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I can only say this after personal knowledge, after almost 25 years in this field, that the field of consumer credit has expanded and is continuing to expand. The bankruptcy rates have increased. The economic morality of the individual is being discouraged by a certain segment of the credit industry by the encouragement of bankruptcy and the encouragement of avoiding obligations.

I also ask you to consider who in the business world has supported the Truth in Lending Bills, the Truth in Advertising bills? Who has taken the position for the consumer? If it was not individuals and members of the Association of Credit Counselors.

Have those who have opposed the "outlaw legislation" as I term itis it done in the benefit of the public interest or are they attempting to create an avenue where the individual has no escape from this happening, mounting of indebtedness.

We have been accused as an association of being opposed to the non-profit organizations being established. This is completely untrue and se. As far back as 1959 our association, through its president, Harry Katzen, offered services and continued help to any organization.

In 1962 when I was president of the Association, I wrote to the AFL-CIO and a copy of the letter will be presented to you, offering our services.

Our only objection is, we refuse to allow the consumer to be held in the clutches of a certain segment of the credit industry who dominate, finance and control this.

The cost factor of the non-profit organizations throughout the country are almost identical with the charges that the ordinary professional credit counselor is charging. It is certainly not excessive, and these are figures that are taken out of the publications-quarterly reports by some of the finance companies.

In the State of New York certain bar associations attacked vociferously the outlawing of this bill in this field.

It so happened to land on Governor Harriman's desk the day an indictment was filed against a firm called Silver Shield. Strange as it may seem, the Silver Shield, as the National Better Business Bureau records will document, was owned and controlled by attorneys.

I don't believe any profession is beyond the point where certain individuals will not abuse it, but I certainly believe that ten years of complete, clear, ethical operation without one justifiable complaint in the state of California will prove that regulation will work.

In comparison with Chapter 13, our organization alone last year distributed almost one-third as much funds back to creditors as Chapter 13 did throughout the entire country. It is effective. It is a service and it works for the benefit of the consumer, and notwithstanding certain segments of the credit-oriented industry, it works to their benefit.

I would like to also present at this time the written testimony of an individual who could not appear, Mr. Charles Genosky of Minnesota, which has been submitted to the Clerk of the Committee.

I would like at this time to basically submit this material to suggest some language for a bill.

Mr. Sisk. His statement will be made a part of the record at the conclusion of your testimony.

There are a number of personal letters attached here to Mr. Genosky's statement.

The question arises as to the propriety of making them a part of the record without the permission of the individuals whose signatures appear on these. I am not sure whether or not approval was sought or obtained for the use of these. Have you any comment to make on that.

Mr. RABINOWITCH. No. I would merely like to say if there is any question about their being deleted, I have no knowledge as to the permission granted, but I would like to say that letters are available from Mr. Genosky and other members of our organization both from creditors and clients at any time the committee requests them. I would say under those circumstances possibly we had better delete them from the presentation.

Mr. Sisk. I think at this point we will withhold them from the record in view of the protection of the privacy of the individuals who have not necessarily given their consent.

Mr. RABINOWITCH. In conclusion all I ask is the opportunity to regulate a service but regulate it strictly and give it the teeth that it needs. In outlawing it, all you are going to attempt to do is drive it underground and withdraw from the consumer a way of coming back to a place where he can walk the streets as a human being rather than being oppressed and harassed. I would like to answer any questions any members of the committee may have.

Mr. Sisk. Thank you very much, Mr. Rabinowitch. The committee appreciates your statement.

There are, I am sure, many questions the members would like to ask you. At this time I would like to recognize the gentleman from North Carolina for such questions as he may have.

Mr. WHITENER. Does your organization or members of your association engage in extending credit to your clients under any circumstances?

Mr. RABINOWITCH. No. It is forbidden by statute.

Mr. WHITENER. It depends on where you are whether it is forbidden by statute, but do any members of your organization anywhere in the United States so far as you know engage in the financing of the debtor debts of the client?

Mr. RABINOWITCH. No, none whatsoever to my knowledge.

Mr. WHITENER. All you do is seek the consent of the creditors for a pay-out arrangement and manage this, is that correct?

