Consumer Credit

Abstract:     
The term “Consumer Credit” is referred to consumers availing banking credit services solely for individual needs without keeping any security, thereby excluding mortgages or loans for business purposes. It had been found that, the expression Consumer Credit has been perceived in various ways under different parts of world.

The most common form of consumer credit are: personal or consumer durable loans, educational loans and vehicle loans. They are classified in US laws as closed end credit since the customers are required to pay off fixed debt amount within a stipulated time and open end credit under which category falls mainly the credit cards like Master Card, Visa apart from exclusive credit cards by the Departmental Stores. The reason for being called so is that customers can make additional purchase and if such amount is not repaid within the ascertained time, the unpaid amount along with interest charges is forwarded to next month. Consumer Credit is well associated with following concepts:

(A) Consumer Credit Sale - A popular practice when the contractor or financier arranges all the credit transactions along with the insurance coverage for the customer.

(B) Consumer Hire and Purchase – These types of credit agreements deal with car or automobile loans for personal use. Only when the debtor (individual) repays the full amount, he can have the right to purchase or buy such.

(C) Consumer Leases - Such form of leases are granted to consumers for period of one year or more where the lessee has the option to purchase the goods if he successfully pays all the installments.

(D) Buy-Back Transactions of Land - New Zealand Credit Contracts and Consumer Finance Act of 2003 covers such wider meaning of consumer credit. Here, the home owners sells their property to the financier for means of raising money but with the right to re-purchase the home at later date.

Consumer Credit‘s essence lies in establishing a sustainable fair banker customer relation. The United Nations Guidelines (as expanded in 1999) emphasize that the consumer’s economic interests like right to information, right to choice or decision making, right not to be exploited by unconscionable rate of interests. Earlier there were common practice of Standard form of Contracts where there was no pre negotiation between banks or financiers and the consumers; and the latter were left with the choice either to accept or leave the contractual obligations. However, with the 21st Century Age of Global Consumerism, the banks are duty bound to stipulate beforehand all the essentials like-the rate of interests involved, penalty for default, etc.

The present doctrinal based research paper emphasising on its Hypothesis - In present Scenario, there is urgent need to introduce an efficacious uniform consumer credit law in India for facilitating transparency and fairness in the Banker-customer mutual relationship, has formulated following Research Objectives for systematic study:

(1) Drawing the economics approach in studying consumer credit transactions.

(2) Analyzing the negative outcome of banking credit services.

(3) Depicting the modern-day significance of consumer credit legislations in Western Countries like- US and UK Vis-a- Vis Indian consumer credit legislations along with role attributed to legal enforcement bodies in cases of banking deficiency of services.

Number of Pages in PDF File: 26

Keywords: consumer credit, market economics, bankruptcy, credit cards

working papers series