Consumer Finance & Banking

Jorden Burt's Consumer Finance & Banking Industry Group includes

lawyers

with

extensive

experience

representing

banks,

finance

companies, lenders and other corporate clients in state, federal and

bankruptcy court litigation and counseling.
Creditors' Rights, Loan Workouts and Bankruptcy
Our lawyers regularly represent banks and other lenders in enforcing
secured and unsecured loans, including floor plan financing, retail motor
vehicle, and vessel finance contracts, asset based and other commercial
loans, and commercial real estate loans. With over 30 years of experience
in lender representation, our creditors' rights/loan workout team has
structured a number of successful commercial mortgage loan workouts so
as to avoid protracted litigation, while ensuring that the lender's position
was strengthened in return for any forbearance given. At the same time,
our lawyers are experienced and adept at vigorously enforcing lender's
rights in state and bankruptcy courts when uncontested workout solutions
are not possible. Members of our Team have been active members in the
ABA Banking Law Committee's Loan Workouts and Bankruptcy
Subcommittee and the ABA Commercial Finance Creditor's Rights
Subcommittee.
Complex Credit-related Litigation
Jorden Burt lawyers represent lenders in complex state and bankruptcy
court litigation involving claims against borrowers, guarantors,
controlling persons, and related entities for fraudulent procurement of
financing, misuse of loan proceeds, claims against finance company
providers

of

collateral

protection,

claims

related

to

borrower

mismanagement, accounting, fraudulent disposition and transfers of

assets, receiverships, and assignments for the benefit of creditors.
Credit-related Defense

We also defend banks and other financial service industry clients in

lender liability claims, and in both individual and class action claims
alleging violations of Federal consumer financial protection legislation,
including but not limited to TILA, FDCPA, FCRA, FCBA, and state laws
applicable to consumer financial transactions and collection practices.
Ever mindful of the business aspects of such litigation, we have enjoyed
remarkable success at achieving quick solutions through prompt and
thorough investigation with our clients of such claims, followed either by
dispositive defensive motions, or economically sound, confidential
settlements. Our clients know and appreciate us for our cost-effective and
business-wise approach to such claims.
Compliance Counseling
Our lawyers also regularly counsel on compliance issues such as Federal
consumer financial protection laws including the FDCPA, TILA, FCRA,
FCBA, and obligations under the Dodd-Frank Wall Street Reform and
Consumer Protection Act, and state statutes regulating consumer and real
estate finance. Jorden Burt also assists financial services organizations in
evaluating anti-money laundering compliance (AML) issues and counsels
on the design and implementation of AML compliance programs and
procedures and Office of Foreign Assets Control (OFAC) compliance.
Our firm's lawyers are active members of ACAMS (the anti-money
laundering professional association).

Advantages & Disadvantages of Consumer Financing

X

Consumer financing programs are offered by many businesses in various

industries. These financing programs make it possible for customers to
obtain the money they need to purchase goods and services from specific
merchants. If you are a business owner, offering consumer financing can
provide you with benefits like increased sales. At the same time, you will
have to be aware of drawbacks like increasing your costs.
Function
Consumer financing is a type of financing that is offered by credit
providers to merchants. The companies that offer this type of
financing are generally the same companies that offer credit cards
to the general public. These companies allow customers to set up
accounts through a merchant to buy goods or services from them.
Companies work directly with these credit issuers to offer their
customers an alternative means of payment for their products.
Closing Sales
One of the benefits of offering consumer financing is that it often
closes more sales. When a merchant has the option of offering
financing to customers, this will have the effect of increasing
closing percentages. Customers may not be willing to part with
their cash quite as easily as they would be willing to finance a

purchase. Most merchants find that when they offer customers

financing, the customers begin to think about buying when they
would otherwise not be willing to do so.
Larger Sales
Another benefit of offering consumer financing is that it often leads
to larger sales. When customers find out that financing is an option,
they start to think about what they could buy in addition to what
they originally planned on buying. Customers may only have a
certain amount of cash that they can use, but they will gladly
charge the rest of their purchase on consumer financing in many
cases. This increases sales volume and leads to a bigger average
sale.
Costs
One of the big drawbacks of offering consumer financing is that it
can increase your costs. The companies that offer this type of
financing are in it to make a profit. They will charge the business a
percentage of each transaction that is processed on the consumer
financing. This comes directly out of your profit on the sale. While
the increase in business may be worth it, this can make the sales
that you close less profitable.
Considerations
To make consumer financing work for your business, you need to
set up some rules associated with it. For example, if you have a
sales force to sell your products, setting up minimum dollar
amounts for sales can be beneficial. You may also want to institute

a policy that only allows jobs that are sold above a certain profit
margin to go on the financing. By setting up some rules in advance,
you can avoid losing money on the consumer financing.

