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393-7865
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EVE. OFFICE A OML APP TS.

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ENCLOSURE 3

FRAUDULENT ADVERTISING It shall be unlawful in the District of Columbia for any person, firm, association, corporation, or advertising agency, either directly or indirectly, to display or exhibit to the public in any manner whatever, whether by handbill, placard. poster, picture, film, or otherwise; or to insert or cause to be inserted in any newspaper, magazine, or other publication printed in the District of Columbia; or to issue, exhibit, or in any way distribute or disseminate to the public; or to deliver, exhibit, mail, or send to any person, firm, association, or corporation any false, untrue, or misleading statement, representation, or advertisement with intent to sell, barter, or exchange any goods, wares, or merchandise or ans. thing of value or to deceive, mislead, or induce any person, firm, association or corporation to purchase, discount, or in any way invest in or accept as collateral security any bonds, bill, share of stock, note, warehouse receipt, or any security; or with the purpose to deceive, mislead, or induce any person, firm, association. or corporation to purchase, make any loan upon or invest in any property of any kind; or use any of the aforesaid methods with the intent or purpose to deteire, mislead, or induce any other person, firm or corporation for a valuable consideration to employ the services of any person, firm, association or corporation so advertising such services.

(May 29, 1916, 39 Stat. 165, ch. 130 #1.)

Mr. Sisk. Do we have a representative from the Metropolitan Washington Board of Trade? The witness will state his name for the benefit of the reporter.

STATEMENT OF RALPH E. BECKER, GENERAL COUNSEL, METRO

POLITAN WASHINGTON BOARD OF TRADE, PRESENTED BY
CHARLES C. COON, ASSISTANT EXECUTIVE VICE PRESIDENT
Mr. Coon. Thank you, Mr. Chairman.

My name is Charles Coon, Mr. Chairman, and I am the Assistant Executive Vice President of the Metropolitan Washington Board of Trade.

Mr. Sisk. If there is anyone you would like to bring to the witness table with you, you may do so.

Mr. Coon. We have a problem here this morning Mr. Chairman. The gentleman who was to present the testimony for the Board of Trade was the general counsel of our organization, Mr. Ralph E. Becker. Mr. Becker at the last moment found himself unable to be here this morning. If I have the Chairman's permission, I would like to read the statement that he would make.

Mr. Sisk. All right.
Mr. Coon. Thank you.
My brief statement supporting passage of

H.R. 9806, a bill to prohibit the business of debt adjusting in the District of Columbia except as an incident to the lawful practice of law or as an activity engaged in by a nonprofit corporation or association, is in accordance with the policy of the Board of Directors of the Board of Trade.

Committees of the Board of Trade have studied and reviewed the matter of "budget planners" and "debt adjusting services" on several occasions during the last ten or twelve years. Policy to prohibit the operation of these services was first adopted in 1958 despite, as might be expected, the general basic attitude of business people in opposition to outlawing businesses of any kind.

Inasmuch as Miriam Ottenberg of the Washington Star earlier this year wrote a series of comprehensive articles on the operations of debt

consolidating firms in the Washington area which have been reviewed by the committee, I will not take the time to discuss the modus operandi of such firms. Let me just say that in our judgment their services are unnecessarily costly and often fail to solve the problem since reputable business firms do not usually care to deal with them.

According to Miss Ottenberg, 21 states, including neighboring Virginia and the City of Baltimore, prohibit the operation of debt consolidating firms. This is an increase of six states in the last nine years.

We are also informed that debt consolidating firms are prohibited in the Dominion of Canada. Since we understand there are twelve states which regulate such operations in some way, it is perfectly clear that the operation of debt consolidating firms has been a matter of national concern.

In our judgment there are other and far more dependable services available to those who are in debt. Banks, credit unions and small loan companies operating under state or Federal control can be helpful either in making cash loans to relieve pressures or counseling concerning debt settlement without charge. The Legal Aid Society is also available at no cost.

