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Legitimating the Credit Infrastructure: Race, Gender, and Credit Access

Louis Hyman

in Debtor Nation: The History of America in Red Ink

This chapter discusses credit access. 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, ... More

This chapter discusses credit access. 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. As such, congress passed laws to guarantee impartial access to credit. At the same time, these laws legitimated practices that would have seemed usurious two generations earlier. By the 1970s, consumer credit—legitimated as fair through federal policy—grew to an unprecedented volume and creditors extended it to all Americans with uncertain consequences for the country's economic future.Less

War and Credit: Government Regulation and Changing Credit Practices

Louis Hyman

in Debtor Nation: The History of America in Red Ink

This chapter looks at a federal policy called Regulation W. As the federal government attempted to restrain inflation during World War II scarcity, it instituted both the well-known rationing program ... More

This chapter looks at a federal policy called Regulation W. As the federal government attempted to restrain inflation during World War II scarcity, it instituted both the well-known rationing program for many consumer goods, and launched the now forgotten first federal attempt to directly regulate consumer credit. With Regulation W, Roosevelt authorized the Federal Reserve to directly regulate how much consumers could borrow and the terms under which this borrowing could occur. While Regulation W reduced the overall amount of consumer debt during the war, it also destabilized established lending practices and encouraged a hybridization of installment credit and charge accounts that combined interest charges and flexibility in a form outside Regulation W. In effect, from the beginning of World War II until the Korean War, Regulation W deeply shaped the course of credit practices in the American economy, pushing retailers and consumers towards revolving credit—the nucleus of today's modern credit card.Less

Postwar Consumer Credit: Borrowing for Prosperity

Louis Hyman

in Debtor Nation: The History of America in Red Ink

This chapter examines postwar consumer credit. Many in the postwar United States achieved a material prosperity that, in debt's absence, they could not have attained. Indeed, this postwar prosperity ... More

This chapter examines postwar consumer credit. Many in the postwar United States achieved a material prosperity that, in debt's absence, they could not have attained. Indeed, this postwar prosperity enabled suburbanites with good incomes to live as well as their perhaps wealthier neighborhoods, even if they had little savings. However, this equality of consumption reinforced inequalities of wealth. While the amount loaned grew tremendously in the postwar period, the growth rate for outstanding debt remained relatively flat. Borrowing remained a viable strategy, not only because of rising incomes, but also because all consumer credit remained tax deductible. In such a favorable climate for borrowing, Americans borrowed their way to prosperity.Less

Consumer Credit, Self-Discipline, and Risk Management

Paul Langley

in Managing Financial Risks: From Global to Local

This chapter examines the embodied economy of mass market consumer credit, an area of economic activity that ballooned at the same time as the housing market. Drawing on governmentality literature, ... More

This chapter examines the embodied economy of mass market consumer credit, an area of economic activity that ballooned at the same time as the housing market. Drawing on governmentality literature, it examines the ways in which the responsibilities of borrowers for outstanding credit obligations have been transformed in the booming mass market for credit cards, such that individual borrower subjects come to perform entrepreneurial self-disciplines that extend well-beyond simply meeting repayments. The chapter emphasizes the intersection of the legal and extra-legal in the punishment of debtors, and how risk calculations in credit scoring can be understood as a technology of government. It offers reflections on the tensions and contradictions that are lived by individual credit card holders as the crisis unfolds, specifically arguing that self-disciplines of risk management fall short of completely containing the complexities and inherent uncertainty in economic life, such as precarious labour markets.Less

Personal Data in the Marketplace: Credit, Insurance, and Advertising

James B. Rule

in Privacy in Peril: How We Are Sacrificing a Fundamental Right in Exchange for Security and Convenience

This chapter studies surveillance in people's financial affairs and in the world of markets and profit-making. The discussion focuses on the marketing of personal data in three domains, namely direct ... More

