CONTROLLING CREDIT

Sun (Auckland), Volume IV, Issue 1082, 20 September 1930, Page 11

CONTROLLING CREDIT

CONSUMERS PAY FOR BANKRUPTCIES STOPPING THE LEAK “The man in the street fails to realise that he pays for dishonest or badly-managed businesses. It is not the bankrupt or the assignee who pays, tl is the honest buyer and seller who pay with the money that is collected from them as the honest consumer and user of goods. Writing in regard to control of credit in New Zealand, Mr. A. J. Hutchinson, of the New Zealand Creditmen’s Association, draws attention to the number of bankruptcies ancl assignments for the first seven months of the year. In the North Island there were 290 bankruptcies, compared with J 269 in 1929, and 84 assignments, compared with 80 for the same period the previous year. The South Island figures are 108 bankruptcies for 1930, against 132 in 1929 and 37 assignments compared with 25 the previous year. In both islands bankl'uptcies decreased by three and assignments increased by 16. Tho above statement is, at the present moment, interesting reading, to which it is well worth while to draw attention, writes Mr. Hutchinson. Unfortunately, these figure facts on which depends so much, and which have a very direct interest for every citizen, are usually placed in small type on the commercial page, whereas, in my opinion, they should appear in big, bold type with striking headlines on a news page. Every ‘reader’s attention should be drawn to them, not only that of those directly interested who have suffered a direct loss. SCRAMBLE FOR TRADE Today credit has been widely extended. There was a time when credit was only extended on personal knowledge of the character of the individual or firm and its ability to pay. For some years, in the scramble for business and in the effort to create turnover, credit has been extended to many who do not honour it. The above returns are the direct result. Those who do honour it and meet the credit obligations a.s debts of honour pay for it. In other words, the consumer -■pays.

If any business man will take the trouble to study the figure facts disclosed, two things will at once be forced on his attention. First, the considerable increase in bankruptcy in tho North Island and the increase in assignment in the South. At first it will be taken as just another indication of the trade depression which, undoubtedly, has a considerable bearing on the state of affairs disclosed, but it is only one of several reasons. *

For a number of years credit in the North Island in particular was extended beyond reasonable limit and without any real effort being made to ascertain the ability of those to whom it was extended to meet their credit obligations. Business was extending faster in the North than the South Island, more particularly so in the Auckland Trovince, and the readiness with which credit was extended by manufacturers, wholesalers and importers to the retailers had the natural effect of inducing the retailer to extend credit terms to the consumer, with the result that enormous book debts were derived. The wholesalers and manufacturers, pressed by the banks, endeavoured to collect from the retailer, who in turn endeavoured to collect from the consumer or individual, who could not or would not pay up, with the result that it was found absolutely necessary to curtail the extension of credit to those who do not honour it and to extend it to those who did.

Here a difficulty at once presented itself. It was almost impossible for the individual trader to secure reliable credit information. Trade had extended to> such an enormous extent, businesses were so interlocked that, in spite of trade organisations for the protection, of certain classifications of trade, it was found impossible to induce the retai 1 — to guard against bad debts. Compewjion was keen and book debts wero counted as sales, the result of this unsatisfactory state being that the formation of a co-operative creditmen’s association in Auckland, known as the National Creditmen’s Association, v. as inaugurated.

PROTECTING HONEST BUYERS The aim and object of this association is to extend credit to the utmost limits to those who honour it. The movement has been most successful. A very considerable extension of credit has taken place, the association membership has grown enormously, and a determined effort is being made to make the granting of credit safe and to rid the retailer, -wholesaler and manufacturer of the competition of the unfair trader, who fails to protect the credit he gives or honour the credit obligations entered into by him. One of the direct results is disclosed by these figure facts. Slowly but surely credit is being controlled. Undoubtedly, in all-classes of trade, the extension of hire purchase to a vast variety of goods accentuated the necessity for the formation of a Creditmen’s Association. It should be a matter of great satisfaction to the Government and all citizens that the “credit honour” of the commercial community is being given serious attention. It is only fair to say that those responsible for the hire purchase extension of credit are cooperating with both wholesale and retail open credit firms. The casli buyer and the honest open credit buyer, likewise the person taking advantage of the hire purchase system, are being protected. The association is doing an immense service for the traders of all classes. It is enabling them to extend credit on sound lines. Sooner or later, within a reasonable time, the credit standing: of all retailers will be known, and it will be possible to curtail bankruptcies or bad debts. The reason for the increase of assignments in the South is undoubtedly co-operation among traders and a realisation that it is better for all concerned to stop the leak at the earliest possible moment. One great benefit that has become very apparent is that tho credit retailer is being protected against the unfair competition of the 2s in the pound trader. Year by year the credit position is being improved. Naturally during the clearing-up process returns of this nature will be inclined to show an increase. Cooperation. exchange of information are, once again, showing the soundness of the principle. The merchant who withholds good or bad credit information is an unfair trader. Sooner or later he will discover this fact for himself. METAL PRICES LONDON, Thursday. (Quotations on September 15 in parentheses). Copper.—Spot. £46 3s 15d (£47 0s 7^d): three months, £46 4s 45d (£47 18s 9d). Electrolytic Copper.—Spot, £49 (£50); three months, £sl (£sl 10s). Wire Bars.— £sl (£sl 10s). Lead.—Spot,' £l7 12s 6d (£lB 3s 9cf) ; three months, £l7 10s (£lB 2s 6d). Spelter.—Spot, £ls ISs 9d (£ls ISs 9d); three months, £l6 2s 6d (£l6 7s 6d). Tin.—Spot, £134 Is 3d (£133 18s 9d); three months, £135 13s 9d (£135 18s 9d); three months, £135 13s 9d (£135 8s 9d). Silver.—Standard, 17d (16 13-16 d). an oz; line, 18 3~Sd (18 l-8d).