Credit Expert Witnesses
Ruey S. Tsay
University of Chicago
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Credit is a multi trillion dollar industry in the United States alone. It is not simply an accounting method, but an important tool to help grow the economy and personal wealth. For most people credit is synonymous with a loan. Credit cards and mortgages are the most common forms of consumer credit.
Credit experts have an understanding of these areas:
- financial services
- banking rules
- banking policy
- lender liability
- creation of financial statements
- credit checks
- credit rating
- loan assessment
- lines of credit
Credit and loans have a dark side given the large amounts to be made in the credit industry. As has been seen when the economy drops, the type and method of credit can have major impacts such as bankruptcy and litigation.
When a case goes to court the specific terms of the loan agreement play a baseline role. If a contract is not drawn up and signed in a way that each party understands and is not within the law then the contract can be invalided. It is not common to invalidate a contract completely.
Credit cards are the most common form of consumer credit. They are easy to get but the penalty for none repayment is high, normally around 20%. The amounts are limited because it is unsecured credit, meaning there is no asset to take if the payment is not made.
A credit card offers credit for about a month after which time repayment is required. If the credit card holder does not have the ability to pay the balance due then the issuer of the credit card has the right to bring legal action for violation of the service agreement. Given the high interest rate, if a credit card holder is not able to pay a balance the amount owed quickly increases.
This is why if seeking credit for longer periods of time people try to get a loan. Banks are the most common place to get a loan. If one owns a home then a line of credit can be offered where the loan is secured against a property with equity. It is hard to get a load without an asset to provide as security. To decide on whether to give credit a financial institution looks at income and credit scores as well as collateral such as home equity.