Evolution of Consumer Finance

By: Ryan Dennin

Consumer finance has become a a topic you hear about almost everyday lately due to the result of our current economic recession. It is important to understand that consumer finance, a term that simply means lending money to consumers is something that has not always been as popular as it is today. Consumer finance really took off in the mid 1900's. Banks began to be less willing to lend to people with poor credit and the consumer finance industry began to be built. Many people chose consumer finance companies as opposed to banks as some people didn't want to deal with the pressures of dealing with a bank. The industry really took off in the later 20th century as sub-prime lending became popular. Sub-prime lending, a current event hot topic, is loans to people with less stellar financial credit and really expensive rates. Americans are "consumpion" happy and love to buy vs. save, an some sub-prime lending for things such as automobiles, and homes has really taken off the last decade. Though this is certainly a part of the reason for the current world recession, it is not the only reason. Consumer finance isn't all about home loans either. They also partner with furniture stores, electronic stores, or any retail outlet where consumers could use extra credit to make purchases. These loans typically attract customers with a NO INTEREST promotion, but usually come with very high interest rates. Consumer finance has become a very important and essential sector in the American economy, and one that US consumers are certain to continue to utilize for some time to come.

Sources:
http://en.wikipedia.org/wiki/Consumer_finance
http://www.nytimes.com/2008/02/12/business/12credit.html
http://www.newsweek.com/id/121512