Disclosure of Finance Charges: A Rationale

One wonders whether in all of the talk generated about disclosure in the past few years the purposes of disclosing finance charges to consumers have not been somewhat obscured. This article is an attempt to examine the subject of disclosure from the standpoint of the function it performs in consumer credit transactions. We shall discuss the various methods of computing finance charges in the different segments of the finance industry, the functions of disclosure of finance charges and the feasibility of using different computational methods in each category of consumer transactions. The problems involved in requiring the disclosure of finance charges are not as simple as one is sometimes led to believe. Each side of the controversy has good arguments to support its view; neither side is the exclusive repository of justice and morality. The problem of required disclosure has long been debated and is ripe for resolution. It is our hope that this article will succeed in pointing out some of the factors that should be considered in a compromise legislative solution of this thorny problem.