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Since February 1959, as anticipated, the Ford Motor Co. has launched its captive finance company, Ford Motor Credit Co. and the American Road Insurance Co., its intent being to parallel General Motor's GMAC and Motors Insurance Corp. As far as I know they have not, as yet, opened an office in Arkansas, but have surrounded us in Missouri, Oklahoma, Texas, and Louisiana. I am sure this operation will be conducted in the same manner as General Motors Acceptance Corp. One example which would bear this out is that in March of this year a Ford district manager explained to one of our good Ford accounts, he was unable to talk to the dealers about this subject of financing, but small Ford dealers in Arkansas were at a competitive disadvantage because they could not obtain as low wholesale rates or get as good a reserve as Chevrolet dealers doing business with GMAC. Further, he said he could not recommend, as yet, that Ford Motor Credit Co. come into Arkansas because all the large dealers either had satisfactory connections or their own finance companies, and asked the dealer if he would be willing to give his business to Ford Motor Credit so they would have enough volume to warrant their establishing an office in Arkansas. Our dealer was not interested.

Another method of controlling dealers is by the harassing method of delays, changing of forms and agreements, etc., on a dealer's wholesale on new car Inventory, which I presume Ford Motor has now started doing by taking a page out of the GM method of operations along these lines. In April of this year, for example, all of the forms for two of our dealers were suddenly up for review by the Kansas City branch and it was announced they were not properly executed forms, some dating back as far as 1949, or in conformance with company instructions. We are still in the process of trying to comply with the newly established procedures to be able to handle our dealers' new car inventory. To quote from one of their letters, after crossing all the "t's" and dotting all the "i's" and momentarily complying with their current requirements, Ford Motor Co. says, "We expressly reserve the right to withdraw or change this procedure to any dealer or dealers at our sole discretion."

Our relations with other motor vehicle manufacturers for handling wholesale have been splendid in the past, especially with American Motors, and I trust will continue in the future. However, they are worried, I'm sure by the big two captive finance company operations, as on March 14, 1961, Mr. A. J. Bruen of American Motors sent out a general letter to all financial institutions serving Rambler dealers, from which I quote.

"Some financial institutions serving our dealer organization very adequately so far as regular wholesale and retail financing are concerned, have not covered the dealers' credit requirements on lease-rental deliveries. In order to prevent this business from being lost to one of our competitors with large credit available to cover fleet sales, we have in some instances arranged for financing through our financing subsidiary, Redisco. This will continue to be our practice as our sales organization requires financing help not readily available from the dealer's chosen financial institutions. It is not our intention to broaden the automobile financing activities of Redisco into other areas of this field unless we are compelled to do so in order to remain competitive and enjoy our share of the market."

We are not protesting because of competition as to rates, reserves, or services rather the lack of it, brought on by manufacturers with their captive finance and insurance companies. I firmly believe that to overcome these monopolistic actions on the part of the manufacturers this bill must be passed and enacted into law, as when enacted it will (1) allow auto prices and finance charges to be set by free competition giving the consumer the ultimate benefit; (2) give automobile dealers the freedom to change franchises and operate as agents in a free economy: (3) strengthen the free marketplace and restore free competition to the U.S. automobile market. I still believe that without passage of this bill, General Motors will continue with GMAC, Ford Motors will continue with Ford Motor Credit Co., Chrysler will probably be forced to form their captive Chrysler Credit Co., American Motors compelled to expand Redisco into all phases of financing motor vehicles, following which, independent finance companies and banks will be out of the motor vehicle finance business for all practical purposes.

This being the ultimate foreseeable end, I certainly do not think it is representative of the American free enterprise system when small enterprise is restricted and the giant enterprise is allowed to legally assume monopolistic proportions.

Mr. Chairman and gentlemen, I do thank you for the opportunity of appearing before you.

The CHAIRMAN. We thank you and are indebted to you. Thank you very much, sir.

It is now 1 o'clock and we still have three witnesses. I want to ask, Mr. Mullins, will your statement be long, sir?

Mr. MULLINS. About the same length as Mr. Whiteside's.

The CHAIRMAN. And, Mr. Steele, will your statement be long?
Mr. STEERE. No, sir.

The CHAIRMAN. And, Mr. Dawson?

Mr. DAWSON. No, sir.

The CHAIRMAN. We will then adjourn until 2:30, and we hope that you gentlemen will not be long and that we will be able to conclude this hearing this afternoon.

(Whereupon, at I p.m., the hearing was adjourned, to reconvene at 2:30 p.m., of the same day.)

