Lending Consumer Support to the Truth-in-Lending Principle of Credit Regulation

• In Event: 40860 - Section on Economic Sociology Roundtables
  In Refereed Roundtable (60 minute): Table 11. Finance, Credits, and Rules

Abstract

In recent years, within the growing scholarly interest in the history of consumer credit in the U.S., several researchers have turned special attention to the development of the Truth in Lending Act (1968), also known as the Consumer Credit Protection Act, which anchored the information disclosure as the core regulatory principle. A less familiar part of this history is the two alternatives that stood before legislators and the role of the consumer movement in backing the federal legislation. This paper uncovers this story to ask why actors pursue certain types of regulation. During the 1960s, on the backdrop of the expansion of consumer credit, two competitive regulatory frameworks were developed, one by federal lawmakers and the other by the legal profession backed by the credit industry. Both legislative proposals aimed to employ a national unifying policy, but in different ways: The former, developed by Democratic Congressmen, suggested a federal law, came to be known as the Truth in Lending Act, imposing information disclosure in the form of an annual percentage rate. The latter, formulated by the National Conference of Commissioners on Uniform State Laws, offered uniform state legislation that codified and rectified existing practices, based on capping interest rates. While both proposals offered protections for consumers, the nascent consumer movement preferred the federal law alternative. Consumer groups perceived the two alternatives as inherently competing, and launched an intensive campaign against the uniform code, implicitly and explicitly backing the federal law. Yet, as shown by Anne Fleming, the regulatory framework of information disclosure was not seen as competing with capping interest rates, but rather the two were conceived as complementary. I show that the reason for the consumer movement’s preferences and campaigns were not rooted in the regulation’s contents, but rather in the identity of the actors that promoted each proposal.

Author

• Yaniv Ron-El, Bar Ilan University