Chapter Six

Legitimating the Credit Infrastructure

RACE, GENDER, AND CREDIT ACCESS

BY THE MID-1960s, a two-tier credit system had emerged in the United States. The practices, technologies, and assumptions embedded in the credit practices of affluent and poor consumers could not have been more divergent. For middle-class Americans, credit had become an entitlement. Rather than a privilege, it was a right deeply imbricated with suburban material culture and everyday middle-class shopping habits. Home buyers borrowed their mortgages, financed their cars, and charged their clothes. To be denied credit went beyond an economic inconvenience; credit access cut to the core of what it meant to be an affluent, responsible adult in postwar America.

Even as poor Americans evinced consumer desires of the 1960s, their credit experiences remained more akin to the world of the 1920s. For poor African Americans in the cities, in particular, credit relations had toxically stagnated. Urban ghetto retailers kept their accounts in leather-bound ledgers and collected payments door-to-door every week, rather than on mainframes that billed automatically like suburban retailers. Credit cards were non-existent. Mortgages were hard to come by.¹ Less transparent and more prone to hucksterism, urban credit relations seemed to exploit poor consumers’ limited geographical mobility, meager financial resources, and fear of impersonal institutions.

Affluent white women, despite their greater access to retailers, confronted inequalities in credit as well. In a world of retail set up for men or dependent married women, working married and divorced women struggled to acquire independent credit access. Credit scoring and rating systems, purportedly objective, were in practice based on the life patterns of men. Objective credit standards were geared toward affluent, white men. In a consumer society dependent on credit, even well-paid women could not borrow for cars, homes, or department store shopping, which curtailed their choices and insulted their sense of self-worth rooted in the consumer privileges of their class. Professional women wanted credit access concordant with their economic power.

Even as the credit problems of affluent, white women and poor, black Americans emerged for different reasons and with different consequences, credit reformers lumped both as discrimination. In the name of fairness and equality, activists, executives, and policymakers negotiated a series of laws in the late 1960s and early 1970s intended to promote credit “fairness” for all Americans—first for women and then for many varieties of discrimination. In attempting to end discrimination, Congress pushed businesses away from possibly prejudiced loan officers to more objective computer credit models, which legislators thought would remedy discriminatory lending.

Through these acts, the federal government grappled with the ubiquity and centrality of consumer credit in the economy, and with the fact that denial of access to credit, whether because of race, income, or gender, constrained the choices and quality of life available for consumers. Though critics attacked the particular ways in which the credit system was constituted, there was no longer a fundamental critique of the role of credit itself in the economy and society.² By the 1960s, credit access was deemed to be unequivocally beneficial. Credit use, far from marking one as immoral or unthrifty as it might have in the 1910s, denoted high social status and personal responsibility. In the 1960s, those without credit agitated for more “fair” or “equal” access. By the end of the decade, as access to credit became a social marker of independence and prosperity, various credit activists for women and people of color demanded access to credit. Those left out—middle-class women and working-class African Americans—wanted in.

Congress passed laws to guarantee impartial (which was equated with “just”) access to credit. At the same time, these laws legitimated practices that would have seemed usurious two generations earlier. Despite the regulation, the mechanisms of debt enforcement and surveillance—credit rating agencies—remained outside federal control, which might have made the credit system truly transparent. Attempts to create a federal credit information agency failed and credit rating information remained the province of private corporations and not the government. By the 1970s, consumer credit, legitimated as fair through federal policy, grew to an unprecedented volume and creditors extended it, in the name of consumer equality, to all Americans with uncertain consequences for the country’s economic future.

“White Man Ain’t Milking Me No More”: Ghetto Riots and Congressional Reactions

As Americans watched poor, black neighborhoods burn in April of 1968, the causes of the riots, which included widespread looting, it was commonly believed, went beyond a protest of Martin Luther King’s assassination. For some, rioters had simply run wild, indulging themselves in the consumer goods that they ordinarily could not afford. For many white policymakers, however, a lack of ownership, rather than a lack of consumption, explained the riots. Since the neighborhood residents did not, for the most part, own the stores, rioters burned them. But for black leaders, as well as white intellectuals and politicians long involved in credit reform, the reasons behind the riots were more complicated and tied not only to the difficulties of ownership, but to the credit system poor Americans faced in a society defined by consumption.³

Even before King’s assassination, in July of 1967 President Johnson had appointed the Commission on Civil Disorders to understand why poor, black residents of American cities had been rioting repeatedly for the past two years. That most stores in riot-torn areas were white-owned, the Commission found, led to “the conclusion among Negroes that they are exploited by white society.”⁴ While emphasizing unemployment and a lack of business ownership in black communities, the Commission also pointed to the “exploitation of disadvantaged consumers” as one of the causes of the riots. Rioters, protesting merchants “selling inferior goods” or “charging exorbitant prices,” had lashed out against white merchants.⁵ Poor families in the ghetto, after all, had the same postwar material desires as the affluent residents of the suburbs. Nearly all poor, black households, for instance, had televisions. The way that inner-city consumers purchased these televisions, however, could not have been more different than the way that suburban consumers bought theirs. Unequal debt and consumer practices were at the heart of the divide in the Kerner Commission’s oft-repeated pronouncement that, “our nation is moving toward two societies, one black, one white—separate and unequal.”⁶

Rather than just anonymously taking televisions, groceries, and clothing from stores, the actions of many rioters revealed deeper frustrations with their personal relation to retailers. The rioters exacted the vengeance of consumers repeatedly wronged as they looted stores. The perceived wrong was the selling of shoddy merchandise at high prices on credit with usurious interest rates. The rioters rebelled not only against the white ownership and the substandard goods, but also the draconian credit relations that compelled poor consumers to pay more, get less, and be publicly shamed when merchants repossessed the goods on default.⁷ During the April 6th riots in Chicago, the Washington Post reported, a 72-year-old neighborhood man, “his deeply etched face illuminated by a blazing grocery store” chanted “burn, burn, burn. White man ain’t milking me no more.”⁸ Credit structured the world of ghetto consumption and it was the structures of the credit system that drew the ire of rioters more than a lack of business ownership in their communities.

Since the early 1960s, a series of investigations, including the widely-read sociology study by Columbia professor David Caplovitz, The Poor Pay More, showed that despite the lower income of ghetto inhabitants, they actually paid more for the same goods than wealthier consumers. A Federal Trade Commission report issued in 1968 detailed the prices that consumers paid in low-income area stores and middle-class stores in Washington, D.C.⁹ Prices were much higher at the low-income credit retailer than in the general market. While at the general market store goods that sold for $100 wholesale cost $159, in the low-income store the same goods cost $255.¹⁰ For instance, the exact same model of GE dryer that cost $238 in more affluent areas cost $370 in the poorer areas of Washington.¹¹ Despite the higher prices, poorer residents who wanted to buy a dryer tended not to leave the neighborhood for the cheaper stores. Local neighborhood merchants offered them credit that many poorer consumers could not get at the lower-priced downtown or suburban stores. Even though, as Caplovitz found in his New York study of low-income families living in public housing, three-fifths of those interviewed thought buying on credit was a “bad idea,” these families bought on credit all the same.

Even in public housing, Caplovitz found that those who used credit had a better material standard of living and owned more appliances than those who bought strictly for cash. But that better life came at a cost.¹² The families who bought only on credit tended to stay more within the neighborhood than those consumers who at least sometimes used cash. Seventy percent of low-income consumers only had credit references with low-income retailers or no credit references at all, which meant that they could not get credit outside their neighborhood. Credit tied lower-income consumers to neighborhood merchants, who enabled them to buy more, but at higher prices.

Without credit references, much less credit ratings, downtown stores would not extend ghetto residents credit, confining them to neighborhood stores.¹³ Paul Dixon, the chairman of the Federal Trade Commission, testified before Congress that, “the poor are poorly served when seeking to satisfy their wants for home furnishings and modern appliances, products which are part and parcel of an acceptable standard of living in American today.” Dixon believed that “steps must be taken which will render unprofitable behavior which seeks to exploit the ignorance, immobility, or illiquidity of the poor.” The necessity of consumer credit to buy modern merchandise on a limited income bound poorer consumers to local merchants, who charged higher prices and higher interest rates than the merchants in more affluent areas. Ghetto consumers comparison-shopped less than their middle-class analogues and did not search out the lowest possible prices, opting instead to shop locally. Dixon and other credit reformers thought that a lack of education caused these “buying habits of the poor.” Educating shoppers to comparison shop would not, he acknowledged, “alleviate the misfortune of poverty” but would “work to assure that each member of our community regardless of income receives a dollar’s worth of goods for every dollar spent.”¹⁴ But rather than just a failure of consumer education, ghetto consumers could not comparison shop because they could not get credit outside their neighborhoods. Lower-income consumers knew credit buying on such usurious terms was, as Caplovitz found, a “bad idea,” but if they wanted televisions and other markers of modern life, they had no choice.

Middle-class conventions of credit lending failed ghetto residents, isolating them from the larger consumer market. Even relatively high-income ghetto residents had few accounts outside their neighborhoods. Fifty-seven percent of ghetto households with incomes over $500 a month either had no credit references or references only with local merchants.¹⁵ One reason that even relatively high-income households from the ghetto had no outside credit was that local merchants actively sought to constrain the choices of low-income consumers. For instance, inner city residents would go to Sears, fill out a credit application, and put down other stores where they had credit. These ghetto retailers would shortly thereafter receive a call from Sears inquiring about the customer. The retailer would claim not to have ever heard of the customer, Sears would refuse the customer credit, and then the retailer would call the customer to tell them to “come on in, your credit is good with us even though not with Sears,” as a legal aid lawyer testified in 1969,¹⁶ More than consumer education, ghetto consumers needed a financial path out of the closed credit system of their neighborhoods.

In ghetto economies, the Federal Trade Commission discovered a world of installment credit that had been eclipsed in the revolving credit world of the postwar suburb. Installment credit, waning elsewhere in the economy except for in the purchase of automobiles and houses, remained the most frequent credit instrument of ghetto life. Revolving credit had not penetrated the economic world of the poor. Low-income area retailers charged interest rates whose distribution skewed higher than in affluent areas. While middle-class retailers in appliances and furniture only sold 27 percent of their sales volume on installment credit, in low-income areas retailers sold 93 percent of their sales on installment.¹⁷ While many affluent and suburban stores no longer even offered installment credit, in poor, urban areas installment credit remained the only kind of credit to be had. At low-income stores, 7 percent of installment contracts charged 33 percent interest rates, while no middle-class stores charged so much.¹⁸ Some ghetto merchants charged lower interest rates, but in turn, raised their prices. The FTC investigators found that instead of competing on price, like middle-class retailers did, lower-income merchants competed mostly on ease of credit terms. Whether in prices or in interest, poor consumers paid much more than affluent consumers for the same goods.

With installment credit came the possibility of repossession, which had largely disappeared in the revolving credit economy elsewhere in the United States. The income of ghetto residents, Dixon testified, was “low, irregular, and unreliable.”¹⁹ Even after consumers borrowed, disruptions in their income could make them unable to complete the payments on what they borrowed.²⁰ While repossession had become economically unfeasible for middle-class Americans, the enormous rate of default in the ghetto made it still necessary.²¹

Why was repossession so high in the ghetto? Beyond the irregularity of income, one of the senators involved in credit reform, William Proxmire, believed the “shoddy merchandise” poor consumers bought on time made them feel “taken” and “so many of them stop making payments.”²² Stopping payment, in his view, was an act of protest rather than an act of irresponsibility. Rather than reflecting the creditworthiness of the buyers, the high rates of default reflected the exploitive relationship between the buyers and the sellers.²³ But by breaking the contract, shoppers further eroded their perceived creditworthiness, which made them further “unable to get credit in downtown stores” even though the problem was not the consumers’ inherent creditworthiness but the low-quality goods.²⁴ Small acts of consumer resistance only tightened the grip of ghetto financing structure.

Though the poor paid more, ghetto merchants did not profit more. These merchants charged their customers outrageous prices and grinding interest rates, but their return on investment was actually less than that of retailers in more affluent areas. With remarkable access to accounting ledgers, credit applications, and customer surveys, the FTC survey provided a picture of the complete relationship between ghetto merchant and ghetto customer that was lost in other consumer-oriented studies.²⁵ While the report affirmed the higher prices and shady sales practices found in other studies, it also found that these practices did not result in higher returns for retailers.

Consumers faced higher prices at low-income market retailers, but the sales and credit methods of the ghetto retailer quickly eroded this sales margin. The average gross profit margin at these stores was 61 percent compared to 37 percent at general market retailer, but the costs of the ghetto retailer were quite different from his counterpart in the suburbs.²⁶ Since nearly all the sales were on installment credit, merchants faced the greater bookkeeping and billing expense that had propelled more affluent retailers towards the advantages of revolving credit in the 1950s. Low-income consumers had higher rates of default and the installment contract, unlike revolving credit, allowed retailers to repossess goods and to take the defaulter to court. And ghetto retailers did.

