Part V.-Credit Problems in Special Fields

CHAPTER XXVI

SPECIAL FEATURES OF RETAIL CREDIT

Credit for the Ultimate Consumer.-The era of transition in retail service which has led from "cash and carry" to "May we charge it?" has not been bridged without a great deal of spirited controversy. It is doubtful if the proportion of credit transactions to cash transactions will ever be less than it is at the present time in spite of the fact that we read such articles in business magazines as "Love not your charge customer less, but love your cash customer more." In the retail credit chain we find the ultimate consumer functioning as the last link. He it is who uses for the direct satisfaction of his wants that product which has passed successively through productive processes. He it is who illustrates Aristotle's definition of economics when he said, "That science which deals with individual income and expense," for the credit customer is continually attempting to balance his monthly expense with his monthly income.

Retail credit transactions are based on the ultimate purchasing power of the customer. Their success lies, in the last analysis, in the careful granting of credit to the reliable ultimate consumer; in the tactful collection of these creditsthat is, in the scientific credit man. The successful retail credit man is the product of this era of cash to credit transition and has been able, through his own growth and policies, to justify the granting of credit to the retail customer.

The majority of merchants today realize that the extension of careful, scientific credit to their customers tends towards stability and permanency in store sales; facilitates the handling of adjustments and complaints; furnishes the opportunity for a greater personal appeal in advertising; serves as a tangible, statistical means for gaging the trend of store buying; and increases good-will in so far as the credit customer continues to receive courteous treatment and to think of the store as "his" or "her" store.

For the ultimate consumer there exists the ability to fill the immediate need without the immediate payment; a personal relationship with the store resulting from becoming "known" as a customer, more courteous sales and adjustment service and a consequent more perfect understanding of store policies; the probability that, at a future date when peculiar credit is needed, he or more especially she-may be able to receive this credit based primarily on her former record as a good character and credit risk.

The Granting of Retail Credit.-In the dominating importance of the personal interview as a source of credit information is probably found the most distinctive factor relevant to the problem of granting retail credit. "Interviewing the applicant" is the touchstone of retail credit granting. If this is well done, success is achieved. Interviewing the applicant is a matter of systematic investigation, of well-planned blanks, of provision for organization routine and courtesy in opening and handling a large number of accounts. It is a matter of personality analysis, demanding a type of business acumen which brooks no comparison with the analysis of financial statements, or a Dun or Bradstreet rating book, though these may sometimes be necessary. In the words of the leading department store credit men of the country, "two or three of these interviewers who have been with us for the past four or

five years can almost instantly decide whether or not an account is good or bad during that period of time that it takes for the average woman customer to pass from the railing to the interviewer's desk." Experience with thousands of individual cases gives the interviewer what is sometimes termed a "sixth sense," so that the questions on his blank are oftentimes a means by which an impression or decision has been checked, rather than the original basis upon which the decision is made.

The Application. The foundation of all accounts is, of course, the application, and the more thoroughly the application is taken the better prepared will the credit manager be to determine the extent to which credit is to be granted. Interviewing applicants is an individual matter. No rules can be set by means of which the information is to be gathered from each applicant. General conversation may develop more information than direct questioning.

The routine of securing information and the methods of filing such information are determined primarily by department policy. There are, however, certain basic facts which every store must know before granting credit to the retail customer. It seems unimportant, but the efficiency of a credit department can be measured by the exactitude with which names, initials, and places of residence are recorded. Inasmuch as retail credit is personal credit the business address, the business telephone, the name of the firm where the applicant is employed, the length of his service in this and other positions and the length of time he has resided in this community are absolutely necessary. Of like importance is the place where the applicant carries his bank account, the address of this particular bank, taking care to ascertain whether it be a central or branch bank, the kind of account and the exact name in which the account is carried. The customer may desire to pay by check. Here a

banking signature, if different from the crediting signature, should be secured. Knowledge as to whether the applicant is a property owner and the type of his interest in that property also aids in measuring his ultimate paying ability.

The careful credit man should ascertain other facts; the establishments in which the applicant has formerly enjoyed the charging privilege, if any; the approximate age of the applicant; the name of a relative or friend now living in the city, or similar information concerning a former employer. Often such miscellaneous information as, "Sold home in Chicago just prior to leaving for Los Angeles. I am now receiving payments through the Continental Trust Company of that city," aids greatly in the final determinations of credit granting.

Checking the Application.—For purposes of internal administration it is important that the person opening the account have his name indicated on the original application card. If the account has been opened by the wife, it is important to get the name of the husband in order that he may receive a letter giving him knowledge of the fact that an account has been established. It often occurs that two or three members of the family may wish to use the same account and, when this has been authorized by the credit customer, their names should also be included on the blank.

In the granting of retail credit it is of prime importance that the customer understand that bills are rendered and due monthly; that, should any special or emergency credit be desired, this matter must be taken up in person with the credit manager.

With the aid of his peculiarly developed "sixth sense" the successful credit man is able to determine with a fair degree of accuracy whether this new applicant will be a desirable credit risk. However, retail credit can not be entirely a matter of character and identification and the credit man must determine

For this

as far as possible the applicant's capacity to pay. information he checks first the employment, bank and personal records of the applicant either by letter or telephone. If the applicant has stated that she has a charge account in a local store or in another state, it is a comparatively simple matter to secure information concerning her credit standing through the retail central clearance offices.

Credit Limits.-The determination and enforcement of monthly credit limits which a customer may enjoy is a matter of store policy. These limits, however, should be determined at the time of the initial interview with the applicant, if possible, and should be dependent upon the economic status of the individual. In the case of the average salaried person it is a matter of common practice to place the limit as one-fourth of the monthly salary. If it is found that the customer has exceeded her credit limit, the matter is sent to the refer clerk who, having access to collection files and ledger information, refuses or extends the credit, the decision being dependent upon the former credit standing of the individual and the wisdom of her purchasing. At this time a personal interview with the customer is often desirable.

Customer Identification. One of the problems of credit extension which must be solved is that of customer identification "on the floor." In order to protect the customer against fraudulent buying on her account, it is necessary that some means of identification of the customer when giving the charge be perfected. Several systems are in use at the present time, namely, presentation of charge coins or courtesy cards, floor manager identification, or customer signature-none of them fraud proof.

The principle underlying the issuance of charge coins and courtesy cards is fundamentally the same-that each credit