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8 B.C. Indus. & Com. L. Rev. 475 (1966-1967)
Economics, Morality and the Real-Estate Loan

handle is hein.journals/bclr8 and id is 481 raw text is: ECONOMICS, MORALITY AND THE REAL-ESTATE LOAN WILLIAM C. PRATHER* I. INTRODUCTION In the area of consumer protection, most of the exploratory dis- cussion and preliminary efforts aimed at legislative drafting, including the current project of the National Conference of Commissioners on Uniform State Laws, have concentrated on the need for protecting the purchaser of personal goods and services from being deceived in the process of credit extension and collection. Such deception usually results either from misunderstanding or sheer ignorance on the part of the consumer, or is caused by dishonest or unethical behavior on the part of the credit supplier. It is generally recognized that the primary impact of protective legislation for the consumer should be directed to those areas where regulation is actually needed. Concentra- tion on specific weaknesses tends concomitantly to dismiss from fur- ther consideration those areas where no problem exists. Consumer- credit legislation, therefore, often excludes from its coverage trans- actions involving sophisticated corporate borrowers, large amounts of money, and credit secured by investment property such as real estate or marketable securities. It is the purpose of this article to point out some of the economic, moral, and legal issues involved in any examination of the real-estate loan in the context of proposed consumer-credit legislation. II. ECONOItCS, MORALITY, AND THE LAW Economics, morality, and the law are so tightly interlaced in any consideration of credit cost and disclosure questions as to be nearly indistinguishable. Yet if a study is to be objective, the significance of each factor must be weighed independently. A number of contemporary economists and financiers find it surprising that the idea of price control for goods and services per- sists in a capitalistic society, since such measures ordinarily are justi- fied only in times of national emergency. Arbitrary limits on credit rates constitute a form of price control comparable to ceilings on the prices of commodities, and, in the money market, interfere just as effectively with the free working of the law of supply and demand. One of the basic tenets of a free-enterprise economy is that buyers * A.B., University of Illinois, 1942; LL.B., University of Illinois, 1947; Member, American Bar Association, Federal Bar Association, Illinois Bar Association, Chicago Bar Association; General Counsel, United States Savings and Loan League. 475

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