ises to pay reasonable attorney's fees in said action to be fixed by the Court. IN WITNESS WHEREOF, the parties hereto have executed this conditional sale contract the day and year first above written.

Per..

THE A. B. C. COMPANY

In nationally operating installment houses it is the custom to secure, record, and file a chattel mortgage on the purchase. This method is probably found most expedient for nationally operating business because of the greater uniformity offered under chattel mortgage procedure and protection.

Collecting from the Installment Buyer.-The collection manager of an installment house must be a most convincing salesman. To be sure, he holds in his possession a lien upon the property for which he is trying to secure payment but he has no desire for its repossession. It is his duty to resell that particular commodity to the customer who has already enjoyed its possession, to awaken interest and pride in possession in such a manner that future payments may come regularly and promptly.

The general procedure in installment collections is essentially that of other collections with varying emphasis upon individual problems. The installment collector must not only continually resell his goods; he must watch installment payments on account, must be alert to recognize any change in the credit standing of the debtor or any attempt on his part to defraud, must be able to understand and deal wisely with requests for time extension on payments or complaints of dissatisfaction of the goods.

The routine of collection procedure varies little from that of other collection departments-the three or four letters of varying degrees of encouragement, interest or severity, warning the customer that his payment is past due; the handling

of special adjustment cases and extension requests; the legal pursuit of the difficult debtor; and the last resort of securing repossession of the purchase. It can be readily understood that there is a great need for tactful, sincere letters of proved salesmanship qualities to urge the customer to pay and yet increase the desire for possession. Of varying degrees of usefulness, dependent upon the case at hand, are the telephone, telegram, registered letters, letters from the house collection agency, from the house attorney, drafts, and when all else fails, threats of and recourse to repossession.

REFERENCES

Griffin, Bryant W. Installment Sales and Collections.

CHAPTER XXVIII

DISTINCTIVE FUNDAMENTALS OF BANK
CREDIT

The Bank and the Credit Relation. The average commercial bank comes in contact with credit transactions through its two functions of (1) discount, or furnishing funds to its customers through loans, and (2) deposit, or the securing of funds to supplement its own capital for the use of its customers.

Credit is the principal thing which the bank has for sale. The customer buys credit, or purchasing power in the present, and promises to pay at a definite time in the future the bank's price. The bank's relation to credit is a most vital one.

The Bank Credit Manager. It follows that the functions and problems of the man in charge of the bank's credit operations are very important.

The bank is a public institution and is responsible first of all to its depositors. It must be able to make payments at any time in accordance with their needs. It must arrange its own obligations in such a way that sufficient funds will at all times be available to make payments and supply its depositors with funds. On the other hand, the more money which the bank has, the greater its income or profit, so accordingly, while a bank desires to invest all its funds, it must keep some on hand to meet in legal tender on demand all claims of depositors. This is the "reserve." It insures the immediate payment of obligations. The amount of the reserve is a percentage of the amount of deposits, and is sometimes prescribed by law, although oftener prescribed by experience. A bank which

enjoys the confidence of the community may keep a smaller reserve than one which the community regards as weak.

By state and federal regulation, the various banking institutions are required to keep their funds in a certain degree of liquidity, i.e., they must invest in quick assets-stocks, bonds and commercial paper which may readily be converted into cash. In time of need, the bank may call in loans, and so automatically increase reserve; or it may sell its business paper.

The bank credit man thus finds that in order to fulfill his responsibility to depositors in such a way that his organization may grow and develop in the community, he faces the problems of regulating loans so that a sufficient liquid reserve is available to depositors. In so far as responsibility for loans is given him, he becomes one of the credit "governors" of the community.

When a customer of a bank applies for a loan, the credit man must conduct an investigation of his standing just as the credit manager of a commercial firm must when the same. customer asks for credit from his firm. Moreover, the bank's per cent of profit is so small that it is necessary to take even greater precaution concerning repayment than the business man must do.

The credit investigation sources used are much the same as those employed in the case of commercial credit as, for instance, personal interviews, hand books, mercantile agencies, such as Dun and Bradstreet, statements of assets and liabilities, etc. The bank credit department has some advantages, however, over the commercial credit department in that the bank can easily get a great deal of information from other banks which is likely to be more accurate than if it were being given to a commercial house. This holds true, of course, because credit information is exchanged between banks. From checks and drafts passing through the bank, and from its close touch with mercantile houses, the bank can obtain information

sometimes unobtainable by any other firm, particularly where competition is keen. The bank credit manager also has another source of information which is very important if he can develop it properly. Officers of the bank come in close contact with borrowing customers and if they can be induced to put the results of their conversations in written form and forward them to the credit department, the files kept there can be made much more valuable.

Organization of the Bank Credit Department.-As banks have grown in size and the territory and industries interrelated with these banks have enlarged, it has become necessary to concentrate in a single department the activities connected with loans. The aim of good bank credit department organization is to have available for the loaning officers accurate information carefully analyzed. In some cases the credit manager is also asked to make recommendations on loans and lines of credit. After the information has been secured through the various sources indicated it must be classified so as to be usable with the least possible expenditure of time and effort. The plan of classification will vary with different circumstances. The following plan is typical:

Classification of Information. On the left-hand side are found the agency reports, financial statements and comparative analyses. On the right-hand side, the history sheet appears first, followed by special reports, answers to inquiries on the subject, checkings, clippings and miscellaneous data. When there is a sufficient volume of information, the different groups are indexed. Upon opening the folder, the comparative analysis and history sheets appear first; this is desirable because these sheets properly made up constitute a brief survey of the account. The purpose of the history sheet is to show an account in its relations with the bank and to summarize its