Mr. RABINOWITCH. Well, it is much more extensive than that, Jr. Whitener. The ultimate objective is to liquidate the man's indebtedness within his ability

Mr. WHITENER. With his money!
Mr. RABINOWITCH. With his money, right.

Mr. WHITENER. And he sends you a certain amount periodically and then you apportion that out among his creditors who have agreed to this proposition, is that right?

Mr. RABINOWITCH. That is about as simple as you can define it. I wish it was that simple.

Mr. WHITENER. What do you do about the accounts of creditors who do not want to go along? Suppose ninety per cent of them want

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to go along with a long-term pay-out and ten per cent decline? How do you handle that?

Nr. RABINOWITCH. Well, frankly, let me say this: I have only had that experience up until the last ten years. In the last ten years the creditor is not our problem. The creditor goes along.

Mr. WHITENER. Even small loan companies?

Mr. RABINOWITCH. Without any question. Without any question. Including some of those who are openly and overtly encouraging the outlaw bill.

I can substantiate this in writing. I can substantiate this through records of not alone our office, but many offices where these organizations refer people to organizations such as ours.

Mr. WHITENER. And most creditors will go along?

Mr. RABINOWITCH. Yes. Creditors are anxious to work with the individual basically, regardless of what anyone may say.

In the period of time that I have been in operation, I cannot think of one hundred accounts that we have not been able to secure creditors a cent. I can also demonstrate that in the city of Fresno, in the city of Bakersfield, Eureka, Stockton, we are there only at the invitation of the credit-grantors, after meetings with them where they ask us to come in to offer a solution to the individual.

Mr. WHITENER. You have made some reference to the comparing of costs and you have an exhibit relating to it, the Chapter 13 fees as compared to your experience with an approximate 15 per cent cost to the debtor?

Mr. RABINOWITCH. Our charge is only 12.

Mr. WHITENER. I believe Mr. Genosky said something about 15 per cent would be a fair figure but he gives specific cases where it has ranged up to 40 per cent for Chapter 13.

Mr. RABINOWITCH. That is true. Mr. WHITENER. He also mentioned the difference between Chapter 13 and your operation from a creditor's standpoint, where the unsecured creditor does not have to face the issue of a secured creditor having priority under Chapter 13.

Mr. RABINOWITCH. It goes deeper than that. As a typical example, I had written to DeWitt Paul, Chairman of Beneficial Finance, on this. This is my first experience in having dealt with this. We had made arrangements with the branch office of this company to liquidate the obligation of a military man instead of at the rate of $28 a month, which he could not afford, at the rate of $14 a month. We made arrangements for five months, I believe. The sixth month we got the check back from the manager of that office saying that he will only accept $28 and will not accept any reduced payments.

Of course, I called because we had an agreement. Well, this was a new manager.

In the course of the conversation he said, "I would prefer him going into Chapter 13 because I will get my full payment as a secured creditor."

I asked, “What are you secured with ?”

He said, “Well, I don't know. This was an account transferred from out of state."

I said, "Well, as far as I am concerned, I am sending you the $17 you credited. I am advising our client that you are attempting to renegotiate your situation, that it is impossible for you to meet this commitment, and I am going to take the liberty of directing a copy of this letter to DeWitt Paul, Chairman of the Board of Beneficial Finance."

I have. I have not had a reply as yet, but I can almost assure you that this is simply the area of one man who feels a new broom is going to sweep clean and is not concerned with the individual consumed.

This is one instance. The one instance. This is also a sort of a sense of policy this individual picked up from another area he comes from where Chapter 13 is being used as a collection agency.

Mr. WHITENER. We have had some real problems with Chapter 13 procedures but we do have the problem that the debtor has to have his money to pay counsel and so forth.

Mr. RABINOWITCH. I don't know about the initial charges, but let me say I am not opposed to Chapter 13. I think there is a strong need for it.

Mr. WHITENER. The trouble is, we can't seem to get anybody to use it except in a few areas of the nation.

I inserted in the Congressional Record an explanation of Chapter 13 and how it works and how the lawyers could help so many people. I personally paid to have it printed and have it sent to every lawyer in my district. I don't believe there has been a Chapter 13 proceeding filed in my district since. So I don't know what we can do to get folks to try to rehabilitate themselves without a bankruptcy proceeding.