Ghetto retailers used the courts much more frequently to enforce the debt obligations of their customers than middle-class retailers, obtaining one court judgment for every $2,200 in sales.²⁷ To put this number in perspective, the FTC pointed out that one large, middle-class department store—whose sales volume “far exceeded” the total volume of all low-income retailers in Washington D.C.—had only 29 judgments for the entire year.²⁸ If middle-class retailers filed suits at the same rate as low-income retailers, instead of 616 court cases a year, they would have had 55,000 judgments.²⁹ Repossession was a standard part of consumer life in the ghetto, but relying on repossession did not increase profits, it just lowered losses.

While retailers relied on the courts to enforce their debts, they did not rely on bank and finance companies to finance their installment contracts. Unlike middle-class stores, 80 percent of low-income retailers did not sell their installment contracts to finance companies or banks. Only 2 percent of general market appliance stores and 43 percent of general market furniture stores did not sell their finance paper.³⁰ In-house financing demanded more staff to handle all the accounting and billing for all those installment contracts, which for middle-class retailers were cheaply outsourced to a finance company.³¹ Moreover, by not selling their installment paper, low-income retailers had to bear any debt loss directly and, unlike finance companies, could not diversify their risk across cities and companies.³² For every dollar of merchandise sold by a low-income retailer, 6.7 cents went to bad debt losses compared to the 0.3 cents of a more affluent retailer’s sales dollar.³³ With 22 times the bad debt loss per $1 of sales, ghetto merchants had to charge higher interest rates and prices. With such high rates of default, it is unclear whether any finance companies or banks would have purchased the contracts.

Instead of selling contracts to finance companies, ghetto retailers instead borrowed the capital directly from the bank and had to pay for the interest on the money borrowed as well as to repay that money to the bank whether or not customers paid them. By charging higher prices, merchants could not only raise their margins, they could also be more certain of avoiding losing the money they had already paid the wholesaler for the merchandise. If an installment contract ran twelve months, the low-income retailer recovered the wholesale cost, on average, in six months, while for the general market retailer it would take eight months. Anticipating a higher rate of default, the low-income retailer raised prices so that even if the customer stopped paying halfway through the contract, the retailer did not lose money.³⁴ Between bad debt losses, lawyers’ collection fees, higher insurance premiums, more accounting staff, and higher sales commissions, the higher costs of ghetto retailers accounted for 94 percent of the difference in the gross margins.³⁵ While the ghetto merchant still made 6 percent higher net profits on sales than middle-class retailers, lower volumes, fixed costs, capital expenses, and higher debt losses led small, low-income retailers to make less money on their invested capital than the large middle-class retailers. The rates of return on capital invested showed that despite the higher net profits, low-income retailers actually had a lower rate of return (10.1 percent) than general market appliance stores (20.3 percent), furniture stores (17.6 percent), and department stores (13 percent).³⁶ The poor paid more, but the merchant did not profit. The credit system of the ghetto hurt both sellers and buyers.

Though the system hurt both ghetto retailers and consumers, it was the anger of consumers rioting in the streets that alarmed Congress and the nation. In addition to the higher prices, the frequent court decisions, wage garnishments, and repossessions that were the bread-and-butter of the ghetto merchant no doubt contributed to the antagonism of poor consumers. Repossessions were public affairs that everyone in the neighborhood could witness. Repo men would come and remove the family television, publicly shaming the family. The public methods of the low-income retailer fostered resentment in ways that the suburban revolving credit, whatever its drawbacks, kept more private.

By no coincidence, the stores that sold on credit, the Washington Post reported, were the “most popular victims of the riots.”³⁷ When D.C. rioters broke into many stores, they burned the credit records before they took the merchandise.³⁸ Burning the records, they hoped, would erase the debts that many rioters had at their neighborhood stores. More than an opportunity to get free merchandise, the riot was a chance to start over. As an “easy-credit” clothing store burned, one man reportedly yelled in the street, “burn those damn records!”³⁹ In another widely republished account, a mother told her son as they looted a grocery near 7th and S streets, “don’t grab the groceries, grab the book.”⁴⁰ The book held the records of debts that she and her son, as well as many other people in the neighborhood, owed to the store. Burning credit records, it was hoped, would end the onerous interest payments.

The efficacy of this record-burning strategy remains uncertain because the newspaper accounts after the riots so directly contradict the investigations before the riots. According to newspaper accounts, outside of very old-fashioned neighborhood groceries, most stores that sold on credit kept copies of their records off-site. While their merchandise might have been lost, their accounts receivables were not. The Washington Post reported that furniture stores, for instance, kept copies of their payment records on microfilm off-site. For stores that used finance companies for wholesale credit or to rediscount their loans, the finance companies also had records. Most stores kept duplicates somewhere else in case of conventional fire, which in these cases also protected them against arson. A Post reporter noted that “their stores may not be in the best of shape, but their books look good.”⁴¹

For stores that did not resell their debt, the situation for lenders was more dire. The positive spin in the Post, while no doubt true for some stores, was contradicted by the exhaustive Federal Trade Commission (FTC) investigation of the previous year. The FTC found that the vast majority of ghetto merchants, unlike their suburban counterparts, continued to keep their credit records on-site and did not resell them to finance companies or banks, as was the norm for retailers in more affluent areas.⁴² If in-house financing had led to exploitation, it had also led to a possibility to resist that exploitation. While the Post reported the futility of burning the credit records, it seems entirely possible that many of the records were destroyed in the uprisings. For those retailers who had lost their credit records and along with them all their records of who owed them money, they must have been looking for a way to move those financing operations out of the store, where the records and the accounts receivable invested could be protected. Despite the failure of the rioters to destroy the debt record completely, the lesson of their actions was clear to community leaders and legislators reexamining credit policy—exploitative ghetto credit contributed in a significant way to the April rebellions.

Separating the role of creditor and retailer would have been a way to ameliorate tensions in riot-torn neighborhoods. The FTC report recommended that a clear way to help low-income consumers would be to encourage “local community efforts in the development of effective credit sources [that] could contribute materially to freeing individuals from dependence on ‘easy’ credit merchants.”⁴³ Whether or not the merchants of the ghetto made excessive profits, the effect on poor consumers was still the same: they paid more than wealthier ones. If a way could be found to extend them credit to shop at stores that would not ordinarily grant them credit, they could spend less and stretch their dollars further.

As Congressional hearings, government investigations, and sociological studies confirmed after the riots, ghetto residents lived in a credit world unimaginable to suburban consumers. Emergent habits from middle-class institutions did not exist in the same way for poor, black Americans. This difference was not simply a gap in consumer education, as many critics suggested, but in how institutional practices constrained the choices of ghetto shoppers. While the financial rationality of the choices that many ghetto shoppers made have seemed illogical to economists and politicians, these choices were no less rational than those of middle-class Americans. The difference for ghetto shoppers was the fragility of their income, their relative lack of political power, and the differences between an installment credit and a revolving credit system.

Before the 1968 riots, credit reform to empower consumers had been largely unsuccessful. Some legislators, like Senator Paul Douglas from Illinois, had pushed unsuccessfully for credit reform throughout the early 1960s. Legislators intended to make all loans express their interest rates and charges in a uniform manner, known as Truth-in-Lending laws, as a way to empower consumers in their credit choices.⁴⁴ Knowing the true interest rates on loans, they thought, would allow consumers to choose intelligently from a range of lenders. Douglass and his allies proposed these laws year after year, only to have them stall in committee or lose a vote on the floor. Though the hearings on these bills revealed a great deal of credit trouble in American cities, it was not until the events of 1968 that sufficient political momentum thrust credit to the forefront of American politics.

In the aftermath of the riots, the liberal Wisconsin Senator William Proxmire led hearings that inaugurated a long series of influential credit reforms over the next decade. The assumptions held by policymakers about how to best resolve the problems of unequal credit access limited the scope of the reforms, even as they profoundly altered the American economy in often unexpected ways. Proxmire believed that to restore the political and economic stability of the American city required resolving the inequities of finance in the urban economy. As the witnesses and the legislators pondered the problem of ghetto credit they recognized, as did Betty Furness, the special assistant to the president for Consumer Affairs, that “the proof was right here in the streets 2 weeks ago . . . [in] the stores that were burned and looted.”⁴⁵ Consumer credit, which had driven the expansion of the suburbs, needed to be found for the city as well. Opinions, nonetheless, differed widely over what aspects of ghetto finance most needed reform.

At Proxmire’s hearings, the way in which expert witnesses envisioned this investment in the ghetto varied, but across the political spectrum all emphasized the importance of local control. Across the political spectrum, many of the legislators, bankers, and credit experts believed that to restore order, ghetto business would have to be controlled by African American businessmen and the profits reinvested in the neighborhood. Jacob Javits, the Republican senator from New York, believed that “the lack of involvement of the . . . poverty area resident in the ownership and management of the business community which serves him,” led to the riots.⁴⁶ While “white-owned stores were burned and looted,” Javits saw that the “‘soul-brother’ establishments were spared.”⁴⁷ Black ownership, he reasoned, would lead to social stability. Walter Mondale, a liberal senator from Minnesota, believed that empowering the “people of the ghetto” was as important as their financial well-being. Mondale insisted that beyond lower interest rates, “community self-determination must be our goal.” As Mondale remarked at one hearing:

In the wake of riots and unrest, the relevant question is not “What is the return on investing in the ghetto?” The real question is “What is the cost of not investing in the ghetto?”. . . . Can anyone really believe that he can insulate himself indefinitely from the problems and frustrations faced by black America?. . . . Of what benefit will higher yielding investments be if our Nation is wracked by social conflict and fear.⁴⁸

Conservatives and liberals alike could agree that African American–owned businesses would stabilize the ghetto. Experts disagreed, however, on what policies could foster economic self-determination but would still be within the capacity of the federal government. For some, the government needed to direct business funds into poor neighborhoods to create jobs. For others, cultivating and mentoring local entrepreneurs would give residents ownership of their own communities. For still others, the key was control of locally supported financial institutions. For Proxmire, the key was to emulate the successful credit programs legislated during the New Deal, like the FHA, that did not abandon the private sector but found a way to guide its funds for the public good. While there were those who tried to find alternatives to mainstream capital, the solution, Proxmire felt, was to convince banks and finance companies to reinvest in the people of the city.⁴⁹ The alternative, he feared, was continued unrest.

Responding to the unrest, many well-intentioned bankers tried to find ways to support home ownership and African American-owned businesses in the ghetto, believing it was a lack of small business financing that had led to the riots. Consumer credit ranked lower in the discussions of economic development than the more respectable forms of investment. Giving people a stake in where they lived, through business and home ownership, seemed more logical to the bankers than providing consumer loans, even though it was the feeling of consumer exploitation that drove the riots. Bankers like George Whitney, who represented the Investment Bankers Association of America, recommended insurance programs for business ventures analogous to FHA housing insurance programs to lure capital into the ghettos.⁵⁰ Providing investment funds, even subsidized by the government, would not change the costs of real estate, of higherpriced post-riot insurance, and of unpaid debts. The higher risk default rates of ghetto consumers, FTC Chairman Paul Dixon cautioned, would inevitably lead to higher costs. Either there would need to be a “voluntary action” on the part of community-minded bankers or “some kind of a Government-guarantee program or some kind of subsidy” for credit to be extended to these borrowers.⁵¹ Furness similarly believed that “the private sector has got to be encouraged to move into—not out of—the ghetto areas [and] banks and other financiers will have to find new ways of establishing criteria for credit, ways geared to the poor community.”⁵² The poor needed better access to credit if they were to become as economically stable as middle-class Americans. Banks would have to be encouraged by the state to enter these risky, marginal markets, but they would have to do so for the sake of political and social stability—if not for profit.

If it were so difficult to bring middle-class retailers to the poor neighborhoods in the cities, why not bring poor consumers to the middle-class stores? With ghetto consumers perceiving exploitation at every turn, Proxmire imagined that providing more credit options would enable ghetto consumers to buy outside the neighborhood, which seemed less daunting than attempting to regulate high-priced ghetto merchants. Market competition would do the rest and drive local merchants out of business. Senator Proxmire envisioned providing the poor with “more direct consumer credit” that sidestepped exploitative retailers. Consumer credit from “banks, credit unions, or other institutions . . . would permit ghetto residents to obtain their own credit on reasonable terms and thus shop in the more reputable stores which charge lower prices.”⁵³ If consumers could use credit at department stores, then these marginal, exploitative retailers could be driven out of business. Proxmire believed it was “the failure of the large downtown stores to adequately serve the low-income market which permits high-cost merchandising practices of the ghetto merchant to survive.” Firm competition would never allow “Sears, Roebuck [to] survive in the middle-class shopping centers,” if it charged the higher prices of ghetto merchants.⁵⁴

The clear solution to Proxmire was to reintegrate the ghetto and the market. While bringing the market to the ghetto would help many ghetto consumers, it would, at the same time drive under neighborhood businesses that already eked only marginal profits, further limiting local jobs to an already underemployed population. Nonetheless, credit that would come from financiers and that could be used everywhere, including retailers that would never extend credit to poor African American consumers, would alleviate much of the ghetto consumer’s difficulties.

