Credit Standard ization

From

Mr. O. H. Spear's address before the Western Retailers

To even the casual observer it is evident that the entire country has gone credit mad. Even in my own town with a population of 15,OOO there are no less than fifteen business houses that sell on the installment plan, and this does not include the retail building material dealers who, by the way, are not entirely free from this menace. Peopi6 are being urged and assisted to buy on the "Have and Save Plah," rather than on the "Save and Have Plan." There are casei where either plan is good but let us get a close up of the situation. One can buy shelter and clothing on the installment plan and likewise practically every variety of equipment for comfort, convenience and pleasure. And as to the quantity of the commodities involved we get some uhderstanding when told that 85/o of the furniture made in this country as well as three fourths of the motor cars are sold on the installment plan. If three fourths there may have been merit in the argument a few years ago of the motor car manufacturers who on being told that sales had reached the peak and must decline, replied, "Oh, no ! those who can afford motor cars are only beginning to buy." No one would argue that the manufacture and sale of motor cars, as well as the manufacturer and sale of furniture, was not a legitimate business. Even more so both are a necessity. But let us go further into this plan of "structural adaptation to envirohmental change." The environmental change is the increase in the desire of people to have what they cannot pay for. The structural adaption involved is in our credit machinery. In other words, a financial instution has been developed to enable the dealer to sell almost any commodity in merchandise for a dollar down and a dollar per week.

The process in brief is to make the sale on weekly payments secured by a lien on the commodity sold, sell the paper to a finance corporation who in turn does business partly on their own and partly on borrowed capital. And so the process goes merrily on pyramiding from one transaction to the next, each hoping the music will not stop while he has the lemon in his possessioh.

The chance for large profits has attracted capital and these modern credit companies are increasing by the score. The largest is eleven years old. Its purchases of installment and other receivables and those of two associated companies total a hundred and seventy five million dollars annually. And how does this affect our own business ? The question is not whether there is too much credit for the good of the credit companies that desire profit, but whether there is too much credit for the good of the installment buyer who desires what he cannot pay for.

The concern here is not about the "structural adaptation," the credit company, unless there be a loss of money. The concern is rather about the "environmehtal change" about the increase in the desire to have what cannot be paid for, and particularly the conc€rn is not so much, lest in paying more than fair cash prices thbre be a loss of money for the installment buyer, but lest there be a loss of character.

It may seem that "loss of character," is a rather large phrase fo rso slight a thing as the effect of buying a phonograph or a suit of clothes or some furniture on the installment plan. Perhaps it is, Let us then say weakening of the moral fiber, the weakening that comes when there is insufficient practice in self denial.

Not alohe to the buying of the above is our credit system over taxed. 'Iake the average man and woman who start out to build a home. Their first thought is to get most anything possible to call their orvn. They are going to be ' so economical and not go too much in debt. Then they go down to see the lumber merchant, if there happens to be one in tovyn and lav their case before him for a nice little five room bungalow like you thought one time you wanted, and possibly started to get it just as they did. But wl,at happens? After spending some time looking at plans the merchant remarks, non' this plan 'ivill probably serve your purpose at the present but how about the future and the children. Thats so, had not thought of that, maybe we should add an extra room and a sleeping porch. Fine, had you thought that you should put in hardwood floors? No, how much extra? Did you say a pipeless furnace for heat? That will do the work but as for dirt, rvell I would advise hot water. That extra of $1,000.00 is added and they have hot water for the rest of their lives making payments. Finish, yet he would advise oak, gum or at least hardwood and so the whole of the extra line is run, until in utter dread and bewilderment they say we rvill take it, glad to see the thing stop. Now up- to this time hot a word as to payment.

The building is started and after sixty days, if the dealer has the courage he asks if it will be convenient for the owner to make a payment only to learn that the loan has not come. After a while the loan does come and the owner finds he lacks several hundred dollars of having enough to pay his material bill, labor of course nrust be paid. Results, he finds himself in possession of a home that cost at least $7,500.00 whereas he expect-ed to invest $4,500.00 which in all probability he should have done. The dealer is forced to take his share of the load in installments or take the place, either of which he cannot afford to do. Do not think this is fiction. Far from it and there are dealers in this audience who could give you even more absurd cases if modesty would permit.

And if there be merit in the query, if u'e are indeed having too much credit for our good-what can be done about it. Such things are discussed each year in our meetings, some make resolves and go home and live up to them for a time and then fall from the wagon. Nothing much can be done about any of the evils that afflict the world, except as each of us does it for himself.

Do not understand me to say that I rvould abolish all kinds of credit and installment payment. Neither do I desire to speak unkindly of the sale of automobile and furniture on payment plans in some cases any more than I woulcl speak in disapproval of the sale of luxuries in homes where the owner can afford them. It has been sttggested that to meet competition in other lines more homes should be sold on the easy payment plan. Of the two I think most anyone rvould agree that in most cases it is better to buy a home than an automobile on the payment plan, but there is a limit for both cases and let us not forget that, "two wrongs do not make a right."

' To stop and reflect for even a moment is to realize that the country to day is just as badly abused with too much credit as there was a limit of the same only a few years ago at the close of the war. The echo of "finance and help the farmer," has hardly died away until we find ourselves at the other extreme of the reaction with not only too much credit but a hazardous era of rvasteful spending.

In my humble opinion there could be nothing better happen to every line of busihess than a sane limiting of credit from bank to manufacturer, wholesaler, retailer and consumer until each and every one is taught the valuable lesson of thrift to the degree of "Save and Flave," rather than "Have and Save."

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