Mr. KASS. At that point, if I can't bring in-and I am not representing a small loan company-if I can't bring in small loan companies, then my concept of competition breaks down, and that is where I stop. I want to service the small loan trade.

The CHAIRMAN. Yes; but the consequences of that, if we can't go the full sweep that you and Professor Caplovitz and others have talked about, and if you couldn't convince Congress to establish a 36-percent small loan, the consequence of not taking a partial step is to dry up whatever competition remains.

Mr. KASS. Senator, I am not sure. Massachusetts was the first State to consider the holder-in-due-course doctrine, and the banks, retailers, and the entire business community said this would dry up credit and we would not survive.

Now, we know that the holder in due course has not been the death knell of business. In fact, business is flourishing very nicely in the five or six States where the holder in due course has dried up. I am not so sure in my mind that credit will in fact dry up. We have a city, we have people here, and we have people that we have to serve. Somehow this city will survive whether Congress has to create an institution such as the Development Bank and others, or somebody like the big retailers or others will set up lending institutions or lending operations and attempt to do it or take a loss.

I am not convinced that the credit will dry up if we keep the existing rates.

The CHAIRMAN. I guess I am not getting across. If you win your lawsuit and if those other lawyers who take a different point of view from Mr. Jennings and yourself win their lawsuit, certain lines of credit are going to dry up.

Mr. KASS. That is correct.

The CHAIRMAN. That is not your basic philosophy, to dry up competitive credit.

Mr. Kass. I am well aware of it. My basic philosophy is open competition plus availability of credit plus consumer protection. I think this committee can add a number of consumer protections such as holder in due course and others, if we can't go to the whole Uniform Consumer Credit Code, at least to curtail the abuses that do exist. I am confused in my own mind about what I want, but I do know that competition is just one aspect of the whole consumer credit market because, again, if there are no consumer protections in the District of Columbia, I submit that I as a District consumer go out to Maryland to buy because I know that I can call the attorney general of Maryland and say, "Look, help me with my problem," and Frank Burch does it if I have problems with my clients. If we don't have those consumer protections, many people-I advise my clients regrettably, "Go to Maryland where at least if you buy something, if you buy a car, a washing machine, you can get protection because in the District of Columbia there is no consumer protection." I submit that is an equally valid force to keep people out of the city.

The CHAIRMAN. What facets of the Uniform Consumer Credit Code are operable in Maryland?

Mr. KASS. Holder in due course is operable

The CHAIRMAN. Go to page 10 of your prepared statement, and I can check these off where you listed seven practices.

Mr. Kass. I might say that the code goes beyond Maryland as to the existing thing. Holder in due course is operable. Repossession tactics. Balloon payments-I don't know what the status of balloon payments are.

The CHAIRMAN. Repossession?

Mr. KASS. Repossessions are identical in the District of Columbia.
Referral sales. I think it is identical. There is no protection.
Door-to-door sales are protected in Maryland. There is protection.
There is a cooling off period of sorts.

Senator Tydings, your predecessor, introduced a bill, but no hearings were held on the door-to-door salesmen for the District of Columbia. Garnishment other than attachment before judgment situation is horrible in the District of Columbia. Our courts are being used as a collection agency. If a man works for IBM or Xerox in Florida, if they can get jurisdiction on him in the District of Columbia, they can collect. here.

Garnishment here is the same because it is Federal law-title III or title IV.

Truth in lending covers the garnishment situations.

I might say the code goes beyond that. Truth in lending said you can't be fired for one garnishment. Two garnishments, they can be fired.

We know that people are being fired in the District of Columbia other than Federal employees. I would like to see no firing for any garnishment, because that just puts the person out in the street, and he has no way to pay the bill.

Debt practices. At least in Maryland you can call the attorney general and say, "I am being bothered; my privacy is invaded," and I have somebody to turn to. I have nobody to turn to in the District of Columbia except the Federal Trade Commission, and they are just too big.

The CHAIRMAN. I didn't get it. Garnishment laws in Maryland are comparable to the District of Columbia?

Mr. KASS. Yes. They are comparable with one exception of the attachment before judgment, which is abused in the District of Columbia.