To create this flow of consumer credit would require giving up Mondale’s dream of local control and self-determination. Existing ghetto financial institutions could not provide this service. Though many institutions and groups attempted to position themselves as creditor to the poor, for various structural reasons, they all failed. Black-owned banks were practically nonexistent. The largest one in the United States, Freedom National Bank in New York, according to Theodore Cross, the editor-in-chief of Bankers Magazine, was the 1734th largest in the country with only $30 million in deposits.⁵⁵ Black-controlled banks typically had higher costs and lower returns than mainstream, white banks. Ghetto banking costs were higher because so many more of the deposits were small savings accounts rather than large commercial checking accounts.⁵⁶ Avoiding the fees of checking accounts, even small businesses in the ghetto had savings accounts. All that extra work created greater labor and interest costs. The personal loans tended to be small and the commercial investments even smaller, which limited profits.⁵⁷ Freedom National Bank, with its $30 million in assets, had 85 employees for all its extra savings account work, nearly double the amount that would have been expected for a bank of its size, draining bank profits that limited the growth of its investment capital.

For any substantial amount of capital, then, black businessmen and consumers had to turn to white-controlled banks. Many states like Illinois limited the branches a bank could have. In Chicago, the large suburban banks could not open branches in the city.⁵⁸ Even states that did not limit branches had difficulties in ghetto neighborhoods not encountered elsewhere in the city or the suburbs. Ghetto banks had higher default rates than conventional banks. Banco de Ponce, a bank that operated in the Brownsville section of Brooklyn, had a consumer loan default rate three times higher than the average in Manhattan. To make up for this loss, Banco de Ponce charged 1.5 percent higher interest than the average Manhattan bank as well. The rate difference, driven by higher default rates, made it impossible for Manhattan banks to invest in ghetto consumer loans. As Cross pointed out, it would be “absolutely impossible for a bank such as the Chase bank downtown to establish a higher rate on its automobile loans in Harlem than the rate it charges in downtown areas.”⁵⁹ A white bank, additionally, could not risk the public relations nightmare that would be created by charging higher interest rates at its ghetto branch than at its main branch. Even if an African American businessman came from Brooklyn to Manhattan to get a business loan, the “downtown banker,” Cross believed, “often avoids taking the note of a Negro businessman, because the banker doesn’t want the potentially bad publicity that may ensue ‘pulling the strings’ on a minority borrower.”⁶⁰ To avoid the possible appearance of discrimination, ironically, bankers had to actually discriminate by not opening ghetto branches or lending to minority borrowers. Because the white banks could not themselves alter their rates and therefore could not invest directly, Cross suggested that the capital had to be moved into the ghetto by some other means.

Several federal agencies and community activists enthusiastically, and unsuccessfully, promoted other possible ways around this difficulty through the creation of alternative, local financial institutions. Despite the best of intentions, these alternatives, like credit unions, could not address the larger investment and credit needs of the ghetto. The Office of Economic Opportunity (OEO) and the Bureau of Federal Credit Unions, to take one of the largest programs, offered extensive consumer education through a plan called “Project Moneywise” that sought to show poor consumers how to use credit and give them, through locally-run credit unions, financing alternatives to those provided by merchants.⁶¹ Like similar programs dating back to the 1920s, these hopeful educators of the 1960s believed that the difficulties in credit use stemmed from poor consumer education.⁶² Unlike earlier credit educators, these programs emphasized shifting the control of banking to the local community. Credit union groups expressed hostility to national organizations, focusing on the importance of promoting community-run, community-owned banks. Between 1965 and 1968, Project Moneywise organized 218 credit unions across the country.⁶³ Growing out of the local control ideals of the left, community credit unions seemed to be a promising solution to the problem of credit for the poor. Training what the assistant director of the Bureau of Federal Credit Unions called “indigenous leaders” to go back to “their communities” and form credit unions, fit the self-determinationist model of local control.⁶⁴ Robert Levine, the assistant director for research at the OEO, envisioned “black power strengthened and directed constructively through green power” at these credit unions.”⁶⁵ While Proxmire wondered, “How can we channel surplus funds from many of the credit unions in wealthy areas to poverty areas?,” Project Moneywise advocates imagined a community-run, self-supporting program that drew on the “latent savings in the community” independent of larger financial institutions.⁶⁶ Community-run, such a program would have provided the needed services, and kept the profits, in the community.⁶⁷

The problem with such plans, however, rested with the lack of “latent savings” that communities were able to deposit in the credit unions. Those 218 credit unions had a combined capitalization of only $2.2 million.⁶⁸ While the OEO paid for the initial setup costs, staff salaries, and space rentals of these credit unions, the actual capital to lend was extremely scarce.⁶⁹ Poor Americans had relatively little savings and larger credit unions would not put their capital at risk by investing in these well-intentioned banking projects.

The OEO and the Bureau of Federal Credit Unions could create offices, but they could not create capital. The OEO found that “in most cases capital accumulation among the poor is so slow that it takes years before a low income credit union can make loans that are meaningful.”⁷⁰ Moreover, ghetto credit unions that did accumulate capital faced exactly the same choice as larger financial institutions: should they invest in the lower-risk mortgages of white subdivisions or in higher-risk urban areas? Why should credit union managers privilege the theoretical needs of the community over the very real investors who saved at their bank? Community credit union bankers made the same prudent decision that the national banks did. Federal Reserve studies had found that even ghetto credit unions reinvested funds in white suburbia.⁷¹ While it was easy to provide an office, credit unions found it difficult to amass capital or even to keep that capital in the community when the risks and resources so favored the suburbs.

Additionally, the financial services of the federal credit unions involved with Project Moneywise were antiquated and did not address the needs of poor consumers. Project Moneywise’s credit unions offered consumers old-fashioned personal loans for their consumption.⁷² These programs clung to older models of personal loans rather than extending revolving credit cards to consumers. In the credit union model, lower-income consumers would have had to go to the credit union, get additional loan money, and then go to the retailer. These barriers to transaction that department stores had done away with in the 1950s were unnecessary in the late 1960s. Without credit cards, which would have enabled ghetto residents to shop in lower-priced middle-class stores, federal credit unions could do little to address the underlying credit problems of the urban poor.

Undercapitalized and antiquated, alternative financing schemes like Project Moneywise, while successful in a limited fashion, could not scale up or reach out to meet the needs of the ghetto. The small amounts that these credit unions commanded would not be able to fix cities, which was what Proxmire and the committee aimed to do. Proxmire did not want to wait for any “splendid pilot approach” to work out over twenty to thirty years.⁷³ Citing the Kerner report’s five-year deadline for better housing, Senator Proxmire wanted results “in the next few years” akin to the dramatic reversal of the New Deal.⁷⁴ Other solutions, outside of state-subsidized credit unions, would have to be found.

While policymakers and businessmen focused on increasing the business credit of the black entrepreneur or offering alternative credit schemes through credit unions, other black leaders, more connected with the day-to-day needs of their poor, pushed for greater credit access.⁷⁵ John Jacob, who in 1968 was the acting executive director of the Washington Urban League, applauded the calls for business investment in the ghetto, seeing the hearings as “one of a number of growing indications that America has finally decided that it might be appropriate to begin to extend capitalism to black Americans.”⁷⁶ While Jacob approved of “putting capital in the hands of Negro citizens [as] part of the answer to easing urban unrest,” he also doubted if these business-oriented white policymakers truly understood the situation. Jacob wondered if white businessmen focused on the virtues of business ownership had learned the “lesson from our expensive history.” If white American consumer life could not be moved to the ghetto, perhaps, some black leaders like Jacob suspected, could the ghetto consumer be moved to white America?

Rather than invest in the ghetto, Jacob called on Congress and bankers “to consider a concept that would extend the consumer credit system available now to most Americans,” that is, “a credit card for the ghetto residents.”⁷⁷ More than ownership, ghetto residents wanted what all other Americans wanted—to shop without feeling cheated. Jacob believed that credit cards would give ghetto consumers the choice to shop wherever they preferred. Consumers could shop at local stores run by proprietors they were familiar with, or if they felt cheated there, they could go elsewhere, either in their neighborhoods or in white areas.

Credit cards for ghetto residents were necessary, Jacob felt, because white institutions discriminated against black consumers. Whether because of racial prejudice or economic creditworthiness, 70 percent of ghetto residents still did not have established credit with what FTC chairman Dixon called “general market retailers.”⁷⁸ The Urban League’s program would remedy this deficiency. Jacob pointed to the main culprits in denying poor African Americans credit—credit bureaus, department stores, and financial institutions.

Jacob held that discriminatory lenders denied the credit because of their race. African American consumers could not get charge cards at the cheaper downtown stores. Credit bureaus automatically, he thought, downgraded their credit ratings. White banks, he believed, would not lend to them. Capitalism for Jacob was a consumer capitalism from which African Americans had been excluded. Credit cards would liberate the black consumer from “mainline credit bureau [that were] the end all in establishing credit” and from “the loan shark, to the pawnbroker, to the “credit advisers,” or to the high-interest purchase plans.” Cheaper credit would lower the overall costs of consumption for ghetto consumers. As Jacob reminded the committee, “black people in the ghetto buy television sets, washing machines, clothes, and toothpaste” just like white people in the suburbs, but they just paid more for them. Ghetto residents “buy them with borrowed cash that will cost them double or triple in the long run . . . [and] on installment plans that balloon prices so that they could have bought three items by the time they get through paying for one” durable good.⁷⁹ Credit would save ghetto residents money. If white policymakers and bankers were really concerned about increasing the stake of African Americans in capitalism, they would worry less about business loans and find a way to enable black consumers to affordably borrow to buy their homes, cars, and toothpaste just like white America. To deny black consumers credit was to continue to exclude them from the prosperity that defined what was best about the United States.

Jacob thought this plan was feasible because of the Urban League’s experiences in running a credit union for ghetto residents in Washington, D.C. The Urban League apparently had different experiences with “low-income people” than most credit unions. In two years of operation, the credit union made 901 loans for over $100,000. Unusual among ghetto residents, the default rate at the Urban League credit union was low—only sixteen loans, or 1.2 percent of total loan volume.⁸⁰ “If credit can be extended without risk to ghetto residents in the form of loans,” Jacob wondered, “why not also extend that great American tradition of ‘buy now—pay later’ to the ghetto consumer as well.”⁸¹ Jacob imagined expanding credit unions around the country that would provide credit services to the poor. Merchants would sign on to the program because credit unions would guarantee payments even if the consumers defaulted, like the FHA guaranteed housing loans. He believed that ghetto merchants would lower their credit prices in return for the increased debt compliance of African American residents.⁸² These consumers would hopefully spend most of their money in their neighborhoods. While white bankers thought black ghetto residents needed to own the local business, Jacob believed they just needed access to cheap credit in their neighborhood to feel like they had a “stake” in it. Consumer choice, not business ownership, resided at the heart of the ghetto unrest.

Revolving credit cards would best serve the flexible credit needs of ghetto residents. The unyielding fixed repayment plans of installment credit frustrated ghetto consumers, whose paydays could be as irregular as their debt due dates were regular. Unlike department store credit, borrower interest rates could vary by “degree of delinquency and/or defaults.”⁸³ For Jacob, the key to success for the program was avoiding strict repayment programs for a population with irregular work. Through guaranteed payments for merchants and flexible credit for consumers, Jacob hoped that credit prices would fall and ghetto consumers would be given readier access to the goods that they wanted.⁸⁴

Investment in these credit unions, Jacob imagined, could come either from the private sector or the government, and the credit company could be operated on a profit or nonprofit basis.⁸⁵ Jacob thought that most ghetto residents cared more about their own access to flexible credit than whether the lender was black or white. Jacob’s novel departure from most of the other business-oriented testimony that the committee heard attracted Proxmire’s imagination. While other witnesses conveyed the trickery of merchants and the importance of black entrepreneurship, Jacob offered a different way to quell black consumers’ rage—provide them with choice.

