Creditworthy
A HISTORY OF CONSUMER SURVEILLANCE AND FINANCIAL
Josh Lauer
IDENTITY IN AMERICA
Introduction
In late November 1913, a dapper old man stopped into a Cleveland department store to do some shopping. On his way out, he gave a young female clerk his name and instructed her to charge several items to his account. The clerk, who did not know the man, insisted on calling the credit department to authorize his purchases. Perhaps the stranger’s wig and lack of eyebrows aroused her suspicion. The seventy-four-year-old man suffered from generalized alopecia, a condition that had caused him to lose all of his body hair. After the credit department confirmed the customer’s identity and creditworthiness, his charged goods were approved, and he left without incident. This exchange would be completely unremarkable except that the stranger was no average consumer. He was John D. Rockefeller, literally the richest man in the world. The multimillionaire oil baron had been denied access to credit, “at least until the clerk learned that he was ‘good.’ ”1 One hundred years later this story still resonates. Twenty-first-century Americans are accustomed to having their identities and creditworthiness tested, often multiple times each day, to see if they are “good.” Indeed, whenever we use a bank card to pay for something, we enter into an invisible surveillance network that confirms our identity, records the details of our transaction, and instantly updates our status and legitimacy as a paying
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Introduction
consumer. All of this happens in the few seconds that it takes to swipe a plastic card—or just as commonly, in the time it takes for an online purchase to be confirmed. Such speed and ease are hard to argue with. Why fool around with cash when the whole thing can be settled with a signature or code? Rockefeller and many of his fellow Americans would have agreed. For someone like Rockefel ler, a charge account was largely a matter of convenience. He had piles of money sitting in the bank. But for many Americans who did not, credit accounts allowed them to walk out of stores with all sorts of things—from furniture and appliances to clothing and food—all on the thin promise of future earnings. Credit was not just a frivolous indulgence, as its critics have long insisted. In many cases, it was a necessary bridge between income and paychecks. The absurdity of the Rockefeller incident was comic fodder for newspapers throughout the nation. The retired titan of industry took it in stride and even commended the embarrassed clerk for her “caution.” He had bigger concerns, such as founding some of the nation’s most venerable philanthropic organizations and caring for his ailing wife. Yet the story, for all of its populist mirth, reveals something else: consumer credit surveillance was an established fact of life. It was funny that Rockefeller’s credit standing had been questioned, but it was taken for granted that systems for interrogating one’s identity and creditworthiness already existed. Rockefeller, like millions of Americans from all walks of life, had a second self, a disembodied financial identity that inhabited the vast files of retail credit departments and local credit bureaus (figure 0.1). No one, not even the wealthy or famous, could escape the gaze of this unseen surveillance apparatus. How did this happen? How did Americans become faceless names and numbers in an enigmatic network of credit records, scoring systems, and information brokers? How did financial identity become such an important marker of our personal trustworthiness and worth? It is easy to mistake consumer credit surveillance and financial identity for new technological developments, products of late twentieth-century databases and algorithms. The importance of financial identity and credit risk has become a topic of serious public debate. The scourge of so-called identity theft and the 2008 subprime mortgage crisis illustrate the high stakes of credit information in contemporary life. However, systems for monitoring
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John D. Rockefel ler and his family received consumer credit ratings like everyone else. Their names and ratings appeared beside those of fellow citizens from all walks of life, from lawyers to firemen. (The Credit Rating Book for Cleveland, O[hio], Early’s Mercantile Agency, January 1909)
consumer credit identities and for judging one’s creditworthiness are not new at all. They were central to the ascent of consumer capitalism in the United States. Long before credit cards filled mailboxes in the 1960s, before Americans bought refrigerators on the installment plan, or the first mass-produced and mass-financed Model Ts rolled off assembly lines, consumer credit surveillance systems were already in place. This was the surveillance system that Rockefel ler stumbled into when his financial identity—his hidden record of prompt payment and trustworthiness— temporarily trumped his identity as the world’s richest man in the flesh. The history of American consumer credit and its cheerless corollary, debt, has only recently begun to receive serious attention.2 Compared to
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Introduction
the study of capitalism’s dazzling material culture and advertising, the history of borrowing and paying bills appears dreary in the extreme. Credit, as Lendol Calder lamented in his pioneering history of the subject, is the “neglected stepchild of consumer culture.”3 Yet borrow and pay we must. The way that Americans manage and spend their money is, paradoxically, so banal and so private that it easily eludes historical analysis. The same taboo that inhibits Americans from discussing personal finance has also made it very difficult for scholars to study it. We flaunt our consumption— our cars, our homes, our fashionable clothing—as proof of self-worth and social membership, but we hide our debts, our mortgages, our overdue bills, and our collection notices. This secret world of personal finance is essential to our understanding of modern economic life.4 Its history, as Calder and others have shown, reveals not only the deep nineteenth-century roots of consumer credit and changing American attitudes toward debt, but also the far-reaching effects of the institutionalization of credit. To say that consumer credit comes with strings attached is an understatement. Borrowing forces us into complex, rigid, and often unforgiving relationships with financial institutions and businesses that demand our personal information and ceaselessly collect data about us. It requires that we enter into bureaucratic systems of identification, recordkeeping, accounting, marketing, and consumer research. Whenever we promise to pay we become subjects of intensive surveillance. This book explains how this happened and why it matters today. In Creditworthy I detail the rise of consumer credit surveillance in the United States and its ongoing effort to control the behavior of American citizens and to quantify their value in a growing array of contexts, from credit and insurance risk to consumer analytics and target marketing. In short, this book is about how credit surveillance seeks to make American consumers “good”—morally responsible, obedient, predictable, and profitable. This history follows a broad arc, from the development of commercial credit reporting during the 1840s to the growth of algorithmic risk scoring and big corporate data in the 1990s. It also traverses a number of momentous social, economic, and technological shifts over more than a century, from urbanization and mass marketing to post–World War II suburban sprawl and information age computing.
