Uniform Consumer Credit Code (UCCC)

The Uniform Consumer Credit Code (UCCC or U3C) 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, and is intended to protect consumers who use credit from fraud and misinformation.

The UCCC was approved by the National Conference of Commissioners on Uniform State Laws in 1968, and revised in 1974. The Code is not in itself a federal or state law, but states may use the Code in writing consistent consumer credit laws. So far it has been adopted in 11 states (Colorado, Idaho, Indiana, Iowa, Kansas, Maine, Oklahoma, South Carolina, Utah, Wisconsin, and Wyoming). Many others states have incorporated at least some of its provisions into their laws.

One of the most significant guidelines in the UCCC is the limitation of interest rates charged to consumers by lenders. However, the actual ceilings on rates vary according to the type of loan. 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, which is the illegal lending of money and charging unreasonably high fees, many of the Code’s guidelines are about the establishment of fair contracts. For example, 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, which are subject to interpretation but typically refer to negotiations which are so overwhelmingly one-sided as to be unenforceable. These unilateral practices might include disclaimers of warranties or the blatant misrepresentation of products.

Credit cards were a relatively new type of consumer credit during the first writing of the Code. But as credit card use has grown, the UCCC guidelines have proven crucial to safeguarding consumers. One primary directive says that the bank issuing a credit card is also subject to the claims of a cardholder against a merchant, in most cases.

Federal law has superseded some Code guidelines.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.