While Jacob and the committee debated the riskiness of lending to ghetto residents, with their high default rate of nearly 14 percent, Proxmire suggested that perhaps the solution lay not in government subsidized credit unions but by encouraging existing companies, like American Express, to offer their credit services to ghetto residents. Proxmire wondered if Jacob thought it “feasible for commercial banks to organize this service as opposed to starting new companies?”⁸⁶ Rather than see credit cards as another way for white institutions to exploit black consumers, Jacob thought the ghetto residents would welcome it and it might engender “a new attitude toward the whole banking institution,” making banks seem more a part of the community.⁸⁷ In general, Jacob suspected banks would be unwilling to provide such services because of their traditional discrimination against black borrowers. Remedying racial discrimination in lending practices would almost, by itself, solve the problem of credit in the ghetto. The director of the Urban League agreed that ending racial discrimination, either by legal fiat or a shift in banker culture, would enable credit cards to reach the ghetto residents who needed them and ameliorate one of the primary sources of urban unrest.

While Congress did not fund the programs, over the next few years Jacobs’ vision and Proxmire’s hope for the dissemination of credit cards in the poor neighborhoods of the American city would nonetheless become a reality, but not in the way that they had imagined. In 1968, following the hearings, Congress passed the Consumer Credit Protection Act, which mandated uniformly calculated interest rates on all credit transactions. Consumers could now make informed choices in their credit and compare deals between different lenders more easily. The Act empowered consumers who had the option to make rational choices between several options, but in the late 1960s many poor Americans’ credit choices remained limited. The credit card was still not in the ghetto. Despite the push for reform coming from the ghetto riots, the new law did nothing to extend credit to poor African Americans. As the president’s special representative on Consumer Affairs, Betty Furness, remarked in the aftermath of the 1968 riots, “this nation long ago extended a promise to all its citizens—a promise of [e]quality [sic] and justice and freedom. It is time that promise was fulfilled.”⁸⁸ To fulfill the consumer promise of postwar America to everyone, credit would have to be guaranteed to everyone. But the road to rebellion-quelling credit cards in the ghetto would emerge not from well-intentioned banks, credit union activists, black entrepreneurs or even moderate black leaders, but unexpectedly through the legislative lobbying and street protests of predominately white feminist groups. Credit equality for women would open the door to legislation and practices ending all forms of credit discrimination, including against ghetto residents, even though everyday problems facing affluent, white women could not have been more different.

Women, Credit, and Discrimination

While poor, black Americans confronted the limits of their credit options and turned, unsuccessfully, to the state for redress, another group, much more affluent but still constrained in their credit access, began to lobby Congress for credit equality. For upper-middle-class women in the late 1960s and early 1970s, credit formed an indispensable foundation of their economic and social lives, yet the ability to use credit remained contingent on a man’s creditworthiness or even his permission. Unlike today, when microfinanciers win Nobel prizes for recognizing the higher creditworthiness of women over men, in the 1960s and 1970s lenders considered women of all marital statuses poor credit risks. Single women, married women, and divorced women all encountered barriers in their access to credit, but for different reasons and with different effects. Marital, parental, and employment statuses all shaped women’s need and demand for credit, and why creditors denied them that credit. While women enjoyed greater liberties in divorce and coverture law at the end of the 1960s than earlier, they also found that everyday credit practices and retail policies had not kept pace with the statutes. Affluent white women who explicitly juxtaposed their class-based “right to credit” against welfare subprime mortgage programs for poor blacks, demanded credit in the name of ending discrimination—a rhetorical move that ultimately and unintentionally aided poor, black consumers as well.

The Consumer Protection Act of 1968, whose passage was strongly aided by the ghetto riots of that year, even while not redressing the root causes, had also, in addition to the Truth-in-Lending provisions, mandated the creation of the National Commission on Consumer Finance. The Commission existed only for a few years, from 1970 to 1972, but its hearings and its recommendations had an important effect on federal policy. While it examined many aspects of consumer credit, one of its primary roles was to investigate whether lenders discriminated against women, and if so, how. As during the hearings on credit in 1968, the commission articulated the centrality of credit to the promise of American life. Representative Ira Millstein, who chaired the hearings, believed that “credit has been and continues to be the cornerstone upon which our enviable U.S. standard of living rests.”⁸⁹ Like the authors of the Consumer Credit Protection Act, the commission believed the key to a just credit economy was not direct federal regulation but making borrowing transparent to consumers as they decided between credit options.

At the heart of this investigation, however, rested a contradiction that repeatedly surfaced throughout the credit reform of the 1970s, but was ultimately addressed, though unsuccessfully: the appropriateness of real categorical discrimination in a credit system based on profit. Discrimination might, it was argued, reflect actual differences in borrowing behavior. Group A might be charged higher premiums because they, as a group, could be riskier borrowers than Group B. If lenders were to profit from lending to Group A, then they would need to charge Group A higher interest rates or refuse them credit at a higher rate than Group B to have the same rate of profit. The third-rail question of the hearings was: If Group A is riskier than Group B, can the higher rates of interest and refusals be considered unjustifiably discriminatory? As Representative Ira Millstein and Senator William Brock asked many witnesses about the possibility that women actually were poorer credit risks than men, the witnesses stammered and then claimed, like Betty Howard of Minnesota’s Department of Human Rights, that “anything that stereotypes an individual . . . is discriminatory. You cannot judge an individual by grouping characteristics.”⁹⁰ As testimony to the entrenched belief that discrimination, ipso facto, was wrong, even if possibly actuarially justified, few witnesses seemed to even understand the question and repeatedly returned to the importance of the individual.

Even as Millstein asked this crucial question, however, he woefully misunderstood how credit systems worked at the beginning of the 1970s. Actuarial science and statistical analysis had little bearing on whether lenders extended credit to women—or any other group. While limited numeric systems existed, these were rarely based on detailed statistical analysis. Loan officers’ everyday prejudices and assumptions more decisively determined credit eligibility. Creditors, or rather their low-level evaluators, did not deny women credit or charge them higher premiums because of their unflinching loyalty to statistical regressions but because they believed in a certain set of assumptions about the proper relation of men, women, and credit.

For both the witnesses and the commission, the solution to discrimination against women lay in greater transparency of credit evaluation and increasing automation of decision making, moving credit evaluation out of the hands of discriminatory loan officers and into the algorithms of objective quantitative credit lending models, which they believed would end discrimination. Senator Leonor Sullivan, one of the driving forces behind the 1968 act, saw the hearings’ purpose as discovering if “discriminations against women in the extension of credit are based on real or imagined creditor problems or on old laws which may or may not still exist.”⁹¹ Sullivan was less agnostic than Millstein about discrimination. She “notice[d] that many millions of women, American women, obtain credit today without any difficulty, . . . but those women who encounter difficulty in obtaining credit often are penalized for no other reason that the fact that they are women and that is wrong.”⁹² Making credit evaluation objective would help women get the credit that they deserved.

While many industry and government representatives testified before the commission, women’s groups as well as professional women constituted the bulk of the witnesses. These self-selected voices of women were not average women. They were affluent, mostly white women who were for the most part lawyers practicing in Washington. They were the exact opposite in most ways from the ghetto rioters of a few years earlier, save for the fact that they too lived in Washington, D.C. Yet they also felt discriminated against by retailers and banks. Affluent, married women’s frustrations were political—retailers wanted to extend credit only in the name of the husband and these women wanted to be recognized autonomously from their husbands. For divorced women the discrimination was more economic—for a variety of institutional reasons, retailers resisted giving divorced women credit, despite their incomes. Unlike many ghetto rioters, these women had large amounts of money at their disposal, which ultimately retailers wanted spent at their stores. Between organized protests, political lobbying, and firm competition, professional women were able to convince Congress and retailers to change their practices and the law.

The existence or lack of individual credit histories for women drove many of the differences in credit access between single, married, and divorced women. Single women, ironically, had the easiest time establishing a credit identity, but lenders’ limited their credit access in ways that they did not for single men. Department stores, since the 1920s, had readily provided single women with sufficient income charge cards. Nonetheless in the early 1970s, even after the ostensible end of coverture, when a woman married creditors merged her credit identity with that of husband. As National Organization for Women (NOW) representative Lynne Litwiller testified, “in a country where credit is more important than money . . . women are summarily excluded, at best tenuously eligible conditioned upon remaining forever single. Any woman who is married, has been married, or who may ever get married, 90 percent of all women, will find that credit follows the husband.”⁹³ Even in the late 1960s and early 1970s, as so many middle-class married women entered the workforce, women still depended on their husbands for their economic identity. For feminists, credit dependency on their husbands was a tangible reminder of how institutions defined them as an economic appendage of their husbands. Much more so than single women, married women confronted challenges in acquiring credit if they wanted it independently from their husbands. While married men could easily make credit choices affecting their households, women who tried to do the same met consistent and obdurate obstacles. At the intersection of the feminist desire for economic independence and the middle-class performance of consumption, credit access contingent on their husbands’ approval focused the exasperation that many professional women felt about the limits of their economic freedom. Government studies, Congressional hearings, and women’s letters revealed the pervasive and infuriating difficulty women had in contracting credit without men.

The department store provided the largest source of frustration to affluent, married women partially because these women had so easily acquired credit there before marriage. Middle-class and professional women, forced to get their husband’s approval to shop even when they spent their own hard-earned money, became furious. Most department stores forced newly married women to close their accounts and reapply for credit in their husbands’ name. Women’s credit history prior to their marriages had no bearing on their credit as married women and credit access depended on her husband’s credit history. For women who had shopped at these stores for years, dutifully paying their bills every month, the demand for reapplication did not seem like due diligence but a gross insult to their personhood.

Jorie Friedman, for instance, had worked as a well-paid newscaster for Chicago’s NBC affiliate for many years before meeting her husband and had had credit accounts at most major department stores, always paying her bills on time. Through her large salary as a newscaster, she never had any trouble getting credit, that is, as she testified, “until [she] got married.”⁹⁴ Friedman recalled that, “the response of the stores was swift.” One store closed her account immediately and all the rest sent her applications to reapply, asking for her husband’s name, bank accounts, and employer. Friedman’s own name, accounts, and employer no longer mattered. The stores all claimed that they were forced by the law to close the accounts, but using her investigatory skills as a reporter she quickly discovered that there were no such laws in Illinois. Retail credit practices, not the law, created the situation.

Unfortunately for both Friedman and her husband, her husband had been unemployed when they were married since his unsuccessful bid for mayor of Chicago. With a husband out of work, the well-paid newscaster could not get credit. Applying for a charge account at “one of the world’s largest department stores,” Friedman was asked for her husband’s employer. As he was unemployed, she offered her own employer and her bank. The credit officer told her that, “we don’t care about the women, just the men” and refused her an account. To Friedman, this experience summed up the credit problems of married women: “in the eyes of a credit department, it seems, women cease to exist, and become non-persons, when they get married.”⁹⁵

Credit represented more than a simple extension of payments for these professional, independent women; credit access reified both their middleclass consumer power and the gender limits circumscribing that power. To be confined to the limited economic and social role of “wife” as dependent, to be as Friedman said, “treated like a child,” abrogated professional women’s public achievements. All over, professional women found they could not shop without their husband’s authorization, even if they paid the bills. For Friedman, Campbell, and other professional women, being denied credit was a violation of their consumer freedom.

For women who were the primary household earners, such a husbandcentered credit system made their lives even more difficult. Josephine McElhome, an economist with the Federal Home Loan Bank Board, testified that “in general, it seems that unless a married woman of childbearing age has a long work history and can produce a doctor’s certificate stating that she cannot bear children, her income will be largely disregarded.”⁹⁶ Similar medical information was never required for men. Sharyn Campbell, a lawyer with NOW’s Women’s Legal Defense Fund, recounted the story of a married woman who, upon applying for charge card with a “major chain store,” was told that her application could not be accepted unless her husband was listed as the head of the household and she as a dependent.⁹⁷ The outraged woman, who was a “practicing attorney earning the same salary as her husband,” went to the Fund for legal redress when the credit officer told her that she “might have children and then become dependent on [her] husband.”⁹⁸ Lenders took the greatest possible care to establish the probability of a wife’s possible pregnancy, including requiring in many cases a letter from her doctor that she was either infertile or on a well-regulated birth control program. No similar inquiries were made, Campbell pointed out, about “the effect that unforeseen illness or physical impairment would have on [the husband’s] earning capacity.”⁹⁹ No medical examinations or doctor’s letters were ever required on behalf of the man. Pregnancy was seen as an inevitable interruption in payments. Working mothers were not conceived as part of the credit system.

Usually lenders only counted the husband’s income in determining how much credit the couple was good for; if they counted the wife’s income, lenders only included a fraction thereof. In Minnesota, the state Department of Human Rights received repeated complaints of sex discrimination in credit access. To investigate discrimination, the Human Rights department had two investigators—a man and a woman, each earning $12,000 and each the sole supporter of a family—go to twenty-three banks to borrow $600 for a used auto. More than half the banks refused the woman credit without the husband’s signature, or “approved the loan only as an exception to their usual procedures.” Some, suspecting her marriage was in trouble, referred the female investigator to marriage counseling. The same banks, denying the woman a loan, waived the co-signer requirement for the man.¹⁰⁰ The St. Paul’s study showed, as its published form was titled, that women could not easily borrow money for an auto, even though a husband could easily borrow without his wife.

