Re: What are consumer finance accounts?[ Edited ]
03-04-2012 01:23 PM - edited 03-04-2012 01:28 PM
"Back in the Day," many consumers, particularly those in rural areas, did not have the ability to credit-shop, so often had to rely on local lendors who often did not offer the best rates and terms. With the advent of internet home banking, personal access to most creditors can be obtained at home, and thus lower risk consumers can now obtain better terms without the need to go to the creditor.
There is a portion of the credit industry that will grant credit to higher risk consumers, obviously in compensation for higher rates and less favorable terms.
As I understand the negative view of such consumer finance companies, when a consumer chooses to use such creditors, it is no longer viewed as a physical necessity, but rather as an indication that they were unable to secure better terms.
Ergo, the viewing of consumer finance companies as an indication of increased consumer credit risk.
What I dont understand is who classfies accounts as CFCs. Obiously, using a small lendor can actually result in lower rates and better terms if the consumer uses them wisely.
One can get a low or zero interest rate loan at Sears, for example, to finance that new refrigerator. While going through a CFC, that does not necessarily indicate a negative consumer risk. So who pegs creditors with such a designation?