The wide use of credit can lead to abuses. Some people take out more credit than they can repay. Then they refuse to pay back what they have borrowed. When merchants get stuck with unpaid balances, they pass along that cost to other customers in the form of higher prices. Thus, we all pay for people who overuse credit. Is it ethical for peopleto overextend their credit, knowing or suspecting that they will not be able to repay it? Give at least three (3) tips to prevent overextending individual's credit.

social invention of consumer credit has expanded greatly during the past 20

years with resulting abuses such as personal overextension of credit or lenders

taking an unfair advantage of less knowledgeable consumers. With the new types of credit and great amounts of money involved, it is essential for consumers.

distributors, and educators to understand the role of consumer credit in our.

economy. The viewpoints and comments of 35 attorneys. family finance specialists.

educators, government officials, business representatives, home economists, and

experts in consumer credit were presented at a national workshop attended by 200

home economics leaders. Presentations are classified according to: (1) Consumer

Credit in the United States Economy. (2) Problem Users of Credit. (3) Guidelines for

Using Credit. (4) Teaching Consumer Credit in Money Management.. and (5) Overview. A workbook on consumer credit, a bibliography. charts and tables*, a roster of participants and a list of regional and state follow-up meetings are included in the

document. (FP)

Explanation:

Credit is one of many social inventions widely

used by families, by retailers, by financial institu-

tions, and by many others involved with distribut-

ing_goods and services to the ultimate consumer.

The expansion in the use of consumer credit by

American families during the past 20 years has

been .of great interest and some concern to home

economists as well as to others in education; busi-

ness, and finance.

We recognize changes taking place in society

which have influenced consumers' attitudes toward

credit use. As a result,_some persons are over-

extending their use of credit as evidenced by the

increasing numbers of people going through bank-,

ruptcy proceedings or having wages garnisheed or

both. On the other hand, some lenders may be

taking unfair advantage of less knowledgeable

consumers.

During the early 1940's, concern was expresscd

that some families were using too much credit

and using it unwisely. At that time consumer

credit outstanding was about 8 billion dollars, but

consumer incomes were also at low levels. With

the advent of World War II, saving was promoted.

Few consumer durables were available, and the

use of consumer credit was reduced. By the end

of 1945, total cash loans and installment credit

for family living amounted to less than 6 billion

dollars.

Since that time, installment credit as a means

for paying for automobiles, consumer durables,

and services such as vacations has expanded rap-

idly. New types of credit such as multi-purpose

credit cards and revolving credit have been of-

fered. The number of users of consumer credit

has grown just as rapidly. Now consumer credit

outstanding is 96 billion dollars.

Overextension describes a loan or extension of credit that is larger than what the borrower can repay. Overextensions can require the borrower to consolidate his or her debts into a single loan. Consumers who must use more than a third of their net income to repay debt other than their mortgage are generally considered to be overextended.

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