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 credit is most often used for cars and homes and other large purchases.

Federal and State Laws

Federal and state statutory laws have been enacted to 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. The Uniform Consumer 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 Consumer Credit Protection Act in part to regulate the credit industry. It requires creditors to disclose credit terms to consumers. The 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.

While I don't believe we need credit to exist, having and managing credit has become a psychological necessity so to speak for many. We may not need it for everyday things like groceries and toiletries, but if we want to own a car or a home, many feel 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, the credit industry is a multi-billion dollar business. Because we do desire lines of credit to get some important things in our lives, it's a good thing that legislators realize that having 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. Managing your credit can work for you or against you - it's really all up to YOU!



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