bourgeoisie, 1850–1896 (Cambridge, 2001), 327.
For helpful comments and discussions, I thank Edward Balleisen, Mehrsa Baradaran, William Buzbee, Daniel Ernst, Sarah Barringer Gordon, Donald Langevoort, Adam Levitin, Walter Licht, Cathy Mansfield, Allegra McLeod, Joseph Miller, Steve Salop, Logan Sawyer, Brad Snyder, and David Super, as well as participants in the Business History Conference and American Society for Legal History annual meetings and the Georgetown Law Center and University of Georgia Law School faculty workshops. I am also grateful to the three anonymous reviewers for JPH, who provided excellent advice on how to improve the article. Adam Mikhail, Christine Zhao, and Josh Zuckerman offered superb research assistance.
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