One of the most remarkable developments in the financial system over the past century has been the awakening of the consumer as a leading borrower and lender of funds within the global financial system.

• Households—individuals and families—have become the principal sources of loanable funds in the money and capital markets in most years. They are also among the leading borrowing sectors in the financial system.



• Due to intense competition in the financial-service sector, new consumer-oriented financial services have appeared in profusion in recent years in an effort to attract and hold consumer accounts. Examples include NOWs, money market deposits, share accounts in money market mutual funds, universal life insurance policies, consumer cash management services, and home equity loans.



• While consumers are among the leading borrowing groups in the economy, overall their dollar holdings of financial assets far exceed their indebtedness, though their ratio of liabilities to financial asset holdings has risen in recent decades.



• Lenders to the household sector consider multiple factors in deciding whether or not to grant a loan, including the size and stability of a consumer’s income, length of residence in current location, amount of installment debt outstanding, and any holdings of valuable assets (including stocks, bonds, and other assets of readily marketable value). Increasingly, credit scoring systems are being used to evaluate consumer loan requests, relying on computer processing and advanced statistical techniques to speed up and lower the cost of making consumer loan decisions.



• Important federal laws have been passed in the United States over the past four decades to accomplish two major objectives: (a) disclose the terms of loans and other financial services so the household customer can make an informed financial decision; and (b) prevent discrimination in gaining access to financial services (especially access to credit). Among the key pieces of federal legislation protecting consumers are the Truth in Lending Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Community Reinvestment Act, and the Truth in Savings Act. The Truth in Lending, Fair Credit Billing, Fair Credit Reporting, and Truth in Savings acts promote greater disclosure of the terms attached to loans, savings deposits, and other financial services, while the Equal Credit Opportunity Act and the Community Reinvestment Act focus mainly on preventing discrimination against consumers seeking access to financial services. Among the most recent laws passed are the Financial Services Modernization (Gramm-Leach-Bliley) Act and the Fair and Accurate Credit Transactions Act, which deal with protecting consumer privacy and stopping the rapid rise in identity theft.



• U.S. bankruptcy laws have been a center of controversy between consumers and lenders since the 1970s when a more liberal United States bankruptcy code was enacted and the numbers of household bankruptcies began to climb significantly. Fearing that debt relief rules for households might have become unbalanced in favor of the consumer, Congress debated a powerful new bankruptcy bill in the late 1990s and as the twenty-first century began. The proposed new law, if it ever passes, would raise the cost of consumer bankruptcies and demand that households seeking bankruptcy relief receive training in the hope of avoiding future financial problems.