Uniform Consumer Credit Code (UCCC)

What Is the Uniform Consumer Credit Code (UCCC)?

The Uniform Consumer Credit Code (UCCC) is a code of conduct that governs consumer credit transactions. It provides guidelines for laws related to the purchase and use of all types of credit products from mortgages to credit cards. It is intended to protect consumers who use credit from fraud and misinformation.

Understanding the Uniform Consumer Credit Code (UCCC)

The Uniform Consumer Credit Code was approved by the National Conference of Commissioners on Uniform State Laws in 1968. It was later revised in 1974 to keep up with legislative and financial changes in the system. The code is not in itself a federal or state law, but states may use it in order to write consistent consumer credit laws.

Although it's not used nationally, the code has been adopted by nine states — Colorado, Idaho, Indiana, Iowa, Kansas, Maine, Oklahoma, Utah, and Wyoming — with other states incorporating at least some of its provisions into their laws. South Carolina and Wisconsin have codes that are very similar to the UCCC.

The Uniform Consumer Credit Code isn't a state or federal law.

One of the most significant guidelines in the UCCC is the limitation of interest rates charged by lenders. However, the actual ceilings on rates vary according to the type of credit issued. The code also encourages lower interest rates by limiting barriers to entry in the consumer credit field. The codes do this on the theory that more competition will result in lower consumer rates.

Beyond protection from usury — the illegal lending of money and charging unreasonably high fees — many of the guidelines are about the establishment of fair contracts issued to consumers by lenders. For instance, the code prohibits the use of waiver-of-defense clauses in lending. The waiver-of-defense clause states that a borrower relinquishes the right to any legal defense in the event of a conflict with the lender. Such provisions allow a lender to receive a summary judgment against a borrower with no opportunity for protection in either court or arbitration.

The code also limits so-called unconscionable transactions. These deals are usually subject to interpretation but refer to negotiations that are so overwhelmingly one-sided as to be deemed unenforceable. These unilateral practices may include warranty disclaimers or the blatant misrepresentation of products.

Special Considerations

Credit cards were a relatively new type of consumer credit when the first version of the code was written. But with the increase in credit card usage, the UCCC guidelines have proven crucial to safeguarding consumers. One primary directive says the bank issuing a credit card is also subject to the claims of a cardholder against a merchant.

As new technologies and systems are devised and the landscape for finance changes, certain services remain exempt from UCCC. For example, income-share agreements (ISA) that are piloted by universities in Indiana are not subject to the UCCC. Under such agreements, an educational institution takes on a portion of the student's expenses in exchange for a share of their future income.

Federal law has superseded some of the code's guidelines. One example is restrictions on aggressive collection practices, which are now governed by the Fair Debt Collection Practices Act (FDCPA). Another is the original guideline on disclosure of loan terms. The Truth in Lending Act (TILA) now contains those rules.

History of the Uniform Consumer Credit Code (UCCC)

As mentioned above, the UCCC was established in 1968 as a way to protect consumers from predatory and questionable credit transactions. Amendments were made in 1974 to update the code as the financial industry and legal landscape were changing.

The code was developed by the National Conference of Commissioners on Uniform State Laws — also referred to as the Uniform Law Commission. The commission was created in 1892 to provide states with clear legislation and stability in statutory law. A total of 350 commissioners — all of whom are lawyers — are appointed by the states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

The commission is responsible for more than 300 different uniform acts including the UCCC and the Uniform Commerical Code (UCC). The UCC is a set of laws and regulations meant to help standardize business transactions between entities in different states. The code was established in 1952 in response to the problems companies faced doing business across state lines. Now adopted universally by all states, the UCC provides legal guidelines and standards that govern transactions such as banking and lending.

Other acts developed by the commission cover a variety of topics including family and domestic law, real estate, probate, commercial law, dispute resolution, trusts, and estate law.