We recognize, however, that most of these agencies are not generally used by our low-income people. Therefore it seems perfectly clear that a free credit counseling service operated as a community agency should be established here as it has been in many other large cities of America.

In cooperation with District Government, we have joined with the D.C. Chamber of Commerce in a study of alleged exploitive practices by retailers. We are reviewing the possibility of the organizing of a free consumer education service, similar to services established in other cities. We have asked the Federal Trade Commission, District Government agencies, Better Business Bureau, Legal Aid Society and the Neighborhood Legal Services to give us evidence of overpricing, misrepresentation and bad credit practices in disadvantaged neighborhoods to determine what recommendations can be developed for lessening or eliminating such practices. The District Commissioners have already announced that they will initiate free consumer counseling service in the near future and this should include credit counseling

It is therefore apparent that steps are under way to provide the kind of counseling services that are needed by people of modest means who are in debt and there would therefore seem to be no possible need for these commercial debt-adjusting operations.

That is the conclusion of his statement, Mr. Chairman.
Mr. Sisk. Thank you, Mr. Coon, for the statement this morning.

As I understand your statement, there is a proposal to establish some type of counseling or consumer service here in the District; is that correct?

Mr. Coon. Yes, sir.
Mr. Sisk. How far along is that effort at this time?

Mr. Coon. The District Commissioners have expressed their intent to do this. We are cooperating with them and the District of Columbia Chamber of Commerce by examining the evidences that we can get of these kinds of practices and trying to determine what the problems would be in the establishment of a service of this kind. We only just

а.

within the last month or so came to this agreement with the District Commissioners to try to be helpful in this.

There have been some meetings on this but we have got some distance to go before we have any recommendations to make on this matter.

Mr. Sisk. Has the Board of Trade made any study or any specific report on the activities of the Credit Adjustors in this area ? Are you or the Board knowledgeable of the experiences in this area in the past few years? I notice your statement does not include any particular information along that line. Knowing generally and having high regard for the Board of Trade and your activities, I was wondering if you had a study committee looking into this matter.

Mr. Coon. I do not think so for some time, Mr. Chairman. This statement, I am sure, reflects a policy of the Board that has been established for some years and has been periodically reviewed and in the judgment of the members of our Board there has not been reason to change it. On that basis I would be glad to let the committee know further on that, but I am not aware of any recent study of the kind that you mentioned.

Mr. Sisk. The overwhelming majority of the business houses, particularly in downtown Washington are members of the Board of Trade, are they not?

Mr. Coon. Yes, sir.

Mr. Sisk. Are you aware as an individual or in conversations with businessmen as to their general attitude toward helpfulness or lack of helpfulness, if that be true, of credit-adjusting firms?

Mr. Coon. No, sir, Mr. Chairman. I am not competent to answer that question. I would be delighted to try to get an answer for you but I do not feel competent to try to comment, if I may.

Mr. Sisk. In other words, to the extent to which local firms may be cooperating in the credit consolidation programs a matter in which you are not informed! Are you yourself connected with any local business?

Mr. Coon. I am the Assistant Executive Vice President of the Board, Mr. Chairman. I am Mr. Press' assistant in a staff position in the Board. I am sure that if Mr. Becker were here with you this morning he could answer your questions for you. I am just not competent to do it on this subject.

Mr. Sisk. Any questions of the gentleman ?
Mr. WALKER. No.
Mr. Sisk. Thank you, Mr. Coon, for your appearance.

Mr. Coox. Let me express Mr. Becker's regret at not being here this morning.

Mr. Sisk. We regret he was unable to appear.
Mr. Coon. Thank you.
Mr. Sisk. Is Mr. Zimmer in the room?
(No response.)

Mr. Sisk. Without objection, Mr. Zimmer's statement will be made a part of the record.

(The statement follows:)

STATEMENT OF ANDREW P. ZIMMER, ATTORNEY My name is Andrew P. Zimmer, and I am a member of the Bar of the District of Columbia and have been in general practice here some six years, presently with an office at 1342 “H” Street, N.W.