The CHAIRMAN. Of the seven items listed on page 10, the only two where Maryland has significantly better laws as you view it insofar as consumers are concerred, one is holder in due course and, No. 5, door-to-door sales.

Mr. KASS. Of course, we are comparing apples and oranges but, yes. In Virginia, the Governor has now recently appointed a consumer office, attached to the attorney general's office. That at least gives some protection. Basically, I think their laws are about the same as

ours.

The CHAIRMAN. As the District's?

Mr. KASS. Yes.

The CHAIRMAN. In the development of this report, and you were the executive director, and I guess spent more time on it than any other individual, can you tell us whether there was any consensus arrived at amongst the participants? Mr. Jennings said that at least one banker was on the committee.

What was the name of the banker?

Mr. KASS. Mr. Burke, who was the senior vice president of Riggs. Mr. Addison from Union Trust was originally on the commission, then for personal reasons he had to resign, and Mr. Burke was his replacement. It is my understanding that the Bankers Association and all the bankers supported the recommendations of our commission unanimously on the consumer protection. As to the rates, they wanted the Congress to pass the rates. The consumers wanted the City Council to pass the rates. We all, I think, agreed on the need for competition. The CHAIRMAN. So, the hangup was on Riggs as to who imposed them, et cetera?

Mr. KASS. Yes, sir.

The CHAIRMAN. But there was a consensus both on the commission and you believe in the banking community on all seven of the items listed, for instance, on page 10?

Mr. KASS. On the package that I will submit to you, yes, sir, which is adoptions of the Uniform Consumer Credit Code.

The CHAIRMAN. My staff man tells me Mr. Burke is with us.

Are you Mr. Burke?

Mr. BURKE. Yes, sir, I am.

The CHAIRMAN. Could I direct that question to you so that we will have it in the record, Mr. Vincent C. Burke.

Would you come forward?

STATEMENT OF VINCENT C. BURKE, EXECUTIVE VICE PRESIDENT, RIGGS NATIONAL BANK, WASHINGTON, D.C.

The CHAIRMAN. Are you with the Riggs Bank?

Mr. BURKE. I am.

The CHAIRMAN. What is your title?

Mr. BURKE. Executive vice president.

The CHAIRMAN. You served on this commission that has been heretofore described?

Mr. BURKE. I did, sir.

The CHAIRMAN. I directed a question to Mr. Kass. Was there a consensus both of the commission and, as you checked around since the commission report, the members of the banking community on the findings and recommendations of the commission with respect to the seven items that Mr. Kass listed on page 10 of his testimony? I will read them: holder in due course, balloon payments, repossession tactics, referral sales, door to door sales, garnishment, and debt collection practices.

Mr. BURKE. The answer is very definitely there was complete agreement from the banking fraternity. As a matter of fact, Senator, before I went back to one of the final meetings we had a meeting of all 14 banks. They agreed with the seven enumerated items that you just mentioned. There was absolutely no controversy in that area at all.

The CHAIRMAN. The main controversy was in rates, whether openended such as Mr. Kass suggests, or fixed and, if so, by whom, Congress, council, et cetera?

Mr. BURKE. Senator, I would like to answer that by saying that the five businessmen on the commission filed a separate report pointing out that the commission that Mr. Kass was the executive director of never addressed itself to rates whatsoever. I urged Mr. Kass, and I urged Mr. Hahn that the commission remain open so that an eco

nomic study could be made in order that the commission would have completed its work. We felt that the commission did not complete its work because of the lack of an economic study on the basis of which, in turn, we could then intelligently make a recommendation as a commission to the council with reference to rates, and then finally as Mr. Kass stated there was disagreement as to who should fix the rates.

The CHAIRMAN. I think that summarizes it, at least as I heard the testimony.

If Congress were able to devise a practical method of opening up the rates so as to make them more competitive, whether that practical method be what is envisioned in S. 1938 or Congress itself setting the rates precisely, would that act coupled in with some of these other recommendations made by the commission in your opinion, Mr, Burke, give us a more viable organic commercial banking law with protection both to the consumer and greater competition in the marketplace?

Mr. BURKE. In my opinion, it would, yes.

The CHAIRMAN. How would you answer that same question? Don't ask me to repeat it, Mr. Kass.

