Changes in lending laws and stricter penalties for unethical practices have been prominent over the past 10 years in the U.S. Additionally, optimism has been met with harsh reality as the economy as well as financing for equipment has seen their ups and downs. The U.S. is still feeling the effects from one of the most significant periods of setbacks to our country’s financial foundation. And, since water treatment equipment is a relatively expensive purchase for most homeowners and business owners today, the ability to lend and offer financing is critical to a dealer’s success.
Changes in credit card rules
In May 2009, President Barack Obama signed into law new credit card rules, which affect lending, financing and credit status. Below is a brief look at some of the areas that were addressed under the Act, according to the U.S. Senate Committee on Banking, Housing and Urban Affairs:
- Prevents unfair increases in interest rates and changes in terms
- Prohibits exorbitant and unnecessary fees
- Requires fairness in application and timing of card payments
- Protects the rights of financially responsible credit card users
- Provides enhanced disclosures of card terms and conditions
- Strengthens oversight of credit card industry practices
- Ensures adequate safeguards for young people
- Enhanced penalties
- Gift card protections
- Encourages transparency in credit card pricing
- Protects small businesses
- Promotes financial literacy.
Information courtesy of http://banking.senate.gov and complete details can be found at this site.
How important is financing?
The availability of financing continues to be a top concern for our readers. In 2011, Water Technology conducted a survey. One question on the survey addressed the availability of financing. We asked, “Is financing easier to obtain today compared to 12 months ago?” Here were the results:
- Question does not apply – 38 percent
- More difficult to obtain – 32 percent
- Unchanged – 26 percent
- Easier to obtain – 5 percent.
This year, we asked the same question and received these responses:
- Question does not apply – 31 percent
- More difficult to obtain – 31 percent
- Unchanged – 30 percent
- Easier to obtain – 8 percent.
Customer confidence is key to financing”s recovery. If the buyer is not willing to believe that financing is a practical option — either based on past experiences or false information — your company will not be able to change their mindset without reassurance.
Additionally, the recession has had a wide range of negative impacts on buyers across the country. Some people’s credit scores were badly damaged. Dealers may continue to see higher fees on lending to some “high risk” customers until their credit history is stabilized.
Moreover, the housing market’s recovery will also open more financing opportunity doors for dealers. Since the water treatment industry is dependent on the housing market”s successes and particularly new housing development, as foreclosures and loans for real estate progress, lending for water treatment equipment will improve as well — and so too will the number of prospects.