Shylock Was a Piker

When it comes to consumer credit, the rule applied by many a department store, used-car dealer and friendly finance company is caveat emptor. Yet in an economy where outstanding credit totals $92.5 billion--at an annual cost of $12.5 billion in interest--the wary buyer or borrower is rare. Some of the interest rates charged--and paid --in the U.S. would scandalize Shylock. A Manhattan woman bought a $300 sofa that actually cost her $624 after two years of installment payments with interest of 108%. A Jersey City man ended up paying $420 for a TV set priced at $123.88, thanks to a 229% annual interest rate. One used car entailed 283.9% in interest charges.

Last week a "truth-in-lending" bill, aimed at unmasking such retail usury, zipped through the Senate with little discussion and no opposition. The vote: 92 to 0. The measure, based largely on legislation originally drafted in 1959 by former Democratic Senator Paul Douglas of Illinois, would force retailers and lenders to state explicitly both the effective interest rate and the cost of credit in dollars.

Foe of Frills. After Douglas' defeat last fall, Wisconsin Democrat William Proxmire became the bill's chief sponsor. More flexible than his old friend and mentor, Proxmire facilitated passage by agreeing to exempt smaller transactions under the revolving-charge-account systems used by many department stores. The stores will still be able to state their "service charge" on unpaid balances as 1 1/2% a month--instead of the pause-giving figure of 18% a year. Transactions in which the annual credit cost is less than $10 would be excluded, along with loans exceeding $25,000, and all first mortgages.

Proxmire, long an unclassifiable loner, is beginning to be an influential Senator. He entered the Senate in 1957 after an Ivy League education (Yale, Harvard Business School), stints on Wall Street (J. P. Morgan & Co.) and in journalism (Madison Capital Times), and three losing races for Governor. As a freshman Democrat, he had the temerity to criticize Majority Leader Lyndon Johnson as dictatorial. A liberal on most issues, he has been conspicuously economy-minded during the Kennedy and Johnson Administrations. Proxmire often chips at public-works projects and appropriations for the space program, has attacked the Government-sponsored SST (supersonic transport) project as a "frill."

Boob a Minute. Proxmire's new finesse was only one ingredient in the lending measure's passage. November defeats eliminated not only Douglas, the most intransigent proponent of the bill, but also Banking and Currency Chairman A. Willis Robertson of Virginia, its stubbornest opponent. Robertson's successor as chairman, Alabama's John Sparkman, proved more tractable.

The prospect is for favorable House action this year. If the bill is finally enacted, it will by no means repeal Barnum's law that a sucker is born every minute, but it may at least amend it to let the boob know for just how much he is being taken.

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