Where should consumer financial protection be located?

The Treasury plan suggests that consumer protection needs a separate
new agency. In the past, consumer protection has been part of the
prudential supervision process, at the FED or other regulatory agencies.
That has clearly not worked very well. The FED did not police mortgage
lending effectively prior to the crisis. There were issues around the
authority that the FED possessed, but certainly they knew about the
erosion of mortgage standards in state chartered financial institutions and
elsewhere and they did not respond. It would have been helpful had the
FED brought all mortgage regulators to Washington, dressed them down
and told them to stop the bad practices. The crisis would have been much
milder, but unfortunately this did not happen. The argument for a new
agency is that consumer protection will always be the poor relation inside
a prudential organization.13 Today the FED and other regulators are very
focused on consumer protection, but the danger is that situation would
fade over time. The case for having the CFPA separate from prudential
regulation is a good one. So that leaves only the question of whether it
should be part of another agency or a free standing agency.
13 For
Part of another agency
There are candidates for existing agencies that could house the CFPA
function. The FTC is a possibility, but perhaps the best candidate is the

SEC. The SEC did a terrible job of supervision over broker dealers. They
gave Bear Stearns a clean bill of health shortly before the company went
under. But Mary Schapiro, the new head, has a strong track record and
her promises to revitalize and reform the agency should be taken
seriously.
Why the SEC? In looking around the world at how different countries
manage their financial sectors, we have been impressed by the so-called
twin peaks approach, used for example by Australia.14 With the twin
peaks system there are two regulators, the prudential regulator and the
conduct of business regulator, with the latter charged with the protection
of small and minority shareholders and with consumer protection.
Together with the central bank, these two regulators make up a tripartite
group that should be required to work closely together to improve the
safety, stability and efficiency of the financial sector. Unlike the current
US system, this model has only a few separate regulators, each of which
has considerable power, each of which should be given the power to pay
well and expect accountability from its employees. There is no guarantee
that streamlining the number of regulators would avoid another crisis, but
both common sense and the experience in Australia and some other
countries suggest that a streamlined system would work much better than
the current overly complex US structure of regulation. The SEC is not the
only possible candidate for the consumer protection functions, but it
would be the natural home for a strong conduct of business regulator,
given its existing role in shareholder protection.
My favorite plan for the proposed CFPA, therefore, is that the group of
people that are now doing consumer protection at the FED and the groups
at other prudential agencies be relocated to a consumer protection
division at the SEC. The FED has neglected consumer protection in the
past but in recent months has become good at it. The current head of

consumer protection at the FED would make an excellent candidate to be

head of the new agency within the SEC.
The CFPA as a standalone agency
The disadvantages of a separate CFPA are twofold. First, this approach
adds one more agency to the list. There are already too many agencies
and adding another one is a move away from streamlining and
consolidating financial regulation.
The second possible problem is that a separate agency is more likely to
attract an activist group and end up in an endless fight with the financial
industry. It is important that supervisors and regulators have the power
and independence to stand up to private industry. But at the same time,
they must be able to understand how the industry works, its need for
profitable lines of business and challenges it may face from customers
that do not always pay their bills.
In the past, I have expressed pretty strong opposition to a standalone
agency for the above reasons. At this time, after having spent more time
examining the issues, I now accept that a separate agency is a
reasonable outcome that should improve overall regulation and help
consumers. It would be important, of course, that it be well-designed and
avoid the pitfalls and dangers described earlier.

The Loan Contract

The loan contract is the most critical document of the loan process. It
describes what the lender requires of you once you are granted the loan.
Whenever you borrow, you put your future into someone elses hands;
therefore, you need to know what you are doing. Read the entire contract
and make sure you fully understand the details of the loan before you sign
the loan agreement.

