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and other experience of the inquiring house. The top and bottom lines of this sheet contain the words "We give you below Our Experience with" and "Retain This For Your Files. Give your experience on attached slip," respectively; whereas the

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top and bottom lines of the duplicate sheet contain the words "Kindly give us below your experience with," and "Return This to Us," respectively. In all other respects the two sheets are identical (see Fig. 21).

Still further to encourage reciprocity in the exchange of ledger

experience other than through the convenience afforded by the form, and at the same time to prevent abuse of the system, the National Association of Credit Men established the following rules or obligations, most of which are printed on the back of the form used for direct interchange, for the observance of the inquiring department and the department inquired of. These rules may be arranged as follows:

GENERAL RULES TO BE OBSERVED BY THE INQUIRING DEPARTMENT

1. A stamped addressed envelope must accompany the inquiry. 2. Inquiry should be made only when necessary, for indiscriminate and promiscuous use of this system inevitably leads. to harm because of the unnecessary labor it involves.

3. The inquirer should be reasonably certain that the credit department inquired of possesses information bearing upon the subject of the inquiry.

4. Inquiries must be limited to orders on hand or to actual ledger accounts. Much complaint against the interchange system is stirred up when inquiries are made with a view to sizing up a prospective customer and determining the desirability of soliciting his trade, unless that fact is plainly set forth at the time the inquiry is made.

5. The inquirer must state accurately the reason for making the inquiry, whether it is made on a first order, a past-due account, and the like, and must state the amount involved.

6. To encourage reciprocity in the interchange of credit experience, it is but fair for the inquiring department to give a complete statement of its previous experience with the subject, unless it be a first order, which fact must be so stated.

RULES TO BE OBSERVED BY THE RECEIVER OF AN INQUIRY

1. All inquiries should be answered as quickly as possible, preferably on the day on which received.

2. The duty of answering inquiries should devolve upon the credit manager himself, or on a responsible and qualified assistant, who is able to add to the ledger experience on hand other valuable facts known to the department inquired of.

3. The receiving department must give its exact experience so essential to the maintenance of this important institution.

4. Finally, the National Association of Credit Men urges the receiver of an inquiry to correct abuses of the interchange system

on the part of the maker, thereby assuring progress and wholehearted cooperation.

Similar rules of ethics have been prepared by the Robert Morris Associates for the guidance of bankers and credit managers. These rules apply especially when letters take the place of the forms above illustrated, and may be divided into three parts, as follows:

RULE URGING THE IMPORTANCE OF TRUSTWORTHINESS

The first and fundamental principle is the sacredness of credit information. Any betrayal of confidence on the part of receivers of information brands them unworthy of trust and consideration.

GENERAL RULES APPLYING TO THE INQUIRER

1. Information should be asked for only when actually needed, for indiscriminate use of the system imposes unnecessary burdens. 2. The object and scope of the inquiry must be conspicuously indicated in every letter of inquiry.

3. If several inquiries on the same name are forwarded simultaneously to institutions in the same city, this fact should be plainly stated.

4. In using form letters, it is essential that they bear the signature of the inquirer in order to establish responsibility for the facts stated therein.

5. Inquirers must never seek information from their competitors with a view to determining the desirability of soliciting the accounts investigated, unless the object is frankly stated.

GENERAL RULES GOVERNING THE DEPARTMENT INQUIRED OF

1. The recipient of an inquiry should carefully read each special letter of inquiry in order to enable him to answer the questions contained therein specifically.

2. In answering inquiries it is essential that all the facts available bearing on the subject under review be disclosed, if a full understanding of the case is to be gained.

3. No sources of information should be disclosed without permission in replying to inquiries.

Objections to Direct Interchange.-Notwithstanding the advantages gained through close contact between the members of the Credit Men's Association which the direct interchange system induces, nevertheless many significant objections are to

be found. Foremost among them is the tremendous multiplicity of investigations inevitably resulting therefrom. Considerable time, for both givers and receivers of information, would be required were this widely adopted as a means of securing ledger experience. For example, were a grocery name being investigated, it would be safe to assume that each of a dozen or more houses dealing with the subject would inquire of each of the others as to his experience, involving in this instance no less than 11 replies concerning a single name. The system, therefore, is both burdensome and inconvenient, except when used sparingly to supplement information secured from other sources. In the second place, numerous inquiries concerning a risk, particularly when in weak financial condition, may arouse undue suspicion in the minds of creditors inquired of, to the detriment of the subject under investigation, and ultimately injurious to themselves. In the third place, the system lends itself to abuse. No expense being involved in the matter, many unscrupulous credit managers are likely to take advantage of the situation and make indiscriminate investigations not only of existing accounts, but also of prospective customers.

SELECTED REFERENCES

BREWSTER, S. F.: "Legal Aspects of Credit," Pt. IV, chap. 17.

ETTINGER, R. P., and GOLIEB, D. E.: "Credits and Collections," pp. 142-150. PRUDDEN, R. F.: "The Bank Credit Investigator," chaps. 9, 10, and 11.

CHAPTER X

INTERCHANGE OF LEDGER EXPERIENCE

THROUGH INTERMEDIARIES

To obviate the difficulties incident to the direct exchange of ledger experience among credit grantors, credit interchange bureaus have been established. The development of these intermediaries was so tremendous, particularly during the decade beginning with 1910, that many organizations are now to be found the sole object of which is to collect quickly and with a minimum of effort complete ledger figures and make them conveniently available to their respective members or subscribers. Thus not less than three modes of securing ledger experience through some sort of a central bureau are at present at the disposal of the alert credit manager. These means are as follows:

1. The Credit Clearing House, the National Credit Office, and others.

2. The Credit Interchange Bureaus maintained by local associations of credit men.

3. Trade credit bureaus, reporting on a single line of trade or a limited number of allied trades.

THE CREDIT CLEARING HOUSE

One of the institutions clearing information on so extensive a scale as to embrace the entire nation is, without doubt, the Credit Clearing House. Established in 1888, the organization has gradually though consistently grown to such dimensions as to constitute at present the largest of the collection agencies in the country, as well as one of the most effective. In addition, it has for years served as a center for the collection and distribution of a very extensive mass of credit information.

Method of Operation.-Each member is required to register with the agency the names of his customers and is under obligation to contribute his experience whenever one of his accounts

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