Uniform Consumer Credit Code (UCCC): Meaning and History

What Is the Uniform Consumer Credit Code (UCCC)?

The Uniform Consumer Credit Code (UCCC) is a draft law adopted by 11 states to govern consumer credit transactions. It establishes rules related to the issuance and use of credit products, from credit cards to mortgages, in order to protect consumers from fraud and unfair practices by lenders.

Key Takeaways

• The Uniform Consumer Credit Code (UCCC) prevents fraud and abuse in credit transactions.
• Eleven states have adopted the code, while others have incorporated some of its provisions into their laws.
• The code provides guidelines for credit, including limitations on interest rates and the establishment of fair contracts.

How the Uniform Consumer Credit Code (UCCC) Works

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

Eleven states—Colorado, Idaho, Indiana, Iowa, Kansas, Maine, Oklahoma, South Carolina, Utah, Wisconsin, and Wyoming—have adopted the code, while other states have incorporated at least some of its provisions into their laws.

One significant guideline in the UCCC is the limitation on interest rates charged by lenders. The code also encourages lower interest rates by limiting barriers to entry in the consumer credit field to promote competition and lower rates for consumers.

Other guidelines in the UCCC concern fair contracts issued to consumers, prohibiting the use of waiver-of-defense clauses that relinquish a borrower’s legal defense in a conflict with the lender. The code also limits unconscionable transactions characterized by one-sided negotiations or misrepresentation of products.

While federal law supersedes some of the code’s guidelines, the UCCC remains relevant in protecting consumers from predatory lending practices.

History of the Uniform Consumer Credit Code (UCCC)

The UCCC was established in 1968 as a means to protect consumers from predatory and questionable credit transactions. Amendments were made in 1974 to update the code to reflect changes in the financial industry and legal landscape.

For example, the code’s guidelines for credit cards have proven crucial in safeguarding consumers as credit card usage increased. The UCCC also exempted certain services, such as income-share agreements offered by universities, from its provisions.

The UCCC was developed by the National Conference of Commissioners on Uniform State Laws, which was created in 1892 to help states achieve uniformity in desirable laws. The commission appoints more than 300 lawyers from states and territories to work on uniform acts addressing various legal matters.

In addition to the UCCC, the commission has developed more than 300 uniform acts, including the Uniform Commercial Code (UCC) that governs business transactions between entities across states.

How Are Commissioners Appointed to the Uniform Law Commission?

Each jurisdiction determines the method of appointment and the number of commissioners, with most states appointing them for a specified term. ULC commissioners are volunteers who serve without compensation.

What’s the Difference Between a Uniform Code and a Model Act?

Uniform codes, or uniform laws, are drafted by the Uniform Law Commission and may be partially or entirely adopted by state legislatures. Model acts serve as guidelines but are rarely enacted in their entirety and can be drafted by anyone.

What Federal Laws Protect Credit Card Holders?

Credit card holders are protected by federal and state laws. The Credit Card Accountability Responsibility and Disclosure Act of 2009, also known as the CARD Act, is a major federal law that amended the Truth in Lending Act to provide clearer credit term disclosures and limit fees charged by lenders.

The Bottom Line

The Uniform Consumer Credit Code (UCCC) establishes legal rules to protect consumers who use credit in states where it has been enacted. It works in conjunction with various federal laws with the same aim.