CRA for finance firms doesn't make any sense, trade group chief insists.

WASHINGTON -- Listen to Randy Lively long enough and you may start to believe that finance companies are what makes this country great.

"The great diversity of the consumer credit and financial service industry is one of the basic foundations of our economy," said the new president of the American Financial Services Association.

"It's why we are set apart from the rest of the world in terms of the production of capital, and why the distribution of capital is so widespread in this country -- because common people can create capital through prudent use of the vehicles that are available in the marketplace," he added.

The 59-year-old Mr. Lively, who took the helm of the finance company trade group last month, is concerned now about growing talk in official circles about bringing nonbank financial companies under the same community reinvestment requirements as banks. That notion, he said, is entirely misdirected.

In fact, Mr. Lively thinks that members of his association serve lower-income portions of the marketplace that. banks will not even touch.

The reason is simple, he said, and has to do with the fundamental difference between banks and consumer credit companies. Banks put depositor's funds at risk when making loans, he argued, while finance companies expose their own capital.

"Since we're not bound by using consumer funds in the lending process, we're able to loan to consumers who are in a much higher risk segment than banks can even consider," he said. "That's just not a ballpark that banks have ever been in."

Of course, risk and the cost of acquiring funds in the marketplace coupled with administrative and collection costs require higher interest rates on consumer loans, Mr. Lively said, but the bottom line is that finance companies are providing credit to people who could not get it otherwise.

"We are penetrating down into the marketplace to more necessitous customers who don't have high incomes and still have the need to tap into the capital market and to be able to bootstrap themselves up to the next level," he said.

Mr. Lively's sweeping views of the consumer credit industry aren't just the idle musings of a newcomer to the industry -- they're based on years of experience in consumer finance.

For 22 years, he worked in credit operations for Sears, Roebuck & Co. before being recruited in 1981 by Zale Corp., the national retail jewelry chain, to establish a consumer credit subdivision.

"With the implementation of Truth-in-Lending and all the disclosure issues and everything else that came along, they had to formalize their process, or not extend credit at all," Mr, Lively said.

Mr. Lively moved about inside the Zale corporation under a variety of rifles. He took charge of all staff operations for Zale as executive vice president of administration and worked as chief executive of Bailey, Banks & Biddle, Zale's high-end jewelry store chain.

Not one to sit idle -- Mr. Lively preferred to call his January 1993 retirement a "sabbatical" -- he kept busy with some consulting work for small businesses.

"I was doing principally the kind of thing you always dream about doing when you retire -- working on small entrepreneurial businesses that had kind of outgrown their owners' skill sets," Mr. Lively said.

Yet his consumer credit roots ran deep, and when acquaintances in the industry recommended Mr. Lively as a candidate to succeed Lana R. Batts as head of the trade group, its board gave him a call.

"After due consideration, I thought it would be a great capstone to my career, so here I am," he said.

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