Harrisburg, Pa., April 5 — Bankers should discourage dealers who advertise the loosest credit terms as a come-on and then surround the prospective buyer with all kinds of restrictions.
This was the advise given by Walter B. French, deputy manager in charge of the Consumer Credit Committee of the American Bankers Association, to bankers attending the Pennsylvania Bankers Association's one-day Consumer Credit Conference at the Penn-Harris hotel here.
Referring particularly to the no-down-payment and X-months-to-pay type of advertising, Mr. French said: "No lender, be it a department store, sales finance company, or bank, could long stay in business if it had on its books only the type of credit advertised in the papers every day."
Stating that there were over 13,000 banks engaged in various forms of installment lending, he expressed the opinion that "these banks in particular have an added responsibility to the installment credit field. If in their commercial loan portfolios they have paper from others also engaged in installment lending, it is their responsibility to investigate the terms on which merchandise is sold or the terms on which credit is extended. It is their duty to see that advertising is honest and that they do not become a party to a dishonest operation by supplying money and credit wholesale or indirectly. Where consumer paper is bought wholesale from dealers, this is of particular importance, because the bank takes the onus of every unfair or tricky operation when the consumer makes his payment every month at the bank despite the fact that the bank participated in no way in extra charges or benefits in any way because of irregular terms."
Reminding his audience that "the public is becoming better informed in this matter of installment lending," he suggested, "the banks of the country be the leaders in seeing to it that the consumer is advised in just how much a credit transaction is costing him; teach him to ask for full disclosure in cost of financing, and in your own transactions, give him full disclosure of all costs of financing voluntarily. If we educate the people to insist on clean deals, we automatically help our own operations.
"It does little good, however, to operate a department that bends over backwards to be fair to the public in its direct operations and, at the same time, have that same department buy paper from dealers that are known the be guilty of shady practices. It is not going to take the public long to know what its rights are in these matters of finance. You are now its closest advisor. Keep that position of trust by helping it wherever you can.
"Loose credit terms never bothered me very much for the reason that the average consumer who is a good risk won't accept them. He is a pretty sound individual and knows, in advance, how best he can handle a loan. He realizes sometimes better than the seller the advantages of having a fair equity in the merchandise at the time he buys it.
"As for those who actually live up to the loose terms that they advertise and sell goods on that basis, all we can say is that it has been tried many times before. Then comes the day when losses take their toll and the sharp competition folds its tents and steals into the night. The best check on terms is losses. They are far more effective than Regulation W, and in a buyer's market the only one we should tolerate."