Lenders defended their policies in several ways, all of which resulted from the absence of a married woman’s independent credit history from her husband. At Sears, Roebuck, women regularly had difficulty gaining independent credit without the assistance of men. Mildred Hagen, a credit executive with Sears, testified that accounts defaulted to the husband unless the wife requested special treatment. The Sears manual allowed special treatment if “her circumstances qualif[ied] her as acceptable according to Sears normal standards” [emphasis in text].¹⁰¹ Hagen insisted, however, that accounts defaulted to the husband in an effort to “avoid confusion of misapplied payments, misapplied sales, etc.” rather than an intentional desire to affirm patriarchy.¹⁰² Male authority, however, riddled the Sears credit training manual. The manual required that a married woman’s name be prefaced by “Mrs.,” and that the remainder of her name be that of her husband, as in “Mrs. John Smith.” Again Hagen explained this procedure as a simple artifact of bookkeeping. The Sears witness claimed that “these instructions help to prevent mistakes on credit reports” and that “without this information it is possible for erroneous reports to be made if there are a number of individuals with the same common name in file.” Sears justified its denial of women independent credit in an effort to keep the files straight with the credit bureau, even as this denying of credit kept their identities out of the credit bureau, which in turn demanded that women not have independent credit identities! In keeping a family’s, that is, the husband’s credit rating straight, women were denied an economic existence. With all credit transactions in her husband’s name, a married woman could not have a credit history.

Many lenders also erroneously pointed to state laws that made the husband responsible for the wife’s debts, which they claimed forced them to check with husbands before extending their wives credit.¹⁰³ Yet the reverse was not true. If such laws had still existed—which, by 1972 they did not—the wife would have also been responsible for her husband’s debts. Yet these same responsible lenders never thought they ought to consult with the wife before extending the husband credit. Moreover, such national firms, such as the department store J.C. Penney, often had common credit applications for their stores across the country, undercutting the state-specific requirements that they used to defend their credit policies.¹⁰⁴

Bank credit cards, like BankAmericard, treated women largely the same as the department stores. Creditors resisted giving wives autonomous credit identities from their husbands. BankAmericard policy was to issue cards only in the name of the husband. Credit card companies and department stores typically assumed that the husband headed the household and could, at his leisure, extend credit cards to other members of a household including his wife. For a woman to apply for a Diners’ Club card, for instance, required a husband’s authorization, whereas a husband’s application did not require a wife’s authorization.¹⁰⁵ Wives could receive a “supplemental” Diners’ Club card with the written permission of her husband and $7.50.¹⁰⁶ The additional card asked only for the wife’s first name and middle initial—there was no way to indicate if a wife had a different last name from her husband. Treating women as appendages to their husbands could be bad for business. A Chicago woman, for example, wrote Congresswoman and feminist activist Bella Abzug about her frustrating experience with BankAmericard. In May 1970, when her bank switched over from a regional credit card network with First National Bank of Chicago to the national BankAmericard network, all earlier cards were canceled and replaced for members in “good standing.”¹⁰⁷ But as this female cardholder noticed, all the customers in good standing “must be standing in a Men’s room somewhere.”¹⁰⁸ All her male acquaintances received their cards, as did her husband, but she only received an application. After repeated calls and letters to First National Bank, where she had a savings account of over $2 thousand and a history of prompt payment, a credit manager, who tried once again to have her fill out an application, assured her that she would have her credit card by January. By March of 1971, when her credit card still had not arrived, she closed out both her and husband’s accounts with the bank. More than the loss of convenience was the outrage at being treated differently than her husband. Swearing that she would “never willingly put another penny in your bank” in a letter she wrote to the bank, she hoped that other women, “treated in this same high-handed fashion,” would also someday withdraw their money to the bank’s regret.¹⁰⁹

Separate credit histories were possible, to establish in theory, but for most married women the institutional and financial barriers were insuperable. Homer Stewart, who was senior vice-president of consumer loans and credit cards at Dallas National Bank and a spokesperson for the American Bankers Association, affirmed that in his bank a woman upon marriage would have to reapply for her bank credit card, which at Dallas National was “Master Charge.” Stewart claimed the reapplication was to find out if she would continue to work. If she continued to work, the bank would continue the plan, but if she stopped working to “settle down and raise a family,” the bank would insist in putting the card in “papa’s name.”¹¹⁰ It was possible, Stewart explained, for women to create autonomous credit identities even while married, but it was neither standard nor easy. Credit bureaus, at least in Stewart’s home state of Texas, could establish a separate identity for the married woman, but she had to make a special request at the local credit bureau “at her request.” While men automatically acquired a public economic identity, married women with public economic identities were special cases.¹¹¹

Additionally, the merger of identities had tangible economic benefits for most couples, which prevented many women, even if they were frustrated by the merging of their identities, from establishing separate credit histories. Most married women, Stewart testified, wanted their income lumped with their husband’s in their credit applications so that the household could borrow more.¹¹² Only in couples where the wife earned enough by herself and had feminist political beliefs did women want, and could financially afford, separate credit accounts. Women could be identified separately but at the cost of a reduced ability to borrow. For professional women or for women who earned substantially more than their husbands, this choice could make sense either politically or economically, but for many middle-class and working-class women, the desire for greater credit limits constrained their abilities to assert autonomous credit ratings while married, even if they knew that creating a separate credit rating was an option.

Such asymmetry of economic identity, as representative Martha Griffiths noted, gave “the husband control of the couple’s finances, of course, and prevents the wife from ever establishing her own credit record.”¹¹³ Without a credit record, the annoyances faced by a married woman multiplied into serious problems if she was divorced, abandoned, or widowed. For women whose husbands left them, credit became a nightmare. Abandoned women, who may or may not have worked, suddenly became responsible for all the bills of the house. If the household owed money, she was responsible for paying the debts. Yet, even if she managed to pay off these debts, she would be ineligible for additional credit without her absent husband’s signature.¹¹⁴ Without a divorce, her situation was dire.

Even for divorced women, who were becoming increasingly common in the early 1970s, credit difficulties increased.¹¹⁵ Because husbands were expected to approve credit for their wives, divorced women who wanted credit at department stores were compelled, sometimes, to produce a divorce decree or even have their ex-husbands sign for the account.¹¹⁶ Divorced men, who still retained the family credit rating, did not need their ex-wives’ signatures for anything. Part of the reason for these refusals was that companies did not consider alimony and child support payments as income. For many of these women who had small children to care for, however, alimony and child support were their primary source of income. Even if their lenders ignored their income, many women, such as Sandra Reinsch, a divorced Virginia woman, remained surprised at their credit refusals since she “had paid all [the] bills promptly for years.”¹¹⁷

Lenders’ refusal of credit despite a good repayment history astonished these divorcees, but their so-called repayment histories were in their husbands’ names, and not their own. Divorced women, to creditors, had no history. Having submerged their credit identities throughout their marriage, women found that now divorced they did not have a shared credit record with their ex-husbands, but rather had a gaping hole in the records for the entirety of their married lives. While divorced men continued to enjoy the creditworthiness their record provided, divorced women were effectively unknowns, and were treated as such by lenders.

Of course women, single, married, or divorced, who did have separate credit identities and who were “acceptable according to Sears’ normal standards,” could have independent lines of credit. But as Hagen, the Sears credit executive, testified, Sears did not grant credit to those who were “unemployed or working part-time and cannot show sufficient regular income to meet the payment,” or when credit information was “insufficient.”¹¹⁸ Either not having enough “income” or being outside of the credit bureaus’ reports was enough to be denied credit, which was the case for almost all divorced women. Sears would give divorced women credit but only if they had, as Hagen said, “the ability to pay and the willingness to pay . . . [as] evident through past credit history.”¹¹⁹ But of course, divorced women often did not have a credit history. For married women and divorced women, either of these conditions was often enough to deny them credit independent of their husbands or ex-husbands.

The “normal” policy for Sears, and similar retailers and creditors, was geared to a world of social relations becoming increasingly abnormal in the early 1970s. The “unusual circumstances” of working and divorced women rapidly was becoming more commonplace. The “marriage in which the ‘responsible’ member is the wife,” but the husband has a bad credit record, was rectifiable only through the special intervention of the credit sales manager. Similarly, a businesswoman who wanted to have credit in her maiden name would also face obstacles, although they were not insuperable. Sears did not believe that a contract with a woman under her maiden name, which was no longer her legal name, would be valid or enforceable.¹²⁰

Sears considered divorced women “unusual.” For Sears, the lack of a credit record for these divorced women made a general “policy position” impossible since every situation was “individual.” Yet Sears managed to extend credit to young men and women without previous credit histories all the time, and this was not considered an unusual circumstance. The Sears manual encouraged the interviewer to have a “friendly, businesslike approach employing a liberal amount of tact” but also emphasized the “thoroughness [that was] essential in obtaining all the information needed to facilitate a prompt investigation and sound credit judgment decision.”¹²¹ Hagen remarked, in response to pointed questions, that divorced women without credit records would need to be interviewed and counseled by the credit officials, which as so many witnesses testified, they found demeaning since their husbands had to undergo no such travails. The ex-husband’s credit record, often spotless through the ex-wife’s careful management of their finances, guaranteed him easy credit, while guaranteeing her a series of impertinent interviews. Beyond the inequities of gender, consumers deemed the credit manager’s interview insulting even though such interviews had been a standard part of the credit process throughout the 1950s. Filling out a form and checking with a computer record was considered the polite way of lending money. Not only who was borrowing, but who—or what—was deciding to lend was changing by the early 1970s.

For Sears, these “unusual cases . . . represent[ed] only a very small number of the transactions Sears handle[d],” but for the women whose lives it circumscribed, the experience was both infuriating and degrading.¹²² Whether the number of Sears’s divorced customers was small was due to the hassle that these “unusual cases” encountered or because this group was naturally small and/or did not want credit remains indeterminable. It seems more likely, judging from the larger demographic statistics, as well as the other witnesses at the hearings, that it was not that they did not want credit but that Sears and other retailers made it difficult for them to acquire it.

Though lenders commonly discriminated by sex and marital status, such practices began to change in response to agitation from both above and below in the early 1970s. At the local level, independent feminist groups as well as those associated with national organization like NOW organized locally to petition their city and state governments for changes in their laws. For instance, after the failure of the Minneapolis government to pass an antidiscrimination law, an official with the Department of Human Rights reported, a “west suburban female liberationist group” organized “protest marches, rallies, had confrontations with department stores and credit bureaus, demanding that women be able to establish their own credit.”¹²³ Eventually such protests forced the city government to change the law.

Despite the local patchwork of legal changes across the country, discrimination persisted. While the suburbs of Minnesota erupted in protest and the laws were changed, the St. Paul’s study, which took place six months after the passage of the antidiscrimination law, revealed the persistence of practices and assumptions among loan officers that hampered the ability of women to borrow, even as higher-level policies attempted to stamp out gender discrimination as a way to reach out to female consumers.

