Credit Sales: Open-Ended vs. Closed-Ended
In dealing with credit transactions and the extension of
Closed-End Credit Sales
credit to consumers, Credit Sales are often identified as
Closed-End Credit Sales are extensions of credit to a
“Open-End” or “Closed-End”. It is important to know the
consumer for an agreed upon amount.
distinction between the two and the regulatory schemes
transactions, the consumer is not allowed to add to the
that govern them to ensure compliance.
account balance but rather is expected to make payments
In these
on the account at a specified payment amount for a
What is a Credit Sale?
specified period of time. Creditors can also impose a
A Credit Sale is simply an agreement by a consumer to
finance charge on the outstanding account balance.3
make payments in exchange for the sale of a product or
service.1
At Healthcare Finance Direct, all of the transactions that
we process are classified as Closed-End Credit Sales. The
Open-End Credit Sales
transaction documents that we offer to our clients have
An Open-End Credit Sale is most commonly found in the
been certified as compliant with the applicable regulatory
credit card transaction.
schemes that govern Closed-End Credit Sales.
A business or a bank offers
(“Creditor”) a consumer the ability to open an account
with a set credit limit. Then the consumer is allowed to
Our transactions documents ensure that consumers are
add to the balance of their account for the purchase of
provided with all the necessary disclosures mandated by
products or services. In most Open-End Credit Sales the
the federal Truth In Lending Act (“TILA”). In addition, we
Creditor imposes a finance charge on the outstanding
guarantee compliance with State specific regulations that
account balance and the consumer is expected to make
apply
payments on the balance.2
regulations sometimes differ for each of the fifty States.
to
consumer finance
transactions.
These
We navigate the regulatory maze for you so you don’t
have to worry about being up to date on the latest
changes to the consumer finance laws that apply to your
business.
1
2
12 Code of Federal Regulations (“CFR”) §226.2(16)
12 CFR §226.2(20)
3
12 CFR §226.2(10)