5. The next best group is age 31-35. These applicants are near average in the rejection rate (16.4% vs 16.5% average) but higher than average serious delinquency rate (6.3% vs 4.7% average rate). It may be conjectured that possible increases in family responsi- A reject rate of 23.3%, considerable above the average of 16.5%, still 1.20 years of age or less is the poorest credit risk. Even though almost one half (45.7%) of the applicants were rejected, the serious delinquency rate is almost double the average rate (8.4% vs 4.7% average). It appears that despite such high rejection rates, bad debt losses of customers in this age category were abnormally high. EXHIBIT B The following statistics were compiled from credit applications received by six department stores. NUMBER OF NEW CREDIT APPLICATIONS PROCESSED BY MARITAL STATUS/SEX SHOWING APPROVALS, REJECTIONS AND SUBSEQUENT SERIOUS DELINQUENCY 1. Married persons are the best credit risks. Based upon the lowest rejection rate (12.3%), this category produced only a 4.1% serious delinquency rate. 2. Widows and Widowers are the second best credit risk. Based upon the second lowest rejection rate (17.9%), this category produced only a 3.2% serious delinquency rate. 3. Single females represent better credit risks than single males. males showed a serious delinquency rate of 8.4% compared to a 4. Divorced persons (male and female) represent credit risks closest to those of single males. However, their delinquency rate is more serious than those of single male or single females. In these cases, it may be conjectured that the adjustment to a lower standard of living family means being redistributed to support two living quarters, additional food, transportation and other living expenses, with little or no decline in the demands for goods and services may tend to result in increased delinquency. 5. Separated persons (female and male) represent the poorest credit risks. Even though 53.8% of these applicants were rejected for credit (more than twice that of divorced persons (24.9%)), those separated persons who were accepted for credit have the highest serious delinquency rate of any category and their 10.2% rate is higher than that of divorced persons (8.9%). 36-910 074 pt. 1 29 Mrs. SULLIVAN. Thank you, Mr. Kerr. STATEMENT OF RANDY LIVELY, DIRECTOR OF PUBLIC AFFAIRS, Mr. LIVELY. Thank you, Madam Chairman. Mrs, SULLIVAN. Will you summarize yours, too? Mr, LIVELY, Yes. Mrs. SULLIVAN. As I said, your entire statement will be inserted in the record. Mr. LIVELY. I am Randy Lively, director of public affairs in the general credit office of Sears, Roebuck & Co., in Chicago, Ill. Accompanying me in Randy Aires, assistant director for government affairs in Washington. We are grateful for this opportunity to express our views on the Equal Credit Opportunity Act. Madam Chairman. I am sure you will recall that I appeared before this subcommittee last fall on behalf of Sears when you held your oversight hearings on truth in lending and the Federal Reserve regulation 4. We felt then and we feel now that the availability of credit for women is being enhanced as a direct result of the current consumer demand and the response to that demand by competitive private enter We felt then and we feel now that legislating against discrimination No extension of credit is fraught with many problems and requires 4” understanding of the credit granting process in order that the sught to be achieved the enhancement of credit availabilityso made more dieult by the institution of legislation restrictions wasch my bit objectivity. si's wou'd hope that the legislation now under consideration can bo mado responsive to the social need to end discrimination and at the same time permit those who make credit decisions to do so obectively and with a minimum of statutory rigidity. Recently, two House bills have been filed which deal with the subject of discrimination in the granting of credit. The two bills to which Freter are H.R. 14856 and H.R. 14908. The thrust of both of these bills is the same, to prohibit discrimination. However, H.R. 14856 is broader in scope because it would ban discrimination on the basis of race, color, religion, national origin, or age, as well as sex and marital status. We at Sears would favor the bill Tinted to sex and marital status. We are not aware of any widespread pattern of discrimination based on race, color, religion, national origin, or age. To the contrary, one of the studies conducted for the National Commission on Consumer Finance concluded that there was no evidence of discrimination against whites. That study was conducted for the Commission by Prof. Gary C. Chandler of Georgia State University. Another study cited by the National Commission on Consumer Fi Ce was one conducted by Sturdivant and Wilhelm and published the Social Science Quarterly, Southwestern Social Science Associa tion, University of Texas. In that study, Sturdivant and Wilhelm found that there was some evidence-although no perfect patternof discrimination based on minority group status, but that it was "common for consumers to be charged higher credit costs when shopping outside of their own areas." Thus, the discrimination which was evident appeared to be based more on geography than on color or race. Based on these studies, it would appear to us that the real discrimination is not so much a matter of race, color, or national origin as it is a matter of geography and income, and I submit that H.R. 14856 addresses neither of these areas. Neither of the bills addresses this problem of discrimination based on economic grounds. Nor do they deal with the problem of geographic discriminationand I am not at all sure that they can deal with that problem effectively, for the legislative solution to that problem would involve some type of cash price regulation. This 93d Congress-and indeed the entire Nation has been that price controls did not succeed. If they did not work within the economic context within which they were recently tried, they will not work in removing price differentials which may exist between two shopping areas within the same city. Competition, which can be enhanced significantly by improved incomes and greater mobility, is the only real answer. With respect to religion, we are not aware of any complaints of discrimination. Certainly, Sears does not engage in any such discrimination. The inquiry about age is for one purpose-to determine whether the applicant is of legal age, and therefore has the capacity to enter into a binding contract. If discrimination in the credit-granting process does occur, it is likely to do so at the extremes of youth and advanced years. In our experience, however, the credit decision does not turn on the age factor, but rather on economic and other factors which are often corollaries of each and of the age spectrum-such as lower income, and in the case of long term contracts, the life expectancy of the applicant. Sears does not discriminate on the basis of age, and we have no philosophical objection to a prohibition of discrimination on this physical characteristic. However, we are concerned with the intolerable burden of proof which will be placed on a credit grantor in trying to demonstrate that it had not discriminated on the basis of age because of the extremely high degree of corollation between age and economic factors which impact on creditworthiness. We would prefer the "rifle shot" approach, singling out the areas thought by many to be the ones in which some abuses occur-sex and marital status. H.R. 14856 defines the term "discriminate" as meaning "to make any invidious distinction." H.R. 14908, on the other hand, defines the term as meaning "to take any arbitrary action." The phrase "invidious discrimination" has been widely used in a number of civil-rights cases involving such matters as discrimination on the basis of race, economic status, and geographic location of residence. However, we have been unable to locate any judicial interpretation of the phrase "invidious distinction." One U.S. district court defined "invidious discrimination" as meaning "a classification which is arbi |