The culture and practices of low-level loan officers, more than the law itself, engendered discrimination. Betty Howard, of the Minnesota Department of Human Rights, believed that despite the law, the formal antidiscrimination policies of banks “[did] not appear . . . to be filtering down to the middle and lower level of credit interviewers.”¹²⁴ Howard testified that despite the law, most interviewers, with whom credit control rested, believed “anatomy is destiny.” An attractive woman of childbearing age, “regardless of her employment record or good credit references,” would have difficulty in getting credit, one credit bureau head told Howard, because “they are very likely to get pregnant and are considered bad credit risks.”¹²⁵ Similarly, department store credit officers had similar difficulties implementing higher-level directives. Even after official Sears policy changed to count alimony and child-support as income, the actual employees did not always do so. Hagen referred a “problem of communication” to the lower-level credit employees whose decisions reflected “society and circumstances” rather than corporate policy. With such “radical changes” under way in society, Hagen argued, it would take time for the corporate policies to be truly understood by employees.¹²⁶

At the executive level, lenders, even in companies where informal discriminatory practices persisted, tried to change the direction of their companies to increase profits. More than any law, the potential profits of lending to affluent women provided a tremendous incentive for feminists to fight for change. At the same time as organized women protested discrimination, some lenders who saw a tremendous market opportunity in appealing to affluent, creditworthy women, began actively to try to alter their lending practices. “Our policy,” Sears credit executive Mildred Hagen stated, was “to adjust to . . . consumer needs.” Joseph Barr, president of American Security and Trust Company and former undersecretary of the treasury, testified and believed that “profit is still a more powerful motive than discrimination, especially in public institutions.”¹²⁷ Contradicting the testimonies and letters from women who encountered discriminatory lenders, he believed from his experiences as a banker that most women were good credit risks, but most importantly he thought that if women were good credit risks, and bankers discriminated against them, they would lose good profits. Market pressures would solve credit discrimination if women were good loan candidates.¹²⁸

Homer Stewart, American Bankers Association representative, emphasized that women with their higher earning power could make good loan candidates, but that they had to “meet the qualifications for credit” just the same as the “male borrowers.”¹²⁹ These standards, according to Stewart, include “good character, vocational stability, financial capacity to repay, considering continuity of income and availability of assets, personal qualifications, such as an age commensurate with the maturity of loans, and a purpose for the loan.”¹³⁰ Stewart did not believe there was “widespread discrimination against women simply because of gender” but because, according to his figures, women’s median 1969 income was $5,080 compared to $8,670 for men. It was the difference in income, rather than discrimination, that led women to be rejected for credit.¹³¹ On the surface, this argument seems sound and makes sense, yet when considered alongside the actual experiences of high-earning women, the social practices of credit belie this simple argument. For instance, Stewart pointed to the reason for the co-signing of a woman’s automobile loan—as a guarantee in case the woman died someone would be responsible for the loan. But on men’s loans, no such requirement was made.¹³² Yet men who owed money on cars died every day. Stewart’s qualifications were based on male borrowers, male life patterns, and male credit histories. Women, particularly married and divorced women in the late 1960s and early 1970s, could not, because of marriage, meet these requirements. Single women were easier to lend to, Stewart noted, because they had a credit rating.¹³³

If profits could be made, it was believed, banks would lend. The market would correct itself. Some banks did seem to be following this logic, like National Bank of North America, a New York-area bank owned by the finance company C.I.T., which ran advertisements proclaiming that they, unlike their competitors, did not discriminate: “whether you’re a Miss, Mrs., or Ms., we make loans to all creditworthy people.”¹³⁴ In the advertisement, an attractive blond woman, who carries department store boxes under her right arm and holds her left fist up—signifying both greeting and solidarity—unites consumer credit with feminism. For women who faced challenges because of their marital status, reading that “married, single or divorced . . . none of that matters” must have mattered a lot. Despite these gestures toward credit equality from bankers, the market incentives for lending to women had already existed and had already failed to erase discrimination. National Bank of North America’s advertisement was unique enough to warrant winning a “positive image award” from NOW.¹³⁵ The market alone would not completely change lender discrimination. Loan officers whose judgments were based on inherently discriminatory information, were embedded in a bureaucracy and a culture that did not always respond to market pressure.

Many of these bankers had no problems, at least publicly, in supporting legislation to erase sex discrimination in lending. John Farry, president of the U.S. Savings and Loan League, stated that he would be “willing to accept and promote such an amendment.” These bankers who already tried to maximize their profits from lending to well-paid women had no problem helping the market along with some antidiscrimination legislation. Yet legislation, even they acknowledged, might be necessary to hurry along cultural changes that market forces could apparently reform only slowly.

Across the country, local chapters of NOW organized “credit task forces” to gather information and organize on the local level, while coordinating with the national offices in Washington. Following the hearings, Sharyn Campbell, who had become the national coordinator for the NOW Task Force on Credit, reiterated in a letter to the membership the organization’s belief “that all people should have equal access to credit privileges provided they are creditworthy.”¹³⁶ The National Commission on Consumer Credit hearings had spurred NOW into action. Campbell told the membership that the hearings had “established that a nationwide pattern of discrimination against women [did] indeed exist in the various elements of the credit industry. At the local and state level, Campbell encouraged local chapters to “conduct studies to document discriminatory activities,” as well as protest discrimination from retailers and lenders, and to support legislation to end “the denial of credit on the basis of sex or marital status.” The local legislative campaign was very successful. By 1974, half of the states had laws prohibiting discrimination against women.¹³⁷ At the everyday level, however, women still needed to confront the assumptions of employees, which was necessary, as NOW Vice-President Gene Boyer thought, “to help make feminist credit policies a reality by whatever means possible.”¹³⁸

Some banks attempted to use feminism to sell their financial services and to take market share from discriminatory lenders. Though drawing on the language of black radicalism, feminist credit activists reaffirmed the primacy of income as the justification for credit access and, while certain that gender discrimination was unjustifiable, offered contradictory positions on racial discrimination. Class prerogative structured feminists’ notions of women’s liberation.¹³⁹ Many of the testimonies centered on the outrage that middle-class, professional women felt at being able to have careers as independent women and still be treated like dependent homemakers. More than the amount or type of credit, these critics, like NOW’s Lynne Litwiller, seemed more bothered that a “woman achieves the use of credit only as an appendage of the husband,” than that women in general were ever denied credit. Credit for these professional, married women was not a strategy of survival but an expression of class privilege, economic independence, and pride.¹⁴⁰ To struggle for equality and respect in the workplace and then be denied the consumer benefits of that achievement in the marketplace just reinforced how undervalued professional women were. “While it might seem [that] the refusal to grant credit to married women is a trifling matter,” as Equal Employment Opportunity Commission lawyer, Sonia Pressman-Fuentes saw it, “to women and to blacks such conduct is devastatingly symbolic of their second-class status in American society.”¹⁴¹

At root, however, much of the anger expressed at the hearings was the class outrage of being treated like a poor person. Feminist critics both identified with and distanced themselves from the poor. As Faith Seidenberg of the American Civil Liberties Union, and past president of NOW testified, “all women are poor, even those who work . . . because they have no access to credit.”¹⁴² Though she intended it as a statement of solidarity, the implication of Seidenberg’s statement was that being a woman made even a rich person be treated like she was poor person, which was wrong. Denying poor borrowers credit was justified, but denying the wealthy was not. Yet in her testimony she also asserted the shared experience of “poor women, middle class women, and even women with wealthy husbands” to get credit.¹⁴³ In New York, Seidenberg remarked, it was “almost impossible to open an account in a department store under her own name, even though she [was] a professional and [was] gainfully employed.”¹⁴⁴ While feminist critics wanted credit to be available to all women, they also wanted their occupational and class status to count when it came to consumption. When questioned about the legal right to credit, Seidenberg agreed that while borrowers could be turned down for financial reasons, they ought not to be turned down because they were “black or because they are women or because they are Italian or something.”¹⁴⁵

At the national level, NOW intended to continue to gather evidence of discrimination and push for the passage of Congresswoman Bella Abzug’s antidiscrimination bills in Congress.¹⁴⁶ Responding to the testimony as well as letters written to her about women’s experiences, Abzug called for the end of credit discrimination based on sex. Whatever the cultural and social roots of discrimination, she saw the law as the final arbiter of what was allowed. Credit discrimination against women was possible because “all credit institutions, whether they were banks, department stores, mortgage companies are able to do this because at present, neither the United States nor the individual states have passed legislation to prohibit credit discrimination based upon sex.”¹⁴⁷ Abzug called for “viable and vigorous legislation . . . to correct this incredulous and dehumanizing practice against women.”¹⁴⁸

Again and again, different witnesses asserted that loans should be made on the basis of personal credit histories, not demographic categories. Abzug, like most of the other witnesses, denied the possibility of valid discrimination based on gender or marital status, pointing to the cultural underpinnings, rather than the actuarial underpinnings, of the discrimination.¹⁴⁹ And also like many of the other witnesses, Abzug drew an analogy to racial discrimination, pointing out that “historically efforts made in our society to make it tough for people to participate equally economically in connection with race.”¹⁵⁰ The torrent of antidiscrimination legislation to help black Americans get credit ought to be passed for women as well. As professional women confronted a credit system that made it difficult at every turn to get credit, the language and policies of the civil rights movement and Great Society program were both used and attacked to justify greater credit access for women.

Unlike credit discrimination against women, however, Abzug believed that some discrimination against black borrowers might be justified statistically. This was possible because she believed the statistics showed that with black borrowers there were “greater risks” because they were more frequently of a “lower economic level” than whites.¹⁵¹ This belief about African American income was never far from the surface of the witnesses’ testimonies and indeed from the comments of the legislators themselves. While white women could be wealthy and thus deserve credit, the federal government had helped blacks, who tended to be poor, get credit. The federal government provided access to credit where the market, by itself, could not justify it. To be clear, Abzug did not think the federal government had done wrong by legally mandating access to credit for poor, black Americans. Indeed, she believed that they should be given credit even if the statistics showed that they were higher risks. But she also believed that women should be guaranteed credit access as well and she thought that they as a group, unlike blacks, were not worse risks. In her view, the federal government had a moral imperative to step in and guarantee access to credit whatever the riskiness of the borrower. Giving credit to women was a necessary step toward “women exercis[ing] their right to rake part in all aspects of American economic life.” Credit for African Americans and women helped integrate and elevate women into productive economic roles.

In many companies, the push for ending gender discrimination from above was undone by the embedding of low-level employees in sexist and racist cultures. But applicants could not be judged one by one. The call for judging individuals on their own merits went against fifty years of lending practices. Categories were necessary to lend at the volume required in a debt-driven economy. Credit scoring, while not statistically derived in 1970, offered an opportunity to undo unjustifiable discrimination. Deciding between credit applications, whether by sex, telephone ownership, or shoe size, was a necessary component of the system. What could be done, however, was to make sure that discrimination based on cultural assumptions and habits be replaced by scientific discrimination based on data and evidence. Discrimination could be made transparent and objective. Congress could insist that such discrimination be grounded in evidence and not anecdote. In doing so, feminist activists believed that gender discrimination could be eliminated, even if racial discrimination might not be.

The difficulty with this position, of course, is that it required information on every single individual. If a person was not tracked throughout their economic life, credit could not be had. Avoiding discrimination gave a moral underpinning to expanded surveillance. For instance, NOW’s press release during the hearings called on “Congress [to] amend the fair credit reporting act to require such [credit bureau] agencies to maintain individual files on all consumers without regard to sex or marital status.”¹⁵² Progressive groups like NOW promoted universal credit surveillance to insure equal credit access for all. Women—single, married, or divorced—would all have credit ratings to insure fairer access to credit. Universal credit access would require individual credit records for all citizens and so would bring additional complications to the push for credit equality.

Surveillance, Computers, and the Fair Credit Reporting Act

Like the other credit reform bills, the Fair Credit Reporting Act, first passed in 1970 and amended in 1973, sought to restore fairness to the credit industry. In this case, Congressional policymakers sought to make credit reporting “fair,” by which credit reformers meant “accurate.” The bill’s aim was not to restrain the operation of credit agencies but to make them accurate. Consumers could not opt out of their files, but they would be able to contest the information contained. While policymakers expressed anxiety over so much information in private hands, they also recognized the importance that such a system had for the economy.¹⁵³

Confidentially and accuracy concerned everyone. But for a credit agency to work, information had to be shared. As Senator Charles Goodell (R-NY) insisted, “access to such [credit] information [should] be limited to those individuals who have a specific, immediate, and relevant need for such data.” Goodell, like many others, pointed to the “rights of an individual to his privacy,” but the legal privacy rights against unwarranted state intrusion did not exist for private corporations.¹⁵⁴ Giving information only to those who “needed” it was an ambiguous goal that was difficult to implement and legally suspect. While a government-run credit data system had been debated and defeated in the previous year, the government’s role in regulating the credit reporting industry was still undecided.¹⁵⁵ In 1969, a consumer had no legal standing to challenge an error on a credit report, much less find out if an error existed in a credit report. While some voluntary guidelines had been adopted by the Associated Credit Bureaus in the previous year, many policymakers remained suspicious of the power and secrecy of the credit reporting companies. As Virginia Knauer, President Nixon’s representative on consumer affairs, remarked, “too many consumers feel that information fed to credit reporting agencies is not always full information, and sometimes not even correct information.” To Knauer, the credit databanks constituted “almost a privately run spy network.”¹⁵⁶ For Paul Dixon, the chairman of the FTC, the framework set by this bill would set the stage for the next era of capitalism. Dixon saw this legislation as important because “the rapid growth of interconnected credit bureaus tied in with computer centers and telephone lines constitutes an agglomerate growth pattern which will likely parallel, in ultimate significance, the history of the railroad and telephone systems.”¹⁵⁷ Credit reporting would form the infrastructure of the computer-age economy, as the railroad and telephone had made possible the industrial-age economy. To Dixon and the authors of the bill, the fairness of the Fair Credit Reporting Act (FCRA) was in preserving the accuracy of information. Dixon saw “the two words as synonymous in this bill. Fair and accurate.”¹⁵⁸ These two issues, privacy and accuracy, drove the debates surrounding the FCRA, and how to resolve them would shape the future of the credit reporting industry, which, outside of legal questions, was under other pressures as well.