This chapter studies surveillance in people's financial affairs and in the world of markets and profit-making. The discussion focuses on the marketing of personal data in three domains, namely direct advertising, consumer credit, and insurance. This chapter determines that citizens can and do choose greater control over their information when faced with clear alternatives.Less

Working-Class Life, Consumer Credit, and the Making of Agency Mail Order

Coopey Richard, Sean O‘Connell, and Dilwyn Porter

in Mail Order Retailing in Britain: A Business and Social History

This chapter explores the role of the spare-time agent, from the watch club organizer of the late 19th century through to the working housewife and mother a century later. By the end of the 1930s, ... More

This chapter explores the role of the spare-time agent, from the watch club organizer of the late 19th century through to the working housewife and mother a century later. By the end of the 1930s, mail order retailing had begun to deal directly with the women who held the purse strings in working-class families. Agency mail order only became a significant retail phenomenon when it tapped into the rhythms of working-class women's lives. This was made possible by the creation of systems that allowed for simple credit transactions, founded upon the payment of small weekly sums out of the limited disposable income available in the majority of early 20th-century households. Equally important, the catalogues and payments were administrated by family, friends, or neighbours, who were approachable and understood both the needs and credit limitations of their customers.Less

Hard Payments: Consumer Credit and Thrift

Lendol Calder

in Thrift and Thriving in America: Capitalism and Moral Order from the Puritans to the Present

This chapter deals with the transformation of credit across the late 19th and early 20th centuries. First, it considers the notion that credit is an essentially modern invention by detailing the ... More

This chapter deals with the transformation of credit across the late 19th and early 20th centuries. First, it considers the notion that credit is an essentially modern invention by detailing the history of informal modes of credit (like the tab at the country store) that existed long before the 20th century. Next, it shows how the 20th century saw a proliferation of novel forms of consumer credit, not least the diffusion of the installment plan. It argues that the new forms of credit fostered a new form of penny-pinching, or thrift. To be sure, the discipline of allotting money carefully so that one can afford to make all the monthly payments that accrue in the modern credit era not only reinstitutes thrift but recalibrates it to the patterns of mass consumption in the process. But, again, such transformation of thrift comes with a price: the credit may be easy, but the discipline of monthly interest payments is “hard”.Less

The Boom in Everyday Borrowing

Paul Langley

in The Everyday Life of Global Finance: Saving and Borrowing in Anglo-America

This chapter focuses on the boom in everyday borrowing and the qualitative transformations in consumer credit and mortgage networks that have made it possible. This boom is situated in the two ... More

This chapter focuses on the boom in everyday borrowing and the qualitative transformations in consumer credit and mortgage networks that have made it possible. This boom is situated in the two principal sets of market networks of Anglo-American everyday borrowing — consumer credit and mortgage networks. It is argued that it is only through qualitative transformations in these networks, which include the forging of close relationships with the capital markets of ‘global finance’, that the boom has been made possible. The chapter also calls attention to the close interconnections that have become consolidated between mortgage and consumer credit networks, on the one hand, and the networks of the capital markets, on the other. It argues that the overlapping and intersecting of previously disconnected and detached networks has materialized through new calculative devices and performances which rationally figure and manage the uncertainties of future repayments by everyday borrowers as ‘default risks’. Particular attention is paid to the default risk management techniques of lenders — especially asset-backed securitization, but also so-called ‘structured finance’ and the use of credit derivatives — that turn on the issue and trading of default risk-related instruments in the capital markets.Less

Mail Order Agency in Post-war Britain: The Agent, The Company, and The Customer

Coopey Richard, Sean O‘Connell, and Dilwyn Porter

in Mail Order Retailing in Britain: A Business and Social History

This chapter discusses the importance of the relationship between mail order and ‘free’ consumer credit. British mail order houses helped their customers finance their purchases by allowing them ... More

This chapter discusses the importance of the relationship between mail order and ‘free’ consumer credit. British mail order houses helped their customers finance their purchases by allowing them credit, usually for a period of twenty weeks, but for up to thirty-eight weeks on some more expensive catalogue items. There was no charge to the customer for this service, the cost to the company being bundled in with the price. Here was a second feature that helped to define British mail order retailing, where installment credit sales accounted for over 80% in value of total sales in the mid-1970s.Less

