HSBC and Household International has two general forms of merchant agreements with vendors. This pertains to your Best Buy credit card, Saks card, and over 60 other merchants. A list is on the bottom of the page. For this one may substitute the term vendor, merchant, and store interchangeably. Once may also substitute HSBC for Household. They are the same.
The first form, known as the “closed-end credit dealer agreement” or non-revolving loan, involved a one-time transaction between a vendor and a customer which resulted in the creation of an installment account, with the vendor agreeing to accept installment payments from the customers in return for the goods sold. At the time of sale, the customer would fill out an application for a closed-end loan, and the vendor would submit it to Household for approval. Household would then purchase the installment contract from the vendor and thus be entitled to receive the installment payments from the customer for the items purchased.
The second form, the “open-end” or revolving loan, involved a transaction in which a customer would complete an application for credit and submit it to Household at the time of, or prior to, the initial sale. Household would then issue to the customer a credit card, which the customer could use for multiple transactions, including sales of goods through the vendor. Household would also purchase the installment contract from the vendor and thus be entitled to receive the installment payments from the customer for the items sold by the vendor.
Under both forms of transactions, customers filled out applications naming Household as the “Creditor,” which reviewed all applications and retained the power to approve or disapprove the credit applications. Household as the named Creditor ultimately extended credit directly to the customers. Then upon its purchase of the accounts pursuant to the merchant agreements with the vendors, Household acquired “full and legal ownership” of the customer accounts “without recourse” to the vendors.
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