One of the most important things you should remember about loan
contracts is that none of the clauses in the contract is in your favor; all of
the clauses are in the lenders favor. Lets talk about four clauses that you
will want to be aware of:
1. The insurance clause requires you to purchase life insurance that
will pay off your loan in the event of your death. It benefits only
the lender and increases the total cost of the loan. This clause is
often used in mortgage loans.
2. The acceleration clause requires you to pay for the entire loan in
full if you miss just one payment. This clause is oftenbut not
alwaysdisregarded if you make a good faith effort to catch up on
your missed payment. But it still is a risk.
3. The deficiency clause stipulates that if you do not pay back the
loan, and the company takes your collateral, you must pay any
amount in excess of the collaterals value; this clause takes effect if
the money earned through the sale of your collateral does not
satisfy the loan. You must also pay any charges incurred by the
lender that are associated with the disposal of your collateral.
4. The recourse clause allows the lender to collect any outstanding
balance via wage attachments and garnishments. This clause may
also allow the lender to put liens on other properties that you own
(these properties can act as secondary collateral) should you fail to
repay your loan.

Special Types of Consumer Loans

There are a number of special types of consumer loans, loans that are
different from traditional consumer loans. These include home equity
loans, student loans, and automobile loans. These loans are discussed
below.
Home Equity Loans: Home equity loans are also known as second
mortgages. In a second mortgage, you use the equity in your house (i.e.,
the difference between what you paid for the house and what you could
sell the house for today) to secure your loan.
The benefits of a home equity loan are that you can usually borrow up to
80 percent of the equity in your home, and the interest payments may be
tax deductible. With this type of loan, you can also get a lower interest
rate because the house is secureit cant be moved. One disadvantage of
this type of loan is that it limits your future financial flexibility because
you can have only one outstanding home equity loan at a time. Moreover,
a home equity loan puts your home at risk; if you default on a home
equity loan, you can lose not just your credit score but your home as well.
Home Equity Lines of Credit (HELOC): Home equity lines of credit are
basically second mortgages that use the equity in your home to secure
your loan. These are generally adjustable rate notes that have an interestonly payment, at least in the first few years of the note. Generally, interest
rates are variable and payments cover only interest in the first few years.
These have lower rates of interest than other consumer loans.
The benefit of these loans is that the interest may be tax deductible,
reducing the cost of borrowing. The problem is that these loans will often
keep people from making the hard financial choices to curb their
spending. Why worry about spending when you can get a home equity

loan or HELOC to pay it off? These loans sacrifice future financial

flexibility and put your home at risk if you default.
Student Loans: Student loans have low, federally subsidized interest rates;
these loans are often used to pay for higher education. Examples of
student loans that are available to parents and students include federaldirect loans, plus-direct loans, Stafford loans, and Stafford-plus loans.
One benefit of student loans is that some have specific advantages, such
as subsidized interest payments and lower interest rates. Also, you can
defer payment of federal-direct loans and Stafford loans until six months
after you graduate or discontinue full-time enrollment. The disadvantages
of these loans are that there is a limit to how much you can borrow, and,
like all debts, you must pay these loans back.
Automobile Loans: An automobile loan is a consumer loan that is secured
by the automobile that the loan is paying for. This type of loan usually
has a term of two to six years.
The advantage of an automobile loan is that it usually charges a lower
interest rate than an unsecured loan. The disadvantage is you must make
interest payments, and since vehicles depreciate quickly, you are often
left with a vehicle that is worth less than what you owe on the loan you
got to purchase the vehicle.
Payday Loan: Payday loans are short-term loans of one or two weeks;
these loans are secured with a postdated check. The postdated check is
held by the payday lender and cashed on the day specified. These loans
charge very high interest ratessome payday loans charge more than 500
percent on an annual percentage rate basis (APR). I recommend that you
avoid using these loans completely.

RURAL MARKET ANDCONSUMER FINANCE

Sales were high during festive season.
Rural people feel ease in giving installments instead of single down
payment.
Rural persons found consumer loans useful becauseconsumer durables
are used for productive purposes.

PROBLEMS FACED IN RURALSECTORS

Process of sanctioningloans,documentation and formalitiestakes too
much time.
Higher interest rates for quickersanctioning of loans.
People want advance informationabout the documents needed fortaking
loan.
RECOVERY OF LOANS
Recovery of loans is the toughest jobin rural area.
Recovery rates are higher in co-operative banks.
Schemes for hardcore defaultersdiscourages the consumers who payon
time.