Consumer Credit and Debt

Michael Lobban

in The Oxford History of the Laws of England: Volume XII: 1820–1914 Private Law

This chapter on consumer credit and debt in the 19th century covers imprisonment for debt, the poor man's bankruptcy, pawnbroking, money lenders, and the purchase of goods through hire purchase ... More

This chapter on consumer credit and debt in the 19th century covers imprisonment for debt, the poor man's bankruptcy, pawnbroking, money lenders, and the purchase of goods through hire purchase agreements.Less

Introduction and Overview of Consumer Credit: Development, Uses, Kinds, and Policy Issues

Thomas A. Durkin, Gregory Elliehausen, Michael E. Staten, and Todd J. Zywicki

in Consumer Credit and the American Economy

The term consumer credit refers to all kinds of credit employed by individuals that are not collateralized by real estate or financial assets such as stocks and bonds and not used for business ... More

The term consumer credit refers to all kinds of credit employed by individuals that are not collateralized by real estate or financial assets such as stocks and bonds and not used for business purposes. It includes installment credit for automobiles, home repair and modernization, appliances, education, large recreational items, and revolving credit on credit cards. There are many ways to classify consumer credit into categories, including use, method of generation (direct and indirect closed-end credit, noninstallment credit, and open-end credit), and kind of financial institution generating the loan (depository institutions, finance companies, credit unions, others). This chapter provides historical background, classifies in various ways the kinds of consumer credit found in the marketplace today, and introduces their uses and users. It briefly introduces the concepts of credit demand, supply, and regulation that underlie the structure of the book and previews the book structure and chapters that follow.Less

Sources of Credit and the Extent of the Credit Market: A View from Bankruptcy Records in Mississippi, 1929–1936

Mary Eschelbach Hansen

in Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective

This chapter exploits newly-collected, highly-detailed data on sources of credit drawn from documents filed by a sample of petitioners for bankruptcy in Mississippi in the 1930s. The bankruptcy ... More

This chapter exploits newly-collected, highly-detailed data on sources of credit drawn from documents filed by a sample of petitioners for bankruptcy in Mississippi in the 1930s. The bankruptcy documents reveal that long-distance credit networks were extensive during this period despite the disruption of the Great Depression. Credit networks were dominated by trade credit, particularly book credit that was extended from business to business. At this time, the bank-to-business lending channels that are common today were only beginning to develop. Manufacturers had both fewer long-distance creditors and fewer financial intermediaries as creditors than either merchants or farmers. However, when a bank did lend to a business, the bank’s share of total debt was large, foreshadowing more modern patterns. New sources of consumer credit issued by traditional financial institutions and new small-loan lenders, surprisingly, were available even in the relatively under-developed Deep South.Less

Personal Bankruptcy after World War II

Mary Eschelbach Hansen and Bradley A. Hansen

in Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century

The bankruptcy rate was very low during World War II, but it increased quickly after the war ended. As growth in consumer credit returned to its pre-Depression trend, so did growth in the personal ... More

The bankruptcy rate was very low during World War II, but it increased quickly after the war ended. As growth in consumer credit returned to its pre-Depression trend, so did growth in the personal bankruptcy rate. Bankruptcy grew everywhere, but it rocketed past its previous peak in states with pro-creditor garnishment. Although personal bankruptcy increased, few cases were filed under Chapter XIII. Demand by debtors for Chapter XIII probably was not as great as its Depression-era advocates imagined it to be. People rarely used the procedure for spreading payments over time except in places where bankruptcy referees pushed it.Less

Consumer-Citizens: Inflation, Credit, and Taxing the Middle Classes, 1973–1985

in Waking from the Dream: Mexico's Middle Classes after 1968

This chapter examines the effects of inflation, which began increasing significantly and erratically in the early 1970s. It documents a changing economic relationship between the middle classes and ... More