By the late 1960s the credit reporting industry issued 97 million reports but even as it expanded it was transforming under new demands from technological change and firm competition. While the most rapidly growing and most profitable credit bureaus were computerizing, the majority of credit bureaus, even in 1969, were not updating their methods. And though at the end of the 1960s a few credit agencies like the Retail Credit Company overshadowed many smaller bureaus, these local credit bureaus still existed and constituted the bulk of bureaus in the United States. The older, local model of credit reporting, while still dominant and which relied on local informants, card catalogs, and telephones, only slowly gave way to objective accounting data, computer data bases, and modems. Computerization changed credit reporting not only quantitatively in terms of speed and volume, but qualitatively by transforming the kinds of data reported and the companies that controlled the information. Credit reports in the late 1960s and early 1970s were in a transitional moment between filing cards and data banks. While credit bureaus standardized information, it still was stored in old-fashioned ways, containing qualitative personal information.¹⁵⁹ Today’s standardized credit scores had not yet been popularized. Information remained detailed, personal, and prone to error.¹⁶⁰ As Congress wrestled with regulating credit information, legislators were caught between old and new, making policies suitable for neither.

Retail Credit Company was first organized in 1899 in Atlanta by two brothers, Cator and Guy Woolford, who had experience in the grocery business. Initially, the company provided consumer credit information for local grocers and other retailers who extended open-book account credit.¹⁶¹ The company expanded into insurance, personnel, and automobile reports, so that by the 1960s consumer credit reports made up less than 20 percent of the company’s business.¹⁶² In the early years of credit bureaus, information came from local informants who were paid by the report. Lawyers and bartenders alike informed on fellow citizens. By the early 1960s, however, Retail Credit Company brought this paid informant network in-house and full-time inspectors wrote 98 percent of all reports.¹⁶³ Credit bureaus, who now paid these inspectors full-time salaries, pressured investigators into producing many reports per day, with the expectation that a certain percentage of those reports would be negative. At the Retail Credit Company, for instance, investigators produced an average of 11½ reports a day or, in an eight-hour day, a report every forty minutes, with no lunch break. Such time pressure precluded the cross-checking of information.

These inspectors pressed the boundaries of privacy, reporting a hodgepodge of personal information to retailers, who then decided in idiosyncratic ways on whom to lend to. As Erma Angevene, executive director of the Consumers Federation of America, noted, credit reports moved beyond the financial into “value judgments on our marital relationships, our personal habits and morality, how well we maintain our households and a countless number of other intimate details.”¹⁶⁴ One widespread system of finding out information about a newly arrived household was called, depending on the city, either “Welcome Wagon” or “Welcome Newcomer.”¹⁶⁵ When a middle-class family moved to a new place, the credit bureau would employ one of these two services, which would send a respectable middle-class woman to the new house to call on the woman of the house. Accounts varied on what happened next. According to critics, the Welcome Wagon employee would welcome the newly arrived wife into the neighborhood and present her with complimentary gifts from local merchants.¹⁶⁶ Dissimulating herself as a friendly neighbor, the employee would accept the inevitable invitation in to have a cup of coffee. As one unguarded housewife remarked, “Here comes a nice lady with nice little gifts. You sit and tell the nice lady these things.”¹⁶⁷ Over coffee, she would casually ask about the recently arrived woman’s family: her husband’s line of work, their religion, where they had lived before, how many children she had, what kind of car she drove, and on and on. While many women found this line of questioning a bit too familiar, for the sake of propriety they answered the questions.

After the employee left, the inspector entered all this information into a credit bureau report and moved to the next address, which she gleaned from the credit bureau’s records of new utility account openings. These reports would include all the information from the conversation as well as a description of how well kept the house was and what furniture needed to be purchased, which then was sent to local merchants. Finding out where the family used to live allowed the local credit bureau to forward that information from the previous credit bureau. According to the credit bureaus, these employees were instructed to present themselves honestly as representatives of the local credit bureau. Presenting surveys of visited homes, credit bureaus claimed that over three-fourths of households remembered that the visitor was from a credit bureau.¹⁶⁸ Moreover, 91 percent of those surveyed thought, “there [was] advantage in having credit record transferred here.” While the reliability of the survey was suspect since it was taken after the disparaging reports in the local newspapers, it also revealed that many thought there was an advantage to having a continuous credit record, pointing to the pride in, and importance of, a credit history. As these employees were paid to find out information, like other investigators at the credit bureau, Welcome Wagon employees who did not produce information could lose their jobs. All credit bureau employees felt pressure to dig out information. Even if the bureaus were clear in their instructions, there would no doubt have been incentive on the part of the Welcome Wagon employee to obscure her origins.

Such intrusions affected more than shopping. Whereas earlier one needed a good job to get credit, by the end of the 1960s one needed good credit to get a job. Credit bureaus’ power went beyond consumption into the workplace since employers frequently consulted credit reports when someone applied for a job. Both small credit bureaus and national ones, like Retail Credit Company, used their data for purposes other than credit. Alan Westin, a Columbia University law professor and well-known privacy advocate, believed that for the unemployed, the credit report could have what Westin called a “self-fulfilling prophecy.”¹⁶⁹ Negative information about a person’s work habits or personal finances, possibly biased or incorrect, could prevent future prospective employers from hiring that person. The bureau reported the same information as in a credit report, but instead of denying someone a loan, the report denied him or her a job.¹⁷⁰ And every inquiry into the credit record was recorded, leading future prospective employers to see a long history of rejected job applications.

For the misrepresented, even finding out that a credit report maligned their reputations proved challenging. The contracts between the potential employers and the credit bureaus forbade telling denied workers about the report at all, much less the source of the negative information in the report.¹⁷¹ Even by the late 1960s, consumer activists believed, many consumers did not know the importance of their credit record in shaping their public and private lives.¹⁷² Cloaked in secrecy, these bureaus wielded a tremendous amount of power over people’s consumption and work lives, but with very few avenues of recourse for the misrepresented.

W. Lee Burge, president of the Retail Credit Company, defended the investigatory model of credit reporting. The information they found, he claimed, helped the economy function efficiently. Protecting their sources kept the information free-flowing and honest. Burge thought that, “the confidential treatment we have accorded over the years to the sources of our information, as we have to the individual reported on, is vital to the continuance of the smooth flow of business information.”¹⁷³ If consumers knew the identity of the informants then they would harass them, especially when the information was accurate and damaging. Revealing informants would not increase accuracy, Burge insisted but, because of fear of harassment, “sources [would] alter their stories.”¹⁷⁴ The intensely personal information revealed through investigators and services like the Welcome Wagon were important because Burge believed that “the care with which a person exercises the premises of his home seemed to be carried over into other habits of his life.”¹⁷⁵ Despite his claims to the contrary, the Retail Credit Company manual instructed investigators “to investigate in such a manner that the applicant or insured will not learn of the investigation.”¹⁷⁶ The decentralization of the information in card files and 300 branch offices offset, Burge felt, the Orwellian possibilities of the information’s misuse. The very inefficiency of the qualitative, noncomputerized systems made Retail Credit Company’s services not nearly as sinister as detractors like Westin claimed.

The older filing systems still allowed for privacy breeches, however, even without being centralized. Credit information could be accessed either by paper requests, or more frequently, it was obtained over the phone. Subscribers to the credit bureau service would receive an identification number and when they needed information on someone would call the bureau and give the identification number. But, as William Willer, critic of the credit reporting industry and director of the National Consumer Law Center, there was no telling who had that number, or even whether they were using it only for work-related purposes. In December 1968, an investigation by CBS News found they could get ten out of twenty randomly chosen names from a credit bureau.¹⁷⁷ Information was restricted to credit bureau members, who may or may not be creditors. The FBI, while not a provider of personal loans, credit cards, or mortgages, nonetheless was the largest single user of credit bureau services.¹⁷⁸ Rather than conspiratorial and Orwellian, however, the credit bureaus should be understood as just negligent and profit-oriented. Only after the media and governmental backlash against the ease with which anyone’s information could be had, did they begin to restrict access. But by 1969, even voluntary industry guidelines on privacy were insufficient to quell the rising call for regulation.

While lawmakers debated the privacy concerns created by the networked power of computers, to capture the efficiency gains of computerized credit systems reporting agencies moved away from the most invasive breeches of privacy. Policymakers agreed with industry that someone’s debt record and income could be reasonably used to predict their future behavior. While opinions over the relationship of drinking, divorce, and household cleanliness with creditworthiness persisted, after the FCRA they became largely irrelevant, not by legislation but by changes in the credit information industry itself. The turn to strict financial data, practiced by new companies like Credit Data Corporation (CDC), largely erased the privacy concerns over personal information created by investigative credit reporting.

CDC, founded only a few years earlier, represented a different model of centralized, anonymous, computerized credit reporting. In the words of its founder and CEO, Harry Jordan, “Credit Data is the first on-line computerized credit reporting agency in the United States.”¹⁷⁹ By 1969, CDC had 27 million people on file and was adding a half-million people a month.¹⁸⁰ Each customer had computers installed on-site. Credit Data’s cutting-edge system allowed access to a borrower’s credit information in less than three minutes over a direct teletype connection to the corporate mainframe. Jordan’s privacy concerns structured the organization of the CDC. He believed “that if data banks of the sort that we operate are to survive without creating a mechanism for a police state or for an entirely different sort of society from what we have lived in the past, they must be very carefully insulated from access for purposes other than the announced intended one.”¹⁸¹ Jordan claimed, as well, that CDC was less prone to hoaxes than other organizations because the information was accessed by dedicated computers and not by telephone. While anybody could steal an identification code and phone-in, computers that could dial-in to the mainframe were much harder to come by in 1970. CDC did not release information to the government, and through the late 1960s and early 1970s was embroiled in litigation with the IRS for refusing to release consumer information.¹⁸²

Accuracy in its data, moreover, was much higher than in traditional credit bureaus. CDC data did not come from police reports or consumer interviews like Retail Credit Company, but from the accounting data bases of its subscribers. Such accounts were, of necessity, more accurate than the hearsay reported by inspectors. As Jordan noted, “it is in the subscriber’s own interest to keep his books in balance and he takes stringent measures to reduce the errors in his accounting system.”¹⁸³ Financial data obtained in this way was cheaper to acquire and more accurate than investigative reporting. If their clients were content with just financial data, why should a credit rating agency find out if someone had a bad driving record or a drinking problem when such information could open them to potentially expensive libel suits? Converting handwritten data to computer data opened the possibility of typing errors.¹⁸⁴ CDC’s computer-to-computer data transfer created no such errors. Harassment issues had less meaning when there was no individual informant but an anonymous magnetic tape containing a company’s financial data. Between the new laws and the new data systems, the companies that practiced old forms of credit reporting either began to lose ground to the new companies like CDC or adopt their methods.

Credit bureau companies like Retail Credit, which had the organizational wherewithal and capital to adapt to the new system, continued to prosper. Small town credit bureaus that eked out marginal profits with expensive, manual card catalogs were trapped in legacy organizational systems and did not have the money to computerize.¹⁸⁵ In 1973, Associated Credit Bureaus reported that 20 percent of its membership had an average gross income of only $10,500 a year. Only 80 of its 2,100 members had computerized, which left a gigantic market niche to fill for TRW and other large computerized credit agencies with consumer reports that were cheaper to produce and that would quickly obliterate the smaller companies. As Retail Credit Company used its large capital to become Equifax in the mid-1970s, it changed more than its name—it changed the way it did business. The older, inaccurate, expensive investigative reports gave way to the new methods. The profitability of the new credit methods led to Credit Data’s acquisition by the large conglomerate TRW in the early 1970s.¹⁸⁶ Following the efficiencies of the computer age, TRW abandoned investigative reports on consumers and had no information about habits, moral character, driving record, or health in their records, just financial data on outstanding debts, income, and payment histories.¹⁸⁷ Rather than relying on investigators, TRW relied on accounting books. The information was cheaper, more reliable, and easier to quantify and to store on a computer’s magnetic tape. Using this new information, TRW quickly caught up with its competitors.

Character, the old cornerstone of the four C’s, which formed the basis of lending, no longer mattered. A new “C,” computer, had taken its place. The long shift from qualitative to quantitative credit information had been completed. In the end, legislators and consumer groups feared the inaccurate and personal information of the older system more than centralized computer information. Consumer groups like the National Consumers League were willing to cede the existence of such data bases in return for citizens’ ability to correct inaccurate records.¹⁸⁸ The credit data could exist but only if it were true. Credit reporting agencies could wield the power of information but it had to be used in a fair manner.

While the new laws fostered greater transparency and reduced credit discrimination, they also created a much more complicated environment in which to lend. For smaller retailers, the red tape was too much. By the late 1970s, Congressional researchers believed that the “trend for retailers to eliminate the use of in-house credit and to rely instead on bank credit cards such as Master Charge or BankAmericard,” was in part driven by the “amount and complexity of Federal regulations.”¹⁸⁹ Most importantly, the computerized credit report encouraged the movement away from humans judging other humans to a credit system based on computerized information analyzed by computer models. Computerized credit reporting moved the industry away from hearsay, moralizing, and discrimination toward a more impartial and financial basis for its judgments. At the same time, computerized credit reporting further consolidated consumer finance operations in large banks and finance companies outside the hands of retailers.