About Bajaj Capital

BFL was created by the three-way demerger of Bajaj Auto, inheriting the
insurance and financebusinesses. Now, it is into consumer financethrough
listed firm Bajaj Auto Finance. It is alsointo general and life insurance
businesses in JVs with Allianz.Bajaj Auto Finance, which initially
financedpurchases from Bajaj Auto, is now changinginto a consumer
finance firm. Last year, autofinance brought 55% business while 45%
camefrom personal loans and financing consumerdurables and PCs.
Process of consumerFinance
Consumer meet with dealer- Purchase decision- Filling of formSubmitting documents
Transfer of document from dealer to finance company
Checking of details by Operation Department
Transfer from Operation to Finance Department
Finance given to customer
Finally Collection Department collects the installmentspaid by
customer(In case of default on finance collection departmenttake legal
action against customer)
Role of Consumer Finance Companies
It was the American industrialist who developed and propagated the
concept of mass production which has led to a mass consumption
economy not only in America but through most parts of the world. One
important consequence of mass production was the rapid increase in the

use of installment credit. With its propagation, the America businessman

was at least assured that his market the consumer would have the
purchase vehicle with which to obtain his mass-produced goods.

What happened with cars in America in the 1920s and with

automatic washers and television sets after World War II has been
replicated in Western Europe, gradually in most Asian countries, and
certainly now in Thailand.

Installment selling, in spite of its having been practiced

elsewhere in the world for so many number of years, is relatively new in
Thailand. There is no clear record as to when installment selling was
started here. It has been observed that the practice caught up rather
slowly but gained a more rapid momentum in the last 10 years, due
largely to the greater degree of competition (entry into the country of
more foreign goods) and the growing influence of the more sophisticated
distribution system brought by the foreign businessmen.

Something has to be said about the culture of the Thais

with regards to their response to the idea of installment credit. It is
perhaps the sense of apprehension for foreign-bred schemes, and
justifiably so, that was responsible for its slow start. There is, likewise,
the element of giving out information on oneself that provided a resistant
factor to its acceptance. Even now it is generally difficult for a trading

company or financing company to solicit credit information from the

prospective buyer.

The Thai consumers are a sensitive lot. For one, they

generally avoid being goaded into signing any kind of formal contract.
They feel that if you, the seller, trust them, then there should not be any
need for elaborate contractual agreement. Hence the strong resistance to
fill up complex information sheets. The apprehension for having
anything to do with the legal implications of a formal contract is another
reason for them to shun organized plans. This is why most local retailers
admitted that they really have not practiced any advanced installment
plans. Their credit sales could extend anywhere from one month to six
months without as much as an invoice to support the transaction. One
has to be flexible, they would insist. How much carrying charge does
the retailer in these cases then add to his normal cash price? This again is
usually without any standard basis. Between 10% to 20% mark-up for
credit terms of up to six months is not uncommon.

Another side to the sensitivity of the Thai consumer is in

the mild affront which he takes if he is queried to need some credit.
Sometime ago, we launched a direct-mail campaign to a selected set of
professionals offering them financing service. Much to our chagrin, some
took offense and quickly disclaimed any need for financing.

In spite of all these, the impact of installment selling in

Thailand could not be abated. The demand for durable consumer goods
was stimulated while the ability on the part of the consumers to acquire
said goods has been greatly facilitated thanks to the increased
availability of consumer credit.

The commercial banks have heretofore played a major role

in the financial structure of Thailand; yet consumer credit assistance has
been left with much to be desired. This situation has lent itself to the
widespread use of the so-called unorganized money market in Thailand.
In fact, it has been estimated that of the financial transactions carried out
during 1966 and 1967, 75% to 80% took place in the unorganized sector
of the Thai financial system.

To some extent, the way the unorganized financial market

has thrived could partly be traced to the innate preferences of the Thai
consumers. The flexibility and the informality of it all not to mention
its virtual secrecy, therefore avoiding any loss of face were some
reasons for this preference. The matters of cost, or of interest, become
secondary.

Apart from the commercial banks, the pawnshops in

Thailand have been credited with having contributed as well to the
countrys economic development. It is they who have coped mostly with
the specific demands of the average consumer. It may be said that

pawnshop transactions is at least one notch better than those availed from
the private money leaders.

