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2009 | Buch | 2. Auflage

Consumer Credit Fundamentals

verfasst von: Steven Finlay

Verlag: Palgrave Macmillan UK

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Despite the huge expansion in consumer credit in the last 25 years there are very few texts describing the operation of consumer credit markets. Consumer Credit Fundamentals is the first book to provide a broad cross-disciplinary introduction to the subject. It covers the history of credit, the types of consumer credit available, how credit is granted and managed, the legal framework within which commercial lenders must operate, as well as consumer and ethical issues. A complete, well-rounded and practical introduction to consumer credit.

Inhaltsverzeichnis

Frontmatter
1. Introduction
Abstract
This book provides an introduction to a range of topics concerning consumer credit. The objective is to describe the nature of credit-debt relationships and the way in which commercial lending institutions manage the credit-debt relationships they have with their customers. These relationships are then placed within a historical, ethical and legal context.
Steven Finlay
2. Products and Providers
Abstract
There are many forms of credit consumers can obtain and use, and many types of organization that provide credit. The goal in this chapter is to introduce each type of credit and describe the nature and objectives of credit providers. The chapter begins with a discussion of the features that can be used to define each type of consumer credit. The central part of the chapter then presents the different types of credit available in the market today, such as credit cards, mortgages and pawn loans, in terms of these features. The final part of the chapter discusses the institutions that provide consumer credit and the characteristics that differentiate one type of lending institution from another.
Steven Finlay
3. The History of Credit
Abstract
It is easy to think of credit as a modern phenomena based around a culture of mortgages, credit cards, personal loans and so on, but credit granting has existed since prehistoric times. It ranks alongside prostitution and brewing as one of the ‘oldest professions’ and over the ages has probably generated as much controversy and debate as either. It is easy to imagine the concept of ‘I’ll pay you tomorrow!’ developing almost as soon as barter and trade evolved and it is likely that credit in a rudimentary form existed prior to the introduction of formal monetary systems. It has even been suggested that an understanding of debt and obligation may have been one factor that enabled early human societies to flourish (Horan et al. 2005). People began helping each other to hunt, lending tools and food to one another, caring for one another when they were sick and so on. These tasks were undertaken on the understanding that they created an obligation which would be reciprocated at some time in the future. This meant people were better able to overcome short term hardship, leading to greater survival rates and an increased population. It is also probable that one factor in the development of currency was a need to express debt in a standardized form (Einzig 1966, pp.362–6). The idea of lending on interest or usury1 as it was traditionally known has origins of a similar age. Loans would be granted in the form of grain or livestock which had a propensity to reproduce and increase over time, and the lender naturally came to expect some share of the increase when the loan was repaid.
Steven Finlay
4. Ethics in Lending
Abstract
Ethics is the study of right and wrong. It is concerned with the decisions people make and whether or not these constitute ‘good’ or ‘bad’ behaviour. The chapter begins with a brief discussion as to why ethics is relevant to the operation of commercially-oriented financial institutions and briefly introduces ethics as a field of study. The discussion then turns to consider some of the ethical questions that have been raised about the nature of credit-debt relationships.
Steven Finlay
5. Legislation and Consumer Rights
Abstract
As discussed in Chapters 3 and 4, debt has caused many problems over the ages, and there have been many ethical concerns raised over the terms and conditions under which credit agreements operate. It is therefore, not surprising that consumer credit is subject to extensive legislation in many regions throughout the world. In this chapter the main UK and US legislation relating to consumer credit is described. Other jurisdictions have their own laws relating to consumer credit, but laws in many regions have been drafted to address similar issues to those addressed by US/UK law.
Steven Finlay
6. The Economics of Credit and its Marketing
Abstract
At its simplest economics can be described as the science of production and consumption. It is concerned with the supply and demand of goods and services, how these goods are produced, priced, sold and utilized, and the interactions and interdependencies that arise between different goods and services. Economics is a hugely diverse subject covering the financial management of nation states, companies, households and a host of other areas, and it can sometimes be unclear where economics as a subject ends and other disciplines begin, or even whether these subjects are merely sub-specialisms within the wider economics field.
Steven Finlay
7. Credit Granting Decisions
Abstract
In an ideal world, every borrower would repay their debts on time and lenders would earn a living from the interest and other income earned over the lifetime of the relationship. In the real world however, there is an inherent risk that a borrower will not repay the credit advanced to them. This could be for any one of a number of reasons, ranging from poor financial management or loss of employment, to family breakdown or death. A credit business will only be profitable if the return from those that repay their debts exceeds the losses where default has occurred. Therefore, when someone applies for credit, a lender needs to be able evaluate their creditworthiness, and only lend to them if there is a good chance that they will repay the loan.
Steven Finlay
8. Credit Reference Agencies
Abstract
Since the earliest times lenders have realized that if an individual had a poor credit history with one lender, then there was a good chance they would default on loans taken out with another. The converse was also true. Those with a good history of repayment tended to be good customers again in the future. It therefore made sense for lenders to follow a ‘you show me yours and I’ll show you mine’ policy of sharing information about the repayment behaviour of their customers. In many markets the idea of sharing information with competitors is considered a rather unwise thing to do. However, the accepted wisdom within the credit industry is that the benefits of obtaining customer information from many other lenders far outweighs any loss that might result from sharing information about your own.
Steven Finlay
9. Credit Management
Abstract
Credit management is about the day-to-day activities required to run a modern consumer credit business. In this chapter the activities of the different business functions responsible for credit management, and the systems and processes they employ to manage customer relationships, are introduced within the context of the credit lifecycle. The credit lifecycle represents the different stages in the life of a credit product, as shown in Figure 9.1.
Steven Finlay
Backmatter
Metadaten
Titel
Consumer Credit Fundamentals
verfasst von
Steven Finlay
Copyright-Jahr
2009
Verlag
Palgrave Macmillan UK
Electronic ISBN
978-0-230-23279-2
Print ISBN
978-1-349-30567-4
DOI
https://doi.org/10.1057/9780230232792