The following can only be a brief introduction of the legal subject concerned. Before you take any action which may have legal consequence, you should first seek advice from your own lawyer or make an appointment at any District Office to see a volunteer lawyer of the Free Legal Advice Scheme.




(506) BORROWING MONEY (4) - CHIT FUNDS AND CREDIT CARDS

Voice

There are many ways of borrowing cash or getting credit for the things you want to buy and there are 4 recordings to deal with this topic.

(This recording deals with pawnbrokers and credit union)

Chit-Fund Business are generally unlawful. They are run with the object of raising a common fund of money from a number of contributors which is then sold to the contributor offering the highest price who promises to pay for it by instalments. The price includes an amount like an interest charge which is paid to the other contributors before the fund is advanced. This amount is usually high. There are severe penalties for persons who operate or participate in an unlawful chit-fund.

Chit-funds are legal only if they comply with certain requirements. They may not have more than thirty participants and the fund may not greater than $20,000. The chit-fund is run by an operator, and the only benefit he may take is one subscription free of the interest charge.

Credit cards are a means of paying for goods and services without using cash. To obtain a credit card you must sign a contract with the company issuing it. Apart from obtaining short periods of interest free credit these cards can useful in keeping a record of your expenses. Unlike cheques, there are no special laws which apply to credit cards. So, your rights and obligations are all contained in the contract you have signed. READ and UNDERSTAND the contract before you sign it.

One type of credit card is issued by banks which have an arrangement with the credit card company. This card often sets you a credit limit which you must not normally exceed and you will receive a regular statement of what you have spent. If you do not want to pay the full amount immediately it allows you to repay the unpaid balance in instalments. A high rate of interest, usually about 2% per month, is then charged on the balance unpaid after payment is due. The "visa" card is an example.

By using this type of card to make payments just before this month's bill you can get over one month's interest free credit because you will not have to pay until the next month.

When you use the card as payment you make two separate contracts: one with the shop for the goods or services and one with the bank for paying the shop. This means that usually the bank cannot help you if the goods or services were unsatisfactory. Payment by a credit card cannot be stopped like a cheque and every credit card contract has special rules which apply where the card is lost or stolen.

Another type of credit card demands immediate payment at the end of the billing cycle. With this type of card you cannot repay the balance in instalments. If you do not settle your account straight away you may not be allowed to continue using the card at all the credit card company may sue you for the outstanding amount. The 'American Express' card is an example. Many large department stores and supermarkets also issue cards like this. Often they require you to settle your account monthly by allowing them to debit your bank account directly.

Date of amendment: 1st October 1992