Mr. RABINOWITCH. It will become worse with this computer age because future employment is going to be dependent upon identification through credit reports.

Mr. WHITENER. Perhaps regulation would be better than prohibition. But there again you run into this matter which I know enters the minds of the District Commissions and any other governmental group and that is you have to create new costs of government in order to regulate. Mr. RABINOWITCH. But these are self-supporting.

Mr. WHITENER. Hardly anything is self-supporting in the government.

Mr. RABINOWITCHI. Unfortunately, in California we, as an industry, have had to make it a self-supporting one and I think it should be maintained that way throughout the area. I think industry who is attempting to earn a profit, which we constantly hope for, and hope some day we will attain, should afford the privilege of paying for this supervision, the audits and the control.

In California it is a very minor phase of its operation, but the audit bills and licensing fees are completely cost-free to the state.

Mr. WHITENER. Of course, you folks don't get in debt.
Mr. RABINOWITCH. You should see Los Angeles.

Mr. WHITENER. This is why I wonder about this budget planning. I think if we had a better system of helping people plan their budgets, we may avoid some of these unfortunate consequences. We congressmen get calls where people can't get their old mother admitted to a hospital because of a credit rating.

Mr. RABINOWITCH. May I point out something else that has not been touched on? That at the present time we eliminate the assistance to people. The approach was 15 years ago that we are dealing with the indigent.

The indigent today are being serviced by the professional credit counsellors, such as myself and others.

In the areas where there is a community counseling service, we take advantage of it by referring them there, or we refer them to a Legal Aid Society or we refer them to the OÉO now, that has established this type of service.

Our average client today is no longer the indigent. He is anywhere from a $5,000 to a $10,000 income. Are we also going to deprivewhether it be a congressman or Frank Sinatra, of being able to secure a financial advisor to maintain his activities, his financial activities? We handled Sterling Hayden for a short period of time and found the fees he was paying in certain areas for services may have been too high as far as we were concerned, but they were performing a service. Are we going to deprive them of it? Are we going to deprive, for example, Willie Mays, of the opportunity of getting professional service in the handling of his funds? Isn't this what this bill will do, an outlaw bill?

We talk about the banks. I think if you will read last night's paper, the Washington Post, Riggs National is considering a computer arrangement with another firm and going into the "cashless check society" where you send your bills and your check to the bank and they take care of all of it.

I am not an attorney, but I would assume that this would also prohibit that. Where are we going with it? What is the purpose? Is it to keep the indigent down? Keep him involved to the point where he can't breathe any more! Or is it a question of attempting to close off everybody from every avenue of escape except to walk in and borrow money and live in this world of oppression in the financial world? Let's look at the consumer and consider who is behind the more to eliminate this assistance. That is all I request.

Mr. WHITENER. Thank you very much.

Mr. Sisk. Thank you very much. Does my colleague from New Mexico have any questions?

Mr. WALKER. I have no questions.

Mr. Sisk. Mr. Rabinowitch, in regard to the material which you furnished, I certainly want to be sure that at least a part of it gets in the record. Without objection, I want the Code of Ethics of the American Association of Credit Counselors adopted at Indianapolis, Indiana, on March 5, 1955, to be a part of the record.

(The document referred to follows:) CODE OF ETHICS AMERICAN ASSOCIATION OF CREDIT COUNSELORS ADOPTED AT

INDIANAPOLIS, INDIANA, MARCH 5TH, 1955 Resolved by the American Association of Credit Counselors in regular Annual Convention assembled, that the following Code of Ethics be and the same is hereby made a part of the By-Laws of this Association for the purpose of determining the rights of the members of this Association.

By this Code of Ethics all members of this Association are firmly bound in that all members shall

1. Furnish a clear statement of the charges, terms, and list of all accounts to be paid.

2. Amortize charges over the number of months necessary to liquidate the obligations and take no more than the amortized amount due at any time.

3. Take no fee until the debt payment program is arranged.

4. Take no account unless a written and thorough Budget Analysis indicated the term of payment can be met.

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