Introduction
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At the center of this story is the consumer credit bureau. The modern credit bureau is one of the most power ful surveillance institutions in American life, yet we know almost nothing about it.5 The industry is currently dominated by three major bureaus—Equifax, Experian, and TransUnion. Together these private firms track the movements, personal histories, and financial behavior of nearly all adult Americans. Until the late 1960s, when the reporting industry suddenly became a lightning rod in debates over database surveillance and privacy, credit bureaus worked in quiet obscurity. They seemed to come from nowhere during the late twentieth century and to exemplify the frightening new realities of computerized surveillance. Yet many of these bureaus have been around since the 1920s or earlier. In fact, two of the nation’s leading bureaus, Equifax and Experian, have roots dating to the 1890s. The consumer credit bureau was a vital information infrastructure upon which American consumer capitalism was built. These surveillance systems supported new consumer lending and financing industries that emerged during the first half of the twentieth century, as automobile makers, department stores, mortgage companies, and banks learned how to turn personal debt into corporate profits.6 Without this infrastructure, the modern credit economy and today’s digital commerce would be inconceivable. More than any other institution, the consumer credit bureau formalized financial identity as an integral dimension of personal identity and established a technological framework for predicting credit risk and extracting debts. THE RISE OF MODERN CREDIT SURVEILLANCE
While we know quite a bit about the history of consumer culture in the United States—its advertising, its spectacular commodification, its desires and deceits—we know much less about how all of this consumption, much of it done on credit, was even possible to transact. This is no trivial detail. The ascent of consumer capitalism, after all, is inextricably linked to the growth of institutional credit at the turn of the twentieth century. It was nothing new for a local grocer or tailor to trust his well-known customers to pay later. This kind of informal open book credit was pervasive in nineteenth-century America. But how could new institutional lenders—
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Introduction
department stores, mail order houses, installment dealers, finance companies, and, later, banks—trust total strangers, hundreds or thousands of them, to repay a debt? The answer is that they could not. But neither could local grocers or tailors. As eastern cities and upstart interior towns filled with unfamiliar faces after the Civil War, the problem of judging creditworthiness was a problem for everyone, including small shopkeepers who allowed their neighbors to run up debts. In this new world of anonymity and transience, consumers who looked “good”—well dressed, professional occupation, well connected—often turned out to be the worst deadbeats. And just as troubling, some who looked “bad”—shabby clothes, lowskilled job, no references—often turned out to be entirely reliable and loyal customers. How could a merchant identify the “good” consumers and avoid the “bad” ones? This problem, the confounding task of deciding whom to trust and whom to invest in, led to the development of systematic credit surveillance in the United States. The first to produce such systems were commercial credit reporting firms that emerged during the 1840s.7 These firms, the predecessors of modern-day business rating agencies such as Dun & Bradstreet, were not concerned with consumers but with commercial borrowers—that is, anyone who might borrow money, raw materials, or goods in support of enterprise. As economic relationships became increasingly distant and impersonal during the antebellum market revolution, commercial credit reporting firms played a key role in helping lenders determine the creditworthiness of unknown customers throughout the nation. These agencies sought to compile information about the personal life, habits, property, and financial reputation of all American merchants and entrepreneurs. This confidential information was recorded in massive ledger books and shared only with subscribers who inquired at the agency’s office. During the late 1850s, some of these firms began to publish rating books that displayed the creditworthiness of each individual in cryptic alphanumeric codes. In essence, what early commercial reporting firms sought to do was to convert an individual’s local reputation into an easily readable, centralized summary of creditworthiness for remote lenders. In the process they did something more profound: they created the modern concept of financial identity.