The pawnshops, to be sure, are adequately regulated by the

government. The private money lenders, however, which consist much of
the unorganized sector of the Thai financial system, are outside any
official supervision. It is generally known that such financial dealings
were carried at an excessive cost to the consumer and with little, if any,
protection to him. Much of it has depended on the liberal use of postdated cheques. It used to be that to issue a bad cheque was a criminal
offence until August this year when the law was revised. The
proponents of the law argued that to obtain credit information was next to
impossible and only a grave penalty would secure the creditor. On the
other hand, those who supported its revision argued that reckless granting
of consumer credit resulted from this very implication and that it did
not help in the proper development of credit structure in the country.

When Commercial Credit Corporation (Thailand) Ltd.,

otherwise known as CCC, was formed in 1964, it marked the birth in
Thailand of a true consumer finance company with the prime objective
of serving the consumers needs. In a way, it could also be said that it
started the finance company era. For just within a few years from then,
finance companies have literally mushroomed.

Finance companies have flourished since. Ostensibly they

have offered services which the commercial banks have considered
outside their regulated sphere such as financing hirepurchase sales of
durable consumer goods. By the same token, they have carried on certain
banking operations such as accepting funds from the public. Since public
welfare and safety or as we would like to refer to as consumer
protection were now at issue, the government finally passed the Finance
Company Law. Henceforth finance companies would be regulated as
from September 21, 1972.

One immediate good effect of these regulations is that it

will enhance the consumers confidence in finance companies. He would
now perhaps be more acceptable to such basic credit practices as filling
up credit application forms, signing contractual agreements, receiving
payment notices and, hopefully, be more conscious of his credit rating.
Slowly but surely, a gradual shift to utilization of consumer finance
companies is deemed inevitable.

As for the retailer, he is quick to admit that the continuing

impact of consumer credit has shown favorably in his sales book. A
doubling of volume between 1960 and 1970 were reported by the retailers
we sampled. Much was attributed in the introduction of installment
credit. Consumer credit has thus served as a potent marketing tool for the
creation and building up of demand and penetrating into the markets.

Meanwhile the pressures of competition have led to

granting longer credit terms, and lower down payments.

In the

automobile hire purchase market, 15% down payment, where it used to

be 35%, is not uncommon. Thirty-six months term has become standard
while the precarious 48-months term is believed forthcoming. In the
appliance business, an advanced payment of the first monthly installment
serves as down payment.

While selling terms have become more liberal, yet the

consumers lack of exposure to standardized credit procedures have
prevailed. The gap widens.

Much can be done. In the direction, effects towards the

upgrading of the credit profession have been started. We suggested last
year through the Thailand Management Association that the formation of
a professional association to be called the Association of the Credit
Managers in Thailand would be one way to achieve this goal. It is
gratifying to note that the TMA has already put this into action. Within
its framework, it is hoped that a fluid interchange of credit information
can be practiced in a prudent and discreet manner.

We believe that with passing of the Finance Company

Regulations, consumers confidence in finance companies will increase;
as much as it will lead to the development of standardized financing
procedures.

The needs of the consumers are very many, while their

financial resources are few and limited. Those of us who are directly
involved in the granting of consumer credit are trying to bridge that gap
between needs and means. To accelerate this process, we in the business
must play a significant role in settling the standards so that he the
consumer is not only served but protected as well.
Role of Consumer Finance Companies
It was the American industrialist who developed and propagated the
concept of mass production which has led to a mass consumption
economy not only in America but through most parts of the world. One
important consequence of mass production was the rapid increase in the
use of installment credit. With its propagation, the America businessman
was at least assured that his market the consumer would have the
purchase vehicle with which to obtain his mass-produced goods.

What happened with cars in America in the 1920s and with

automatic washers and television sets after World War II has been
replicated in Western Europe, gradually in most Asian countries, and
certainly now in Thailand.

Installment selling, in spite of its having been practiced

elsewhere in the world for so many number of years, is relatively new in
Thailand. There is no clear record as to when installment selling was
started here. It has been observed that the practice caught up rather

slowly but gained a more rapid momentum in the last 10 years, due
largely to the greater degree of competition (entry into the country of
more foreign goods) and the growing influence of the more sophisticated
distribution system brought by the foreign businessmen.

Something has to be said about the culture of the Thais

with regards to their response to the idea of installment credit. It is
perhaps the sense of apprehension for foreign-bred schemes, and
justifiably so, that was responsible for its slow start. There is, likewise,
the element of giving out information on oneself that provided a resistant
factor to its acceptance. Even now it is generally difficult for a trading
company or financing company to solicit credit information from the
prospective buyer.

