Weekly television digest (Jan-Dec 1963)

NEW SERIES VOL. 3, No. 44 TELEVISION DIGEST-7 MANUFACTURING, DISTRIBUTION, FINANCE NEB, PULLS RUG ON INSTALLMENT SALES: Financing crisis has hit Nebraska and likely will spread to other states in wake of State Supreme Court's ruling 2 weeks ago that time installment sales made since 1959 are void if their total interest charges exceed state’s usury limit of 9% simple. Voided sales carry stiff penalty: Loss of interest, principal & merchandise. Nub of controversy is court's ruling, in effect, that time-sale contracts aren’t time-sale transactions at all. They're interest-bearing loans. Accordingly, it has ruled unconstitutional state's 1959 Time-Sale Act and substitute 1963 Installment Sales Act which permitted higher than 9% interest rates on certain products— as high as 15% on auto purchases, 12% on other merchandise. Court emphasized that Nebraska Legislature is forbidden by a constitutional provision from enacting any special laws relating to interest. It is empowered only to set maximum interest for all. Legislature met in emergency session last week to consider 4 remedial bills to take retailers & financial institutions off sharply pointed hook. However, Robert A. Nelson, special assistant to the state attorney general, told us: "In my opinion, I don't think they can do anything about contracts already made and declared invalid. The only action they can take is on contracts made from here on." Concurrence came from Robert J. Ne^^on, corporate counsel for GE Credit Corp. He told us: "In my professional opinion it's beyond the power of the legislature to breathe life into contracts that have been declared invalid." If they are right, then purchasers since 1959 of an estimated $1 billion of TV sets, autos, appliyances, other products are home free with the merchandise, can cease payments on their installment contracts, and can file to recoup payments already made. "They can get back everything involved in the loan, and that's everything but the downpayment," Nelson told us. This leaves retailers & financial houses holding the bag. Which one gets rocked with the devastating loss depends upon terms of contract written between retailer & his financing agency. "In most cases, it probably will be the financing agency," Newton said. On other side of fence, retailers & financial groups expect legislature to pass remedial bill this week and are hopeful that it will be constitutional. Marvin R. Werve, consumer credit vp for Omaha National Bank told us "there are several cases on the other side of the question that support our viewpoint" that legislative action can breathe life into voided contracts. Unusual and interesting aspect of Nebraska case is retroactive application and severity of penalty , imposed by court, we were told by several sources. Penalties in such cases, they said, usually are I on a "from now on" basis. Ruling that time sales actually were loans made to the purchasers, court : applied stiff interest-principal-product penalty incorporated in state's 1943 InstaUment Loan Act. The 1959 Time-Sale Act which was declared unconstitutional carried a penalty of loss of interest plus I sum equal to it. Pending legislative action, time sales in Nebraska now are legal only if difference between cash price and total time-sale price doesn't exceed 9% simple interest. "We've been charging 9% since • the court made an initial decision in the matter last June," GECC's Newton told us, 'iDut we can’t continue at 9% much longer. We lose money if we do." GECC had been charging approximately 12% Jon TV sales. Expected to pass legislature this “week, Werve told us, is new interest rate structure carrying (these provisions: 9% limit on all noninstallment type loans & transactions; 12% for installment ^lending; higher permissive rates on installment loans of more than $1, 500 made by licensed institu (tions only. "We're in a state of crisis here in Nebraska," Newton told us, "and this is an emergency in every