Consumer Credit

When we refer to consumer credit, we are talking about the use of credit to finance transactions without having to pay the full amount of the merchandise at the time of checkout.  The most common form of consumer credit is a credit card issued by a financial institution.

Merchants may also provide financing for products which they sell. Banks may directly finance purchases through loans and mortgages. This type of consumer credit is most often used for cars and homes and other large purchases.

The law of consumer credit is primarily embodied in federal and state statutory laws. These laws protect consumers and provide guidelines for the credit industry.  There are many different laws that protect both the lender as well as the borrower when it comes to consumers obtaining credit.

States have passed various statutes regulating consumer credit. The Uniform Credit Code (http://www.law.cornell.edu/uniform/vol7.html#concc) has been adopted in eleven states and Guam. Its purpose is to protect consumers obtaining credit to finance their transactions, ensure that adequate credit is provided, and govern the credit industry in general. 

Congress passed the Credit Protection Act in part to regulate the consumer credit industry. It requires creditors to disclose credit terms to consumers. The Consumer Credit Protection Act also protects consumers from loan sharks, restricts the garnishing of wages, and established the National Commission on Consumer Finance to investigate the consumer finance industry. 

Credit card companies and credit reporting agencies are also regulated by the Act. The Act also prohibits discrimination based on sex or marital status in the extending of credit. The Act also regulates certain debt collectors and provides for rules as to what they can and cannot do when attempting to collect a debt.

Let’s face it, we need to have credit.  We may not need it for everyday things like groceries and toiletries, but if we want to own a car or a home, it’s necessary as not every consumer can pay cash for such high ticket items making obtaining credit a must.

From credit counseling agencies to credit card companies and credit lenders, consumer credit is a multi-billion dollar industry.  Because we do need lines of credit to get some important things in our lives, it’s a good thing that legislators realize that having consumer credit laws is needed so that abuse of the system doesn’t occur.

The everyday consumer has at least one line of credit open, but the average in the United States shows that we have at least four to five lines of credit in some way, shape, or form.  As a consumer, you must use your credit lines wisely and pay your installments on time.  If you don’t, you will find yourself with a bad credit rating and a bad credit report.  Consumer credit can work for you or against you – it’s really all up to YOU!