Unexpected Statistical Reasoning and the Equal Credit Opportunity Act

The fight for credit fairness as understood in expanded credit access, begun with the Consumer Credit Protection Act, culminated with the Equal Credit Opportunity Act (ECOA) in 1974 and its subsequent amendments. Emerging from the recommendations of the National Commission on Consumer Finance’s final report, and reflecting the nationwide surge of feminist activism on credit issues, ECOA initially focused on the experiences of women. ECOA, as passed, forbade only discrimination on the basis of sex and martial status.¹⁹⁰ Banning one form of discrimination made banning other forms politically easier. Congress quickly expanded the antidiscrimination protections of the ECOA with amendments passed in 1976 to prohibit discrimination by race, religion, national origin, or age.¹⁹¹ As President Ford signed the amendments into law, he remarked that it promoted “equal opportunity in all aspects of our society” and the shared commitment of Congress and the administration to “achieve goals of fairness and equality in a broad range of business transactions [that] millions of American consumers engage in every day of every year.”¹⁹² Under ECOA and its amendments, credit discrimination through socalled “protected categories” became illegal. The suspicions of a private information data base on every American and the lingering doubts about borrowing—fears still prevalent in the 1960s—were overcome and resolved in the notion of fairness and accuracy. Universal information was legitimate as long as it was accurate, and enabled every American had the right to credit regardless of race or gender.

As late as the early 1970s, race had remained a standard question on many credit applications. The FTC conducted a study of the lending practices of a major consumer finance company in 1970 and 1971. Collecting racial information remained a standard practice. At the individual level, Sheldon Feldman, an FTC official said, whether an applicant was white, black, or “of Spanish origin” was noted on every application. The credit applications were all given a point score of which white borrower got seven points, a “person of Spanish origin” four points, and a black borrower no points at all. Loan officers inspected minority applications more attentively than white applications. Applications from “racially mix marriages,” Feldman noted, “were automatically rejected because of what was considered to be the inherent instability of such marriages.”¹⁹³ As with mortgages, this major consumer finance company made no loans in “blacked out” areas that were, Feldman found, “largely black, low income neighborhoods in large cities.” Even if reliable customers had lived there before the finance company imposed the blackout, they received no more loans.

By the late 1970s, in an effort to eliminate any possibility of lawsuit, many creditors completely eliminated loan officers in evaluating applicants, accelerating the shift to computer-based credit models.¹⁹⁴ The “traditional credit manager,” Richard Cremer, a Montgomery Ward’s credit executive, remarked, “emphasized his face-to-face contact with the credit applicant,” which allowed non-relevant qualities of the applicant to cloud the loan officer’s judgment.¹⁹⁵ “Biases, prejudices, and even mood” could affect the loan officer’s evaluation, Cremer felt, and this hurt revenue. The credit score, according to Ward’s policy, “encourage[d] a decision motivated by economics alone” and was the “only available method that [met] the criterion of fairness.”¹⁹⁶ Race, marital status, and other “protected categories” were easily removed as variables from the models as creditors moved from human “judgmental systems” to computer credit models. Without these discriminatory categories in the models’ variables, any hint of illegality could be easily disproved. Creditors could point to their models—which had no variable for gender or race—and say that they did not discriminate. The computer model offered creditors the appearance of non-discrimination by eliminating human prejudice. Applications became more consistent and less subject to the whims of a particular loan officer. In computer models, feminist credit advocates believed they had found the solution to discriminatory lending, ushering in the contemporary calculated credit regimes under which we live today.

Yet removing such basic demographics from any model was not as straightforward as the authors of the ECOA had hoped because of how all statistical models function, but which legislators seem to not have fully understood. The “objective” credit statistics that legislators had pined for during the early investigations of the Consumer Credit Protection Act could now exist, but with new difficulties that stemmed from using regressions and not human judgment to decide on loans.

In human-judged credit lending, a loan officer who knew the race and gender of an applicant would be more discriminatory, whereas in a computer credit model, knowing the applicant’s race and gender allowed the credit decision to be less discriminatory. The dilemma in completely excluding race, as well as other protected categories, was that if these variables actually did predict whether a borrower would default and if they correlated with anything else, then the correlated variable would acquire the predictive power of the protected category. Women would not have to be biologically less creditworthy than men for this to occur. Women could simply be more vulnerable to unemployment, which caused income interruption. If women tended to disproportionately own high-heeled shoes, then the variable in the dataset for high-heel ownership would also reflect women’s job volatility, since gender would have been eliminated from the regression. Without gender in the data set, the spurious relationship between shoe ownership and creditworthiness could not be mathematically eliminated. The collision of statistics with racist and sexist labor markets, not culture or biology or shoe ownership, could produce discriminatory credit scores. But with credit scores, what had once appeared discriminatory now seemed objective. In passing legislation geared to a world of prejudiced loan officers, Congress made the newer computer-driven credit models actually more discriminatory.

In real life, zip codes, not shoes, came to be at the center of a renewed credit debate. Zip codes, developed for the efficient distribution of mail and not economic demography, began to be heavily used by credit-scoring companies. Zip codes, in some areas, also tended to loosely reflect racial and economic geography. For instance, if race actually did help predict the default rate of borrowers and did correlate with zip code, however loosely, then a zip code variable, in the absence of a race variable in the model, would acquire race’s predictive power, which in turn, correlated with a more volatile labor market.¹⁹⁷ In the late 1970s, lawsuits were brought against Amoco, Mobil, and Diner’s Club for racial discrimination by their use of zip codes in their credit models. Critics, like Massachusetts Senator Paul Tsongas, correctly saw the use of residential location as a proxy for race in these credit models. A study conducted by the Massachusetts Attorney General’s office found that 43 percent of African Americans in the state lived in zip codes that hurt their credit scores. They were six to seven times as likely as whites to live in such neighborhoods, making it more difficult for them to get credit.¹⁹⁸ Rather than address race directly, and the greater difficulties that African Americans had in holding onto a job in the tough economy of 1970s Boston, Tsongas only sought to add geography to the long list of other protected categories.

By sidestepping the more fundamental question of how economic structures, not individual character, made borrowers creditworthy, the anti-discrimination legislation was rendered less important than it needed to be. The desire to render two borrowers otherwise the same except for race and gender ignored a fundamental reality of the American labor market. Race and gender did affect the ability of men and women to find and keep employment. While Congress might pass a law to help guarantee access to credit, the labor markets continued to pay women less and fire African Americans more frequently. Without remedying the underlying differences to secure the ability to pay back debt—good jobs at good wages—the law only encouraged overlending to borrowers. In a sexist and racist labor market, otherwise the same women and African-Americans were frequently less creditworthy—not from any intrinsic untrustworthiness or lack of desire to pay back their debts, but from the very precariousness of their position in the workplace.

While firms could not explicitly use race and gender in their lending models, lenders found ways to sneak them in, like through zip codes. Such sneaking, it turned out, proved nearly impossible to avoid by the very nature of the mathematics that they used, if race and gender turned out to affect default rates, which, given the racist and sexist nature of labor markets, would have been unthinkable. Every time a variable was excised from the model, any other variable, if it correlated with gender or race, would then pick up the effect. If liberals wanted to rectify the financial condition of poor women and minorities, rather than focusing on credit access, they would have had to remedy the core inequalities of the labor market. Credit access could not recreate the white middle-class prosperity, which relied as much on credit as on good jobs.

As William Fair, the founder of Fair, Isaac & Company, the foremost developer of credit models in the United States, remarked, if Congress wanted to exclude race as a matter of social policy, then it should pass a law implementing that vision, but to exclude race from the credit models did not, and could not, accomplish that goal.¹⁹⁹ Simply disallowing a category made it impossible for it to be statistically separated off from other correlated variables. Geography and race were correlated, but without knowing the race of borrowers, it became impossible for geography not to include the effect of race.²⁰⁰ Divorce, for instance, was such a strong predictor of a borrower default that Citibank struggled in the 1980s to make its credit models predict default and not just marriages breaking up.²⁰¹ If creditors could ask for race and martial status, actual discrimination could have been eliminated, rather than just the appearance of ending discrimination.²⁰²

At the same time, however, of all the credit card providers in the United States by the late 1970s, only two oil companies and Diner’s Club were called to task for such discrimination. Most credit card companies had already voluntarily removed zip codes from their credit models, for fears of these accusations. The discrimination against minorities and women, so pervasive only a decade earlier, seemed to have been largely eliminated from public view, legitimated by the apparent absence of gender and race from creditor’s computer models. Master Charge and VISA were no where to be found. Diner’s Club was singled out, but it was alone among the large universal credit card systems. The credit card industry upheld the letter of the ECOA by expanding its credit offerings to inner-city Americans, no doubt replacing much of the older, expensive credit systems. While formally eliminated, however, racial and gender discrimination persisted through the transition from humanto computer-based evaluation methods. The commonsense reasoning of ECOA could never be fulfilled in a computer credit model world, where statistical reasoning held sway. The “social evil of stereotyping,” as Tsongas termed it, had been ostensibly eliminated from the world of credit. The reality of credit lending remained less certain. Lenders had less information on which to lend, which raised default rates, but that did not seem to restrict their lending, which grew throughout the 1970s to ever-greater amounts.

Conclusion: Fair Credit for All

Early calls for an actuarial basis for credit scoring had, in some ways, been achieved. The seemingly arbitrary discrimination of possibly sexist and racist loan officers had been computerized. Prejudice was no longer part of the credit system. But the third rail question of credit lending remained: Is it discrimination when there is a statistically significant difference between populations? While Congress passed legislation to maintain the appearance of fairness and prohibited discrimination, William Fair’s honest rejoinder to the public-relations-oriented retailers and voter-oriented politicians remained. In the creation of these discrimination-free models, Congress legislated away their ability to fully eliminate the effects of race and gender. Transparency was attained. The credit system, mysterious and arbitrary in the mid-1960s was, by the late 1970s, legible and mechanistic. In an effort to end credit discrimination and give more Americans the opportunity to enjoy consumer prosperity, liberal politicians remade the legal context of indebtedness.

The credit reform laws made credit easier to acquire for many consumers. In return, under this mantle of fairness, accuracy, and transparency, new creditor and credit rating firms rapidly expanded their operations across the country, further nationalizing, centralizing, and computerizing the credit industry. While lenders initially turned to computer credit models to avoid paying for credit reports, as credit reports themselves computerized, the two systems integrated. William Fair’s company went on to create the well-known FICO score—Fair, Isaac Corporation score—that is today synonymous with credit score and is generated for every American by the big-three credit agencies, two of which descended from Retail Credit Company (Equifax) and Credit Data Corporation (Experian). “Fairness” in lending, defined as objective and widespread, seemed to have been achieved, but the earlier lingering question of whether people ought to borrow, and did borrowing actually help consumers when their incomes were uncertain, remained unanswered. In a time of rising unemployment and deindustrialization, the logic of borrowing from a future income—which underpinned the postwar growth economy—began to unravel. Credit cards for all emerged at the exact moment when the future had become less certain than ever before.

Membership, nonetheless, had its privileges. For women, as an American Bankers Association representative testified, the “the only way we can tell sex right now including our credit scoring system . . . is by her name.”²⁰³ Individual credit records created the possibility of individual interest rates. The creation of individual interest rates allowed banks to extend credit in ghetto markets without the appearance of discrimination. Unlike retailers tied to the 1.5 percent per month, new individual interest rates could vary freely with credit scores. Credit had become a right because credit had become a necessity. Only when it was optional could it be seen as a privilege. If consumer credit became a necessity in participating in the modern economy, as both a worker and a consumer, then it started to become a right. Of course, credit was a right for which everyone had to pay.

The onerous experiences of credit and the poor in the 1960s, rather than being obviated by the consumer credit acts of the late 1960s and early 1970s, instead coincided with a new age of post-growth economic volatility in which the middle class began to experience the uncertainty, unpredictability, and sudden losses of income that had previously only characterized poor, urban life. Though revolving credit, which was better suited for varying incomes, increasingly replaced installment credit, working Americans overall had a more difficult time repaying their debts, even with the credit card’s flexibility. Easing the access to credit for millions of Americans and legitimating its expansion, the credit acts helped put all Americans into the position of the indebted poor, and in the face of economic uncertainty, even once stably employed Americans, once again, experienced the vicissitudes of capitalism. Outstanding debt levels, growing gradually since the World War II, exploded as consumers borrowed as they had for generations, but, for the first time, found themselves unable to pay back what they borrowed. While the amount of outstanding debt tripled from 1970 to 1979, the gap between what was loaned and what was repaid increased seven times, to $35 billion a year.²⁰⁴ Everywhere, in the face of uncertainty and declining real wages, Americans indebted themselves to maintain the life they had once been able to afford.