During the course of that time I have been consulted by a number of persons whose personal debts exceeded their ability to pay them, or who faced an uncertain employment future because of the threat of garnishment or creditor pressure upon their employer. Some had gone to local debt-consolidators whose advertising had caught their attention, others sought to deal directly with several creditors to compose or extend their indebtedness, still others had made up their mind to declare themselves as bankrupts. In a half dozen or so cases I felt that an effective and equitable solution to their problem could be achieved through filing a "Wage Earner's Plan" under Chapter XIII, of the Federal Bankruptcy Act, and I counselled these clients to do this.

My purpose in appearing before this subcommittee, thus, is simply to detail and explain a little, the kinds of debtor relief presently available under Chapter XIII and how it operated in certain examples drawn from my own experience.

Basically, Chapter XIII was added to the existing bankruptcy laws in 1938 to provide for satisfaction of creditors' claims out of future earnings of a debtor under a Court approved plan of composition or extension of the debts. The debtor must merely show that his principal income is derived from wages, salary or commissions, and the size of his income does not affect eligibility. I'pon filing his petition and paying Court costs of $31.00, the Court will issue an order restraining the creditors from interfering with his property or earnings, and directing them to submit proofs of their claims and acceptances of the debtor's proposed plan. The "plan" is simply that part of the petition which states how much the debtor proposes to allocate from his earnings to pay his creditors, the frequency of such payment, and other pertinent information. A first meeting of creditors is called, where the plan will be confirmed if approved by a majority in number and amount of all unsecured creditors whose claims have been proven and allowed. Now this coercion of the minority of disapproving unsecured creditors, as well as the exclusion of secured creditors who reject the plan, is one of the chief advantages of Chapter XIII over an individual attempt on part of the debtor to seek a modification of his indebtedness. The Court will confirm the plan when it appears that it is in the best interests of creditors and is feasible to carry out. It will appoint a trustee to receive payments from the debtor directly or wage deductions from the debtor's employer, and thereafter make disbursements quarterly to each creditor pro-rata, until the plan is completed or ended for other reasons. The trustee is allowed a fee of 5% of monies actually disbursed, plus actual expenses, usually totalling another 242%. However, the debtor invariably saves a good deal' more than this, since the accumulation of interest on his unsecured debt stops upon the filing of the plan. This often can be a substantial saving, especially if any of the creditors are lenders operating under small acts permitting interest in excess of 6% per annum.

The following are persons I have represented in Chapter XIII proceedings in Washington, D.C. :

1. Government employee, male, age 50, single, many years with his agency, very anxious over debts totalling $2,900. His personnel officer had received numerous creditor notices, and the employee had unsuccessfully sought help from a debt adjuster. A plan proposing monthly payments of $135 was confirmed, all creditors accepting, and fully carried out over four years, final disbursements being made this spring, with all creditors paid off in full.

2. Government employee, female, age 45, single, a number of years in her agency, but had lost her position at a substantial grade because of heavy indebtedness and some reckless financial dealings. She was in serious trouble over this, completely demoralized, had lost all her records, but was determined to pay back some forty creditors a total indebtedness of $8,000. Her plan, proposing monthly payments of $100 was deemed feasible in part because of her evident good intentions and perseverence. Four years later, this plan is still active, payments were increased to $150 monthly, and as result of relief from her creditors' pressures, the debtor has regained and even advanced above her former position in her agency.

3. Medical technician, now a hotel employee, 24 years old, single, who had written dishonored checks totalling $700 and faced serious consequences. His plan proposed to pay $60 monthly, was accepted by all creditors, and has permitted him to advance in his new employment without fear of garnishment or other penalties. This plan is current.

4. Construction company estimator, age 30, divorced, who had written dishonored checks and owed debts totalling $1850, was subject to penal action and creditor pressure that would disaffect any employer. His plan to pay $100 monthly

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