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This book begins with commercial credit reporting because its key features—totalizing surveillance, detailed personal information, quantification, and disembodied financial identity—all became defining aspects of consumer credit reporting. The first organizations devoted to monitoring the creditworthiness of American consumers, rather than business borrowers, appeared in New York around 1870. The idea quickly spread. By 1890 consumer reporting organizations could be found in cities and towns across the nation, from New York to San Francisco. These early ventures were a motley array of private agencies and voluntary protective associations. While some produced little more than blacklists of debtors and delinquents, others developed complex identification and rating systems that monitored the lives and fortunes of entire city populations. The most ambitious published annual reference books in which the names, addresses, occupations, marital status (for women), and credit ratings of more than 20,000 individual consumers were listed. These late nineteenth-century organizations are the origin of the modern credit bureau and the foundation of the national surveillance infrastructure that governs consumer creditworthiness today. During the first decades of the twentieth century, a national association was formed to organize new credit bureaus and to coordinate their activities with hundreds of others that already existed. By 1940 this national association included more than 1,400 independently owned and operated local bureaus, ranging from big-city offices to small-town outfits. Collectively, these bureaus maintained credit records for more than sixty million Americans—around 70 percent of the nation’s total adult population. This federation of bureaus was hardly airtight, but it drew Americans into tightening networks of surveillance. The industry remained fragmented until the 1980s, when a small number of computerized bureaus annexed hundreds of local bureaus and consolidated their power. By the end of the decade the leading national bureaus each had databases with more than a hundred million consumer files. Though the credit bureau occupies center stage throughout this book, the history of consumer credit surveillance cannot be told without highlighting a parallel and equally impor tant development: the rise of professional credit management. During the late nineteenth century a
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Introduction
peculiar new business specialist, the credit man, emerged in the back offices of mass retailers. As the volume of credit applications grew in department stores, installment houses, and large specialty dealers, credit men assumed the difficult job of judging an unknown customer’s creditworthiness. Even more than local grocers or tailors, retail credit men strug gled to separate the good from the bad among the procession of credit-seeking strangers that came to their offices. For this reason, credit men—and, after World War I, a growing number of credit women—had a major stake in the success of local credit bureaus and were deeply involved in the organization of consumer surveillance networks. While supporting the development of the consumer reporting industry, newly professionalized credit managers also worked to found a “science” of credit management and to systematize the collection of customer information in their own in-house credit departments.8 By the 1920s credit managers had established sophisticated systems for compiling, analyzing, and rapidly transmitting consumer credit information within their own stores and to the local credit bureau. In this way, credit bureaus and credit departments worked hand in hand to build the consumer surveillance infrastructure that exists today. RETHINKING THE HISTORY OF MODERN SURVEILLANCE
Given the importance of these surveillance networks for overseeing the vast expansion of credit-fueled consumer capitalism, it might be enough to simply describe their operations. These organizations were information ser vice providers far ahead of their time. In the context of an industrializing economy, one that excelled at churning out physical things, they produced a strange and intangible new commodity: personal information. Credit surveillance was part of a nascent information infrastructure that began to take shape during the nineteenth century.9 Following the lead of commercial credit reporting firms, consumer credit bureaus and retail credit departments amassed enormous archives in which the lives of American citizens were scrupulously documented and dissected. While the growth of modern surveillance has attracted intense scholarly interest in recent decades, most of it has been directed at contemporary
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developments. This is hardly surprising. The proliferation of new datagathering technologies, many no older than the 1990s, have transformed the nature of privacy, citizenship, and personal identity in alarming ways. Indeed, it has become quite difficult to communicate, search for information, shop, or move through public space without leaving digital evidence about oneself at every turn. The escalation of post-9/11 policing and security has only added to the urgency of studying new surveillance practices.10 At the same time, the gravity of current events and the speed of technological change have made it difficult to view contemporary surveillance in its broader historical context. By focusing on the impact of recent and emerging technologies—mobile computing, biometrics, and big data, for instance—one might get the impression that modern surveillance is very new. And by foregrounding the expansion of government surveillance, we fail to see the key role that commercial organizations have played in the creation of modern surveillance society. This book revises several basic assumptions about the rise of modern surveillance in the United States. First among these is that surveillance as we know it—systematic, pervasive, invisible, personal—is a new phenomenon. Though scholars generally agree that