Mr. KASS. As far as it goes, I think yes. I might say that I think it is important, at the end of the study commission report there are two separate concurring opinions, so to speak, one by the retailersthe business community, who feel we should have tackled the problem of rates; and, (2) by the consumer representatives who felt that although they agreed basically with what we recommended it did not go far enough for protection of the consumer.

As to the package that we recommended, I think there was unanimous agreement.

On the rates, I have to make a personal comment. For the study commission we asked for voluntary contributions from the community at large. I was the paid executive director. We just really ran out of money, although we tried to get more money to do the economic rates. That is the only reason we didn't do the rates. We didn't have the money.

I concur with Mr. Burke's suggestion that this committee, the city council, or some independent committee, even ours, should be recreated and do the study on rates.

Mr. BURKE. Senator, if I may, I don't choose to get into a controversy with Mr. Kass, but I never knew the reason that Mr. Kass did not choose to go forward with an economic study. Was it because of a total lack of funds?

Mr. KASS. I will submit a comment for the record.

On May 4-Mr. Burke was not a member of the commission-I submitted Status Report No. 3 where I said:

Contributions: We have received a total of $6,900 to date. I submit that this is not sufficient, and we have not been able to hire the economists and other researchers who could be of valuable assistance to us.

That, to me, is the reason.

Mr. BURKE. If I may respond, and I promise I will not respond any further, in September 1970, if that is May 1970, I personally went to Mr. Kass in my position as commission member and went to Mr. Hahn to urge the continuation of the commission to make the economic study and further stated I was confident if money was the

problem that the business community would participate in seeing to it that there would be sufficient funds.

Mr. Kass, I am sure, will agree with that statement.

Mr. KASS. Yes; and Mr. Hahn did not want to continue the commission.

Mr. BURKE. Mr. Hahn told me definitely he didn't want to continue it.

The CHAIRMAN. If the economic study were to be made, in essence, it would come out, I trust, in favor of greater competition in the marketplace. But we might have a more refined recommendation as to whether it be the open ended proposition of Mr. Kass or something short thereof but it would certainly have to opt in favor of greater competition in the Washington metropolitan area.

Mr. BURKE. In fixing higher ceilings, yes.

The CHAIRMAN. Either no ceilings or higher ceilings.
Mr. BURKE. That is right.

Mr. KASS. Something better than the 1902 law we are now working under.

The CHAIRMAN. Let me get back to Mr. Kass. We were going down to your sort of hit parade of optimum priorities. I have eliminated the open ended rates just from the pragmatics of the situation. I frankly somewhat despair of the practicality of passing the law to put on the statute books 36 percent for a small loan rate. So we are left to operating in the realm of the attainable within the structure of this bill, adding to it perhaps other semicompetitor type cards that are operated by Sears, Woody's, and maybe one or two others, and perhaps including some of the consumer items that are mentioned on page 10 of your testimony about which there was general consensus agreement both in your commission and in the banking community. Would that be a fair description of the latitude this committee has, practically?

Mr. KASS. There is one other alternative of which this committee is well aware because of the FHA-VA fight. This committee 2 years ago attempted to pass rates to exempt FHA-VA transactions from the usury rates when the rates were at that time 81⁄2 percent and the existing rate in the District of Columbia was 8 percent. This committee and the Senate of the United States passed that bill. The House of Representatives rejected it.

The committee then reconsidered the matter and decided instead of passing the rates themselves they would allow the city council, if it wanted to, to exempt those rates. That passed the House and the Congress without a problem.

Shortly thereafter, the city council exempted the rates so that money could come back into the District of Columbia on FHA-VA. I submit another alternative, which is very viable, is to pass the consumer protections of the consumer credit code as recommended by our study commission, to pass a specific rate ceiling if you want to or the rates proposed by S. 1938, the Maryland-Virginia thing. Although I don't like it, I don't want to be subject to the increases or decreases by the State of Virginia or the State of Maryland, but be that as it may, include the retailers into the coverage and let the city council make the determination of small loans-whether they need them or not.

To me it is very important as a lawyer because I submit that in due time a form of uniform consumer credit code will be adopted.