Suppose a charge customer has just moved from one section of the city to another and that he now wishes to open a new grocery account. The grocer to whom he applies for credit immediately puts him self in touch with the secretary of the association in order to learn how the customer has treated his pay ment obligations in the past. If this investigation shows the newcomer to be in arrears, credit will be refused him until the old debts are paid.
13. A unique credit bureau.—In Medicine Hat, Al berta, Canada, a unique retailers' credit association is in operation. The merchants in town} file with the secretary of the association all unpaid accounts ow ing by individual customers. The secretary makes claim upon each debtor for the total of the amounts that he owes to members of the association. As col lection is made, the amount collected is divided among all the accounts pro rata.
In this bureau, records are kept of each charge cus tomer, showing full name, present address, business position, earnings, property, etc.
It is an integral part of this plan that no credit ac count shall be opened with any customer until the approval of the credit bureau has been obtained. The person applying to a merchant for credit is directed to obtain a credit card from the secretary of the bu reau, it being explained to him that under the regula tions which govern the giving of credit by local mer chants, no store is permitted to open a charge account until authorized by the secretary of the bureau.
The plan is said to work very well. It possesses a special value in that it places the customer in im mediate contact with the credit bureau, with the re sult that he becomes duly impressed with the neces sity of paying his local bills promptly if he is to enjoy the privilege of having his purchases charged.
Another feature of this plan is that each member of the association makes a monthly report to the sec retary of the bureau upon the status of each charge customer's account. By means of these reports, it is at all times possible for the credit bureau to ascer tain the total amount owed by each customer. Pay ments on account are reported weekly.
Under this plan, as will be seen, the credit bureau acts as credit man for the entire membership, thereby relieving the local merchants of the burden of in vestigating each applicant for credit. Whether, in the long run this advantage will outweigh the ap parent disadvantage of such impersonal credit rela tions is perhaps too early to say. It is at least con ceivable that the closer and more intimate relations between merchants and customers, which is regarded as one of the chief advantages of carrying charge ac counts will, under the system described, be less marked. So long, however, as every merchant in the
town belongs to the association and is governed by its rules, the advantages or disadvantages will of course be equally divided. But if some merchants should refuse to join the association, they might be able to turn this division of advantages and disad vantages to their own account.
14. Instalment-house credit.—The purchasing of goods on instalment has become popular with a large number of persons. It is chiefly in the furniture and house-furnishing lines that this form of sale has be come extensive, tho the practice is not by any means limited to such goods. Books, jewelry, and clothing are commonly sold on this basis.
At one time the buyer of goods on instalments re garded the instalment house chiefly in the light of a benefactor and friend of the person of small means. This view has now largely passed away—probably as a result of the keen competition that of late years has developed in the instalment house business.
At first glance, it may not appear that instalment credits differ in any material sense from ordinary retail credits, since both involve selling to private in dividuals on a promise of future payment. There are, however, several important points of difference.
In the first place, the instalment house cannot be quite so discriminating as the ordinary retail store in the selection of its credit customers. While a large number of "charge" customers in the city department stores seek credit solely for the sake of convenience, those who seek credit of the instalment house are usu ally such as could not easily buy on any other pay ment terms. Hence, the instalment house credit man must not expect to find in the customers of his house any strong financial basis for credit. If they appear to be honest, industrious and capable of earning a moderate wage, he must as a rule accept them as cus tomers. This apparent disadvantage, however, is compensated for by another factor which is absent in ordinary retail credits, and which therefore consti tutes another point of difference. The instalment house invariably secures itself by means of a lease or a mortgage upon the 'property sold to the custo mer, so that in case payment should not be made ac cording to the terms of the sales contract, the house may repossess itself of the goods sold.