AFTERNOON SESSION

The CHAIRMAN. Mr. Mullins, president of the Wolfe City National Bank.

Mr. JONES. Mr. Chairman, Mr. Omacht, who was to testify, had to leave for Chicago and he has asked me to file his statement.

Also, in the interests of time, I have the statement of Mr. Richard Meier that I would like to file.

The CHAIRMAN. They will be received.

(The statements referred to appear at pp. 1399 and 1427.)

The CHAIRMAN. Mr. Mullins?

STATEMENT OF R. L. MULLINS, PRESIDENT OF THE WOLFE CITY NATIONAL BANK OF WOLFE CITY, TEX.

Mr. MULLINS. My name is R. L. Mullins. I am president of the Wolfe City National Bank of Wolfe City, Tex. Wolfe City is a small town of 1,500 people and located in the Fourth Congressional District of Texas.

I am also chairman of the legislative committee of the Independent Bankers Association of America, with its principal office in Sauk Centre, Minn. I am a past president of that organization and a member of its executive council.

The CHAIRMAN. Do you speak for the Independent Bankers Association?

Mr. MULLINS. I do.

The CHAIRMAN. How many members are there of that organization? Mr. MULLINS. Six thousand.

I am here today to testify in support of H.R. 71, which bill, I believe, is referred to as the Automobile Finance and Insurance Act of 1961. In April of this year, at a meeting of the executive council of the Independent Bankers Association, I mentioned this bill and told the council that I would likely testify about it, or that if I was unable to testify, someone representing the association should appear in support of the bill.

The Independent Bankers Association was organized some 30 years ago, for the express purpose of resisting monopolies in the field of banking. Our association is composed of about 6,000 community

owned, community-centered, and community-operated banks. We represent the banks at the grassroots of the country. We have, through the years, consistently opposed branch banking, holding company banking, and chain banking, maintaining that branch offices and/or holding company banks and chain banks are instances of absetee ownership which cannot serve the public as well as the community-owned banks, staffed by local people, and with local boards of directors.

As might be expected, therefore, our sympathies, and sometimes our actual activities, extend to the small, independent businessman and his operations. This is especially true when he is in competition with large, corporate structures which do business on a national scale or, sometimes, on a regional or area scale. In this instance, we speak for the smaller banks which feel the competition from the automobile-manufacturer-owned finance companies. We also lend our support to the idea that the smaller finance companies which are not manufacturer-owned, along with the smaller banks and the local insurance agents, should have a fairer chance at financing and insuring automobile installment purchases.

In preparation for my testimony before your committee, I placed a number of telephone calls to my banker friends in several States and asked what had been their experience in the automobile finance field. I completed 15 or 16 of these calls and, while I found some difference of expression, I believe that I can reasonably summarize my findings as follows:

The CHAIRMAN. Would you say that this summary you are giving reflects the views of the Independent Bankers Association, which is 6,000 banks strong?

Mr. MULLINS. About 6,000 banks strong; yes, sir.

The CHAIRMAN. And it reflects the views of that association? Mr. MULLINS. I speak for the association. There might be some bank in some backwoods section of the country who would disagree, but I speak as nearly as an official could speak for the association. It has been discussed in the executive council.

Mr. McCULLOCH. Mr. Chairman, I would like to ask Mr. Mullins if the bank he represents at any time has sought to get business away from GMAC or the large sales finance companies by underbidding their

rates?

Mr. MULLINS. Let me answer that by saying that in any instance. that I know of where we have financed an automobile as a direct loan to a purchaser it has been cheaper than GMAC financing would be.

Mr. McCULLOCH. You do not have difficulty in getting that kind of business, do you, when you finance individual purchases at rates lower than the financing provided by GMAC?

Mr. MULLINS. We certainly do; yes, sir.

Mr. McCULLOCH. What is the difficulty you have experienced in that regard?

Mr. MULLINS. Well, the dealer usually will outsell the customer. I have had them call me at my bank and ask me would I finance a car for him, I would say yes, just have the papers drawn, our name inserted, we will come down and pay for it and they can come get the money and they would never come. If you would care for me to go into details on it I could tell you about one who is a colored school

teacher who has done business with us for years. We financed her from an A.B. degree through a doctorate. She did business with us for years and still does. She called us from a GM dealer and said "I am fixing to trade for a GM automobile and I need about $1,600." I said, "It is OK, it is perfectly all right. We have financed cars for you before and we will be glad to do it again."

But, although busy, I noticed the papers never did come across my desk.

