What is a fair trading?

In many fields of trade today the customer enquires the loan of money of finance goods purchased and must- obtain this money from a bank or finance house of some sort.

All such loans of money are controlled by the Consumer Credit Act 1974, which set up an office of Fair, Trading under a Director General of Fair Trading whose duty it is to keep such arrangements under constant review. Before looking at his duties some discussion of the place of consumer credit in the economy is desirable.

We live in a mass-production society where the production of goods is arranged in such a way that very large outputs can be achieved These can only be disposed of to consumers if payment is arranged out of income, on some sort of installment method. At first this was held to verge come, on some sort of installment method. At first this was held to verge on immorality, because the idea of the poorer classes enjoying the use of expensive durable consumer goods which had not been paid for was repugnant to those who advocated thrift as the great virtue.

Gradually this idea has been eroded away; partly by a general redistribution of income which has increased taxation for the rich; partly by inflation which has made thrift less attractive, but more by the discovery that poverty breeds social unrest, and that in the management of general prosperity thrift is positively harmful.

To keep factories busy and men and women employed we need to spend, not save. Hire purchase has therefore become a great boon to the economy, but it is worth listing some of the difficulties of consumer credit, so that we can see why controls are necessary.

(i) Aggressive businessmen can easily persuade unsophisticated people to purchase goods which they do not really require and cannot afford. Canvassing for business off trade perishes, i.e. doorstep sales, now requires a special licence.

(ii) Rates of interest in hire purchase tend to be a little higher than in other fields, because of the speculative nature of the business, i.e. there are many bad debts. However, because of the doubling-up effect, the true rate of hire-purchase interest in much greater than at first appears. Special control of this aspect is being developed under two headings: the total charge for credit and the annual percentage rate.

(iii) In signing a legal agreement to purchase, the ordinary householder is committed to a contract which is perhaps not fully understood and against the family’s best interests.

(iv) Since property is placed in the possession of people who do not possibility exists that unsuspecting third parties might be misled into buying from the hirer goods that the hirer has no right to sell. Some protection of the innocent private buyer is desirable.

(v) If goods are to be delivered without any payment being necessary, poor people will easily be tempted to order than they can afford. Government policy, except in times of severe unemployment, when the economy needs every possible encouragement, is therefore directed to ensure reasonable deposits.

Consumer credit arrangements are a mixed blessing. They confer great advantages on the purchaser, the retailer, the financier and the manufacturer, but are upon to abuse by the sophisticated and legally advised, so that the consumer requires protection become of his relatively vulnerably condition when surrounded by astute and aggressive salesmen. For this reason statutory control of hire purchase has existed in Britain since 1938 a major Hire Purchase. As the various sections of the Consumer Credit Act 1974 are implemented by Orders, new regulations will be introduced.