surveillance is a fundamental element of modernity, and that the origins of modern surveillance can be traced to the bureaucratic recordkeeping of nineteenth-century nationstates and capitalists, this early history is rarely taken seriously.11 Instead, surveillance before computing and miniaturized electronics—at the very least, surveillance before World War II—is too often characterized as primitive and inefficient.12 The history of American credit surveillance forces us to reconsider this shortsighted and misleading perspective. Paperpushing clerks in early credit reporting agencies and credit departments were not just quaint precursors of our modern surveillance. They operated complex surveillance systems in which millions of Americans were tracked and monitored. This surveillance, moreover, was deeply personal and had real effects. One’s reputation as “good pay” or a deadbeat was no longer an isolated local matter; it was inscribed in one’s financial identity and transmitted throughout the nation. In addition to historicizing modern surveillance, this book also challenges assumptions about the institutional origins of mass surveillance in
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Introduction
the United States, specifically the primacy of the nation-state. The history of modern surveillance, as it currently exists, is largely the history of government surveillance.13 Yet the state was not the only source of organized surveillance before World War II. It had powerful rivals in the private sector. This was especially true in the United States, where commercial surveillance systems, including credit reporting organizations, were well established in the nineteenth century and in some cases dwarfed those of the decentralized state. Not only did early credit surveillance networks track thousands of American citizens, but the information that they compiled and sold also dealt with much more than financial facts. Credit records typically included the intimate details of one’s domestic arrangements, personality, health, legal and criminal history, and job performance, and sometimes one’s physical appearance. In other words, they were comprehensive dossiers. Even after law enforcement and other government agencies grew more powerful during the early twentieth century, the credit reporting industry remained one of the nation’s most invasive and omnivorous collectors of personal data. Its files were so rich with confidential information that local police and government agencies, including the Federal Bureau of Investigation and the Internal Revenue Ser vice, often turned to the credit bureau for help. The history of capitalist surveillance has yet to receive the attention that it deserves. Though nineteenth-century capitalism is widely understood as the nation-state’s twin partner in the creation of modern surveillance, we have very few specifics about the former.14 Who were these unnamed “capitalists,” and what exactly did they do to advance surveillance as a distinctively “modern” practice? Beyond gestures toward the rise of bureaucracy and economic rationalization, themes taken directly from the sociology of Max Weber, the formation of capitalist surveillance is woefully underhistoricized. This is especially striking given the centrality of private-sector surveillance today. One of the most troubling aspects of contemporary surveillance is the growth of commercial databases and new interactive technologies through which personal data is routinely harvested, often without our consent. These powerful forms of surveillance raise not only privacy issues—especially when commercial data is shared with the state—but also larger concerns about how such data is used to classify individuals, to sort
Introduction
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people and populations into categories of risk and preference, and to shape our perception of reality, including which social, economic, and political groups we belong to (and are excluded from). These very issues are the subject of some of the most trenchant and insightful critiques of contemporary surveillance.15 Yet without a history of capitalist surveillance to connect to, recent developments cannot be seen as integral to the calculating logic of capitalism and its commodification of information over a much longer period of time. As this book shows, the roots of extractive “surveillance capitalism” can be traced to nineteenth-century lists and ledgers.16 To date, the history of capitalist surveillance has focused on the regulation of labor. As the American economy was industrialized during the nineteenth century, those who owned the means of production—capitalists— faced the problem of mobilizing and disciplining armies of wage laborers. Surveillance, in this context, centered upon the problem of prodding the work force to perform more efficiently and, naturally, more profitably. In this light, Karl Marx’s analysis of workplace regimentation and coercion is sometimes viewed as an early critique of capitalist surveillance. “The place of the slave-driver’s lash,” he observed, “is taken by the overseer’s book of penalties.”17 Monetary incentives, in other words, were the gentler but no less exploitative rods that capitalists used to drive wage laborers to do their bidding. The formalization of workplace surveillance, however, is more often associated with Frederick W. Taylor than with Marx.18 In his famous time-motion studies of the 1890s and 1900s, Taylor deconstructed industrial work routines and promoted new supervisory techniques for controlling laborers and empowering managers. His concept of scientific management was as much a product of its time as it was the invention of its efficiency-obsessed engineer. The search for social order was a hallmark of the American Progressive Era, reflected in similar efforts to rationalize and surveil education, politics, government, and other domains of life.19 Consumption was one of these domains. DISCIPLINING THE MODERN CONSUMER
The scientific management of production and the close surveillance of workers had an analogue in the scientific management of consumption.