United States of America
Federal Trade Commission
Compiled by M. Greg Braswell y Elizabeth Chernow
U.S. Federal Trade Commission
Consumer Credit Law & Practice in the U.S.1
1. Introduction
Consumer credit is an important element of the United States economy. A
consumer’s ability to borrow money easily allows a well-managed economy to function
more efficiently and stimulates economic growth. This presentation will discuss some of
the features of the U.S. consumer credit system, as well as some of the laws which
protect consumers in the market for credit.
2. What is Consumer Credit?
A consumer credit system allows consumers to borrow money or incur debt, and
to defer repayment of that money over time. Having credit enables consumers to buy
goods or assets without having to pay for them in cash at the time of purchase. Having
a good credit record means that a person has an established history of paying back
100% of his/her debts on time. A person with good credit will be able to borrow money
more easily in the future, and will be able to borrow money at better terms. On the other
hand, having a bad credit record means that a person has had difficulty in the past with
paying back all of the money he/she owes, or with making payments on time. Lenders
are less likely to loan more money to a person with bad credit, making it difficult for that
person to buy a car, a house, or obtain a credit card. Access to credit is a valuable
benefit, which a person should protect and manage wisely.
3. History of Credit Bureaus & Credit Reporting
Until World War II, most consumer credit was offered by retailers directly to
consumers. A retailer’s credit relationships were often based on personal familiarity with
its customers. There were many small, regional credit rating bureaus because
consumers were not as mobile, and there was less of a need for a nationwide rating
system.
U.S. credit reporting bureaus started as associations of retailers who shared th