The Thai consumers are a sensitive lot. For one, they

generally avoid being goaded into signing any kind of formal contract.
They feel that if you, the seller, trust them, then there should not be any
need for elaborate contractual agreement. Hence the strong resistance to
fill up complex information sheets. The apprehension for having
anything to do with the legal implications of a formal contract is another
reason for them to shun organized plans. This is why most local retailers
admitted that they really have not practiced any advanced installment
plans. Their credit sales could extend anywhere from one month to six
months without as much as an invoice to support the transaction. One
has to be flexible, they would insist. How much carrying charge does
the retailer in these cases then add to his normal cash price? This again is

usually without any standard basis. Between 10% to 20% mark-up for
credit terms of up to six months is not uncommon.

Another side to the sensitivity of the Thai consumer is in

the mild affront which he takes if he is queried to need some credit.
Sometime ago, we launched a direct-mail campaign to a selected set of
professionals offering them financing service. Much to our chagrin, some
took offense and quickly disclaimed any need for financing.

In spite of all these, the impact of installment selling in

Thailand could not be abated. The demand for durable consumer goods
was stimulated while the ability on the part of the consumers to acquire
said goods has been greatly facilitated thanks to the increased
availability of consumer credit.

The commercial banks have heretofore played a major role

in the financial structure of Thailand; yet consumer credit assistance has
been left with much to be desired. This situation has lent itself to the
widespread use of the so-called unorganized money market in Thailand.
In fact, it has been estimated that of the financial transactions carried out
during 1966 and 1967, 75% to 80% took place in the unorganized sector
of the Thai financial system.

To some extent, the way the unorganized financial market

has thrived could partly be traced to the innate preferences of the Thai
consumers. The flexibility and the informality of it all not to mention
its virtual secrecy, therefore avoiding any loss of face were some
reasons for this preference. The matters of cost, or of interest, become
secondary.

Apart from the commercial banks, the pawnshops in

Thailand have been credited with having contributed as well to the
countrys economic development. It is they who have coped mostly with
the specific demands of the average consumer. It may be said that
pawnshop transactions is at least one notch better than those availed from
the private money leaders.

The pawnshops, to be sure, are adequately regulated by the

government. The private money lenders, however, which consist much of
the unorganized sector of the Thai financial system, are outside any
official supervision. It is generally known that such financial dealings
were carried at an excessive cost to the consumer and with little, if any,
protection to him. Much of it has depended on the liberal use of postdated cheques. It used to be that to issue a bad cheque was a criminal
offence until August this year when the law was revised. The
proponents of the law argued that to obtain credit information was next to
impossible and only a grave penalty would secure the creditor. On the
other hand, those who supported its revision argued that reckless granting

of consumer credit resulted from this very implication and that it did
not help in the proper development of credit structure in the country.

When Commercial Credit Corporation (Thailand) Ltd.,

otherwise known as CCC, was formed in 1964, it marked the birth in
Thailand of a true consumer finance company with the prime objective
of serving the consumers needs. In a way, it could also be said that it
started the finance company era. For just within a few years from then,
finance companies have literally mushroomed.

Finance companies have flourished since. Ostensibly they

have offered services which the commercial banks have considered
outside their regulated sphere such as financing hirepurchase sales of
durable consumer goods. By the same token, they have carried on certain
banking operations such as accepting funds from the public. Since public
welfare and safety or as we would like to refer to as consumer
protection were now at issue, the government finally passed the Finance
Company Law. Henceforth finance companies would be regulated as
from September 21, 1972.

One immediate good effect of these regulations is that it

will enhance the consumers confidence in finance companies. He would
now perhaps be more acceptable to such basic credit practices as filling
up credit application forms, signing contractual agreements, receiving
payment notices and, hopefully, be more conscious of his credit rating.

Slowly but surely, a gradual shift to utilization of consumer finance

companies is deemed inevitable.

As for the retailer, he is quick to admit that the continuing

impact of consumer credit has shown favorably in his sales book. A
doubling of volume between 1960 and 1970 were reported by the retailers
we sampled. Much was attributed in the introduction of installment
credit. Consumer credit has thus served as a potent marketing tool for the
creation and building up of demand and penetrating into the markets.

Meanwhile the pressures of competition have led to

granting longer credit terms, and lower down payments.

In the

automobile hire purchase market, 15% down payment, where it used to

be 35%, is not uncommon. Thirty-six months term has become standard
while the precarious 48-months term is believed forthcoming. In the
appliance business, an advanced payment of the first monthly installment
serves as down payment.

