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Consumer Credit

Consumer credit is really nothing new. It existed in an informal fashion in the earlier days, where your neighborhood grocer would give you your requirements and you paid up at a particular time. That was based on his instinct of what you were and how you behaved.

In its modern form, it began sometimes between the 1946 and 50s when two people went to dinner and found they had no cash to pay at the restaurant. Thus began the Diners Club, exclusively for use in restaurants. Just like plants, hybrids have grown to where it is now.

Obviously, given the lucrative nature of the market, loan sharks, so called, for their high rates of interest, and arm twisting tactics to get their money back, had a field day, till Government/s were forced to step in.

You don't carry cash; you pay by credit card. The merchant gets his sum instantaneously, and you pay the credit issuer after 30 days or so. The cost of the transaction is covered by its usage by multimillion people across the world, and through the annual charge for possessing it. If you are late in payment after the stipulated date, you pay an additional surcharge. Based on the volume of business that is now driven by credit cards, multibillion dollar industry has been created.

You have options too. You can ask for a staggered payment plan for expensive items that you wish to purchase, but don't have the immediate wherewithal, and the issuer steps and guarantees it to the dealer, and the issuers charges a fee through which the cost of money is recovered.

The other part is handled by banks themselves, in cases of high values, like house mortgages, cars, expensive equipment for small and medium businesses, etc.

Used wisely, it is a great boon for everybody; unwisely leads to trouble. Further, because of its flexibility, it drives the national economy, creating demand for industry for its high value goods and services. But yet there is danger, which we have just seen in the crash of the sub prime mortgage markets. The financial institutions and the debt market have become so inter-twined that the crisis is rocking the foundations of the American banking system.

Not surprisingly, even bad credit has thrown up a whole array of specialists, experts, mediators, intermediaries, who help re-finance and restructure debt.

There is a slew of legislation, both Federal and State, to protect the consumer, and at the same time maintaining the balance between the fiduciary relationship between the cardholder and the finance provider.

The Uniform Consumer Credit Code (http://www.law.cornell.edu/uniform/vol7.html#concc) adopted by eleven States and Gaum, protects consumers, ensuring adequate credit is provided and governs in general the credit industry.

The Consumer Credit Protection Act, enacted by Congress, in part regulates the industry, requiring the creditors to fully disclose the credit terms, protects the consumer form predatory loan sharks, restricts garnishees of wage, and set up the National Commission on Consumer Finance to probe this industry.

This Statute also governs the Credit card companies and credit reporting agencies, prohibits gender or marital status based discrimination in granting credit, apart from regulating debt collectors, and with rules for collectors to adhere to a certain code, which restrains from certain practices in collections.

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