The New Law of Finance Charges: Disclosure, Freedom of Entry, and Rate Ceilings

Robert W. Johnson
1968 Law & Contemporary Problems  
Ever since i8oo B.C., when the Code of Hammurabi fixed the maximum rate of interest "at 33% per cent per annum for loans of grain repayable in kind, and at 20 per cent per annum for loans of silver by weight," there has been an active concern about the prices paid for credit.' Although neither the Uniform Consumer Credit Code (UCCC) 2 nor the federal Consumer Credit Protection Act of 1968 (CCPA) 3 have entirely abandoned rate ceilings, they do represent a significant innovation in placing a
more » ... ter reliance upon competition in the market place to establish rates charged on credit transactions. By requiring the disclosure of the dollar amount of the finance charge and the annual percentage rate, both the UCCC and CCPA provide the means whereby consumers may judge the price of credit and shop effectively for it. By permitting greater freedom of entry into the cash loan market, the UCCC seeks to prevent the growth of localized monopolies in cash lending that would thwart consumers' efforts to shop for credit. Thus the provisions for disclosure and for freedom of entry are essential to the establishment of the price of credit by competition, rather than by governmental fiat. This paper will first examine the objectives and problems of disclosure and free enterprise, and then review the role of rate ceilings as a replacement of usury statutes in the UCCC.
doi:10.2307/1191017 fatcat:3ganzlgvjzbbbdhsknzzexjyyy