This chapter examines the effects of inflation, which began increasing significantly and erratically in the early 1970s. It documents a changing economic relationship between the middle classes and the Institutional Revolutionary Party (Partido Revolucionario Institucional, PRI), focusing on consumer credit, consumer rights, and taxation.Less

Finance and Ownership

ANDREW GLYN

in Capitalism Unleashed: Finance, Globalization, and Welfare

This chapter traces shifts in the financial landscape over the past twenty-five years. These include the rise of the financial sector, the consumer credit boom that resulted in a rise in household ... More

This chapter traces shifts in the financial landscape over the past twenty-five years. These include the rise of the financial sector, the consumer credit boom that resulted in a rise in household consumption, the concentration of shareholdings in the hands of financial institutions, the rise of corporate governance, the costs and benefits of the great drive for shareholder value and the US stock market boom, the growth of international finance, and the eventual financial crises.Less

1740 and the Rules of the Game

Philip T. Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal

in Dark Matter Credit

This chapter looks at the size of the market in 1740 and explores who was involved in it. The stock of notarial debt, even though it excluded nearly all commercial and consumer credit, amounted to ... More

This chapter looks at the size of the market in 1740 and explores who was involved in it. The stock of notarial debt, even though it excluded nearly all commercial and consumer credit, amounted to sixteen percent of GDP in 1740. Although that may at first glance seem paltry, especially when compared to the level of mortgage debt accumulated in some economies on the eve of the 2008 crisis, it is more than what mortgage markets achieve in many developing economies today. This mountain of private, nongovernmental debt raises some serious questions. The chapter addresses this issue by asking how to reconstruct past lending in a society, particularly for credit markets that have long been shrouded from view.Less

The Rise of Consumer Credit in Postcommunist Czech Republic, Hungary, and Poland

Akos Rona-Tas

in Socialism Vanquished, Socialism Challenged: Eastern Europe and China, 1989-2009

This chapter argues that with the retrenchment of the welfare state in Central Europe, just as in more developed Western countries, consumer credit has emerged as an alternative way of redistributing ... More

This chapter argues that with the retrenchment of the welfare state in Central Europe, just as in more developed Western countries, consumer credit has emerged as an alternative way of redistributing income towards the middle class to secure effective demand in domestic consumer markets. It presents a short history of consumer credit in the Czech Republic, Hungary and Poland, and identifies the mechanisms deployed by lenders to overcome the information asymmetry problem in three tiers of the consumer credit market: VIP banking, mass consumer credit and fringe lending. The mechanisms to evaluate loan applicants—identifying, sorting, reputation creation, and quantification—have given rise to new forms of social control and started to reconfigure social relations. Because credit reallocates income from future to present, and not, as the welfare state does, from rich to poor, its redistributive capacity is limited, yet its effect on social structure is growing.Less

Truth in Lending? Consumer Credit and Social Policy after Crowther

Stuart Aveyard, Paul Corthorn, and Sean O’Connell

in The Politics of Consumer Credit in the UK, 1938-1992

Chapter 7 addresses consumer protection issues from the 1970s onwards. It discusses the increasingly complex connections between mortgage and consumer credit, particularly in terms of second ... More

Chapter 7 addresses consumer protection issues from the 1970s onwards. It discusses the increasingly complex connections between mortgage and consumer credit, particularly in terms of second mortgages. It discusses the consumer credit protection put in place by the Consumer Credit Act. It explains how important decisions taken at that point increased further the UK’s diverse and liberalized consumer credit markets and enabled the survival (and growth) of forms of sub-prime credit that died elsewhere in Europe. The chapter also addresses issues around credit discrimination on the grounds of race and gender. It probes the reaction of consumer groups to the backlash to consumerism and the liberalization of personal finance markets under the Thatcher regime. The chapter also breaks new ground in exploring the impact of Europe, with an exploration of the hostile response that emerged when the European Parliament’s Consumer Directive threatened to curtail the UK’s consumer credit markets.Less