While selling terms have become more liberal, yet the

consumers lack of exposure to standardized credit procedures have
prevailed. The gap widens.

Much can be done. In the direction, effects towards the

upgrading of the credit profession have been started. We suggested last

year through the Thailand Management Association that the formation of

a professional association to be called the Association of the Credit
Managers in Thailand would be one way to achieve this goal. It is
gratifying to note that the TMA has already put this into action. Within
its framework, it is hoped that a fluid interchange of credit information
can be practiced in a prudent and discreet manner.

We believe that with passing of the Finance Company

Regulations, consumers confidence in finance companies will increase;
as much as it will lead to the development of standardized financing
procedures.

The needs of the consumers are very many, while their

financial resources are few and limited. Those of us who are directly
involved in the granting of consumer credit are trying to bridge that gap
between needs and means. To accelerate this process, we in the business
must play a significant role in settling the standards so that he the
consumer is not only served but protected as well.

Consumers rejoice as interest rate drops below 9% for the first time in
over 30 years
At the conclusion of todays Monetary Policy Committee meeting,
Reserve Bank Governor, Gill Marcus, announced that the prime lending

rate would drop by a further 50 basis points, bringing the rate down to
just 8,5%.
This is a rate cut that many thought was unlikely and one which has not
been seen in the last 39 years, according to says Adrian Goslett, CEO of
RE/MAX of Southern Africa.
The record low rate coupled with the higher percentage of bond finance
being approved will continue to stimulate the improved property sales
over the past few quarters. Since the reduction of the rate to 9% in
November 2010, many consumers have been able to reduce their
household debt and show more disposable income at the end of the
month.
This has resulted in more first-time buyers able to enter the market than
before, due to them being able to show affordability and obtain bigger
bonds. The increased affordability levels are driving up demand in the
property sector, which in turn will continue to have an impact on property
pricing in the future.
Traditionally the South African property market reacts quite slowly to a
rate cut or increase, so the decrease in the interest rate will definitely spur
consumer confidence in the months ahead and will certainly give
prospective property buyers something to smile about.
Consumer Finance Company Rebrands
Consumer Finance Company (CFC), the leading provider of affordable
credit to households and groups in the country, has unveiled a new
corporate logo in line with its bid to increase its footprint in Ghana.
The new CFC logo, an Adinkra symbol known as Sidie or Nserewa,
which is the local name for cowries, comes in appealing colours of
magenta and cyan with the name of the company boldly written.

At a colourful ceremony in Accra to reveal the new logo, Patricia Afriyie

Boateng, Marketing Manager of CFC, said the Nserewa symbol stands
for wealth, affluence, abundance and sanctity.
We, at CFC, aim to make the working class wealthy, with abundance of
lifes little essentials so that they can have peace of mind in going about
their daily affairs.
The colours of cyan and magenta, she said, were chosen to give the new
logo the ability to appeal and attract diverse workers and professionals in
the country.
Managing Director, Justice Boahene, said 22,000 workers across the
country had benefited from credit in excess of GH30 million.
He noted, This year we plan to almost double this amount by granting
additional GH25 million to more workers in the country.
He noted that CFC commenced business in 2007 after it was incorporated
under the Companies Code on June 8, 2006, stressing that the firm was
ably backed by the Social Security and National Insurance Trust (SSNIT)
and a Mauritius-based personal credit provider, Bay Port ML Group.
CFC has since its inception been providing personal credit to the workers
in the formal sector who are unable to access credit from the traditional
financial institutions.
On a high purchase basis, he mentioned, the company started providing
household furniture and appliances to the formally employed to help
them meet their needs.
In August 2010, the company was granted license to operate as a finance
house to extend its services and undertake a wide range of activities
including cash loans to individuals and operators of Small and Mediumscale Enterprises (SMEs).

Theodore K Gyau, Board Chairman of the company, stated that access to

credit plays a fundamental role in the socio-economic development of a
nation.
However these mainstream banks have their limitations, he said, It is
therefore essential for finance houses and other non-bank financial
institutions such as the CFC to bridge the gap, especially in the area of
personal and SME financing.
Fiifi Kwetey, a Deputy Finance Minister, who was the guest of hounor at
the event, urged CFC to aspire to extend their services to workers in the
informal sector and comply with the laws per the terms of their license.

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