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banking segment in the mid of 90s but that was just restricted to the salaried customers and businessmen. The financial liberalization progression over the previous decade or so, has led to the formation of a banking system which is mostly owned and operated by the private segment. Secondly, the invasion of liquidity in the banking segment from fiscal year 2002, forced banks to diversify and enlarge their income base by venturing into formerly untouched areas and third, the easy monetary procedure attitude of the SBP from 2002 to 2005 provided appropriate customers with financing options at little rate to meet up their consumption demand. Providing purchasing power to the medium class customer has been the mainly important accomplishment of this product set. Not only people been capable to high their standard of existing life by buying a variety of consumption goods which were formerly treated as luxuries.[2]

Banking sector acted as a vehicle in the improvement of the economy of the Pakistan. The development in the banking segment has not just in terms of asset expansion and profitability but also in of diversification of products and risk profile. The banks have targeted some of the formerly underserved segment like consumer finance which has witnessed significant growth in the past few years. Main factors behind such a huge expansion in consumer finance might includes little interest rates, flush of liquidity, product modernism, greater than before competition, financial liberalization, and highly growing income level is the main cause of high economic growth. At the same time, indefensible consumer expansion in less strong macroeconomic environment, unsuccessful prudential and regulatory structure, not a strong risk management system and lawful infrastructure can form systemic vulnerabilities. In 2006, Consumer loans increased by 29 percent or increase of Rs72.4 billion and reached from 252.6 billion to Rs325 billion. Due to determined higher growth, the share of consumer finance in all of the loans has increased to 13.5 percent in 2006 from 9.4 percent in which was in year 2004. [3]

The increase in credit card purchases was corresponding by the expansion in credit extension to further products such as individual loans, banks overdraft, car loans, store cards, payment of utilities in debts, and increase in consumer credit via mortgage lending. All of these products have its personal unique features, so that the consumer financial segment includes a blend of credit and interest rate hazard in difficult economic and financial surroundings. Consumer credit is huge not only in monetary expressions but also large numbers of customers involved and also the impact on those who deprived of consumer credit. The enlargement in consumer credit outstanding in the last 50 years is truly stunning. In the US and Canada for total trade banking and consumer lending is huge, it cross over corporate debt by almost 50 percent with household debt in the united states crossing $7.2 trillion in the year 2000, almost double the value owed in 1990. Not all of this increase is because of borrowing on credit lines. Credit cards have become more and more important as a method of wealth transmission. In the UK, 1316 million dealings by plastic cards in 1993 of which 724 million were by credit card compared with 3728 million dealings by cheque. But in year 2002 plastic card practice had overtaken cheque practice with 4814 million de