I didn't see it and asked my son, who has been in the bank with me for 12 years, I asked him, I said, "Did the deal ever come up?"

And he said it had not.

I later met her on the street and I asked her why the papers hadn't come up. I want to give you her remark. I don't mean for it to be humorous but she said, "They talked me out of it."

I said, "What do you mean they talked you out of it?"

And she said, "Well, they talked me into doing business with that GMCA outfit."

She even got the initials mixed up, GMCA for GMAC.

That is the way we have lost business.

Mr. McCULLOCH. In a competitive way, he told her the rates were less and that the whole package would cost her less than bank financing; is that correct?

Mr. MULLINS. I don't know what he told her. But he told her something. I calculated with her later and we would have saved her about $83.

Mr. MCCULLOCH. That would have been a laudable action.

Mr. MULLINS. We do lots of those things.

Mr. McCULLOCH. Do you think that case is a usual experience or do you think it is the exception?

Mr. MULLINS. I don't think it is the exception, not in our community. Mr. McCULLOCH. How much percentagewise has your business increased in the financing of automobiles over the last two decades starting in 1940?

Mr. MULLINS. With your permission, I'd like to start in 1937, because that is when we first commenced to keep some figures on our income from that source.

Mr. McCULLOCH. That is quite all right; that is even better than 1940.

Mr. MULLINS. 1937 on up through 1941 our automobile financing. both direct and through the dealer, was on an ascending plane. Mr. McCULLOCH. Yes.

Mr. MULLINS. Then came Pearl Harbor and it fell off. Then after the Korean incident, following the Korean incident, we were never able to get back to our former level.

In fact, we had to change our attitude a little bit. We saw that the automobile financing was getting away from us and we had to switch over more to mortgage financing than we ever did before.

Now, then, we have practically no automobile financing except repeat business where we have financed cars for people before. These people still come to us on a direct basis as the schoolteacher wanted to do, but couldn't do.

Mr. McCULLOCH. Now let me ask you this.

If I wanted to borrow $2,000 on a new Chevrolet, what would the financing of the entire package cost me over and above the $2,000 for a 36-month period?

I want you to give me the full package without anything being left out, all insurance, including credit life insurance and all other required insurance, everything that goes with the big sale of the package.

Mr. MULLINS. Could I substitute a different amount and a different term of months and give you the same answer, because I have one right before me.

Mr. McCULLOCH. Go ahead. Let me hear what you have.

Mr. MULLINS. This is an actual GMAC contract that I held in my hands less than 2 weeks ago.

Mr. McCULLOCH. I am asking what it would cost me to have that same kind of a deal financed by your bank.

Mr. MULLINS. And I want to give you that, and then I want to give you mine, if that is permissible.

Mr. McCULLOCH. Go ahead.

Mr. MULLINS. The deal was $1,100 deferred balance. This is for GMAC. It would have been the same in my bank. I am talking about we are going to take the same figures. I am taking an actual

case.

Mr. McCULLOCH. What do you mean by deferred balance?

Mr. MULLINS. That is what he owed after he made his trade-in and his downpayment. He actually owed $1,100. If he had been able to write a check for $1,100 he would have walked away with the automobile. So the first thing that GMAC put on to the deal was $216 worth of insurance which made $1,316 to be carried.

Mr. McCULLOCH. All right; now what did the insurance cover? Mr. MULLINS. I cannot tell you because that was their package of insurance, and I am going to add the same amount over to mine, if it is all right with you.

So they added the deferred balance and the insurance charges and that made $1,316, and then their carrying charges was $278.20.

Mr. McCULLOCH. What do they mean by carrying charge? Mr. MULLINS. I don't think it is exactly right to say interest but that is their charge for financing. That is their financing charge. Mr. McCULLOCH. Does it include what an ordinary person would call interest?

Mr. MULLINS. Interest, roughly, yes, sir.

Mr. CRABTREE. How much was that carrying charge?

Mr. MULLINS. $278.20.

Mr. CRABTREE. May I ask if you also added $216 insurance to yours? Mr. MULLINS. I am going to when I get to it in a minute, yes.

Mr. CRABTREE. Does that cover the same thing the

Mr. MULLINS. I am assuming-you see I didn't see their insurance package-I am assuming that the insurance would have been the same. I am trying to get to my part of it.

Mr. CRABTREE. Is your insurance actually the same?

Mr. MULLINS. We don't write insurance. A corporation in Texas cannot write insurance. Only an individual can write insurance in Texas.

In some States, the corporations, even banks can be insurance agents, but they cannot in my State.

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