In 1970, the US federal government passed the Fair Credit Reporting Act (FCRA). The act can be seen as a early reaction to an emerging appreciation for the power of mechanized (and then digitized) data collection and analysis. The FCRA represents one of the earliest legal actions taken in realm of privacy and security.  Here's a brief look at the the event, and the climate within which it took place.

Post WWII America was characterized, in part, by an aggressive pursuit of the ‘American Dream’, a dream that was growing increasingly expensive. Automobiles for instance, had become powerful symbols of success, but had very high sticker prices. At the same time, Americans were fresh off a seemingly universal international victory, and optimism reigned. Under these conditions, the practice of purchasing on credit exploded.1,2 In this climate, an existing, but undeveloped network of consumer credit information brokers expanded rapidly, transitioning from an ad-hoc network of highly localized and sector specific agencies which may have done little more than compile ‘blacklists’ of unreliable payment makers, into something we might today recognize as a credit reporting agency (CRA). Specifically, from newspapers and by other means, they began to collect consumer information ranging from marriage status and job promotions to arrest records.3 They also began to cross sectors and grow outside their original communities: where once an agency may have specifically collected basic information in a single town or county for use strictly by retailers, that agency may thereafter have begun collecting more information, selling it to both retailers and banks, and been expanding to the state level.4 By 1955 this trend was clear, and was depicted in a congressional report by the Senate subcommittee on Antitrust and Monopoly.5

By 1960 this practice was so well established that it became an international model. In a New York Times article published in November of that year, the then chairman of the National Commercial Bank of Scotland is quoted as saying: “We hope to get to the stage they have reached in the United States, where everybody has a credit rating.”6  It was in this climate that concerns over how consumer information was used, and to what extent a consumer should have control over their data began to surface. A 1968 Times article captures well the state at the closing of the decade. Fittingly titled Senate Investigators Examining Reports of Faulty Credit Ratings, it quotes a federal investigator who sums up consumer sentiment toward CRAs saying “people are frightened.”7  The article also cites several horror stories, where people’s lives were tragically altered by erroneous, in some cases even callous, administration by the agencies. As the title of the article suggests, in 1967, the Senate subcommittee on Antitrust and Monopoly held public hearings on the matter, in response to what then chairman Phillip A. Hart described as “complaints” his subcommittee had received.8 The hearings were to determine if new legislation was needed, and consisted of experts from across the banking, lending and credit reporting industries testifying to the state of the sector. In response to growing public concern over perceived CRA apathy toward individual rights, it was determined that action should be taken.

A year after the hearings, in a similar but separate action, congress passed the Consumer Credit Protection Act (CCPA). The CCPA targeted lending practices deemed unfair, including the garnishment of wages without adjudication, and deceptive loan sales tactics.9 Two years later in 1970, congress passed the Fair Credit Reporting Act (FCRA), a direct result of the 1968 hearings, and incorporated it into the CCPA as additional titles. The FCRA represents one of the earliest legislative attempts to protect people from unfair use of their personal data.10 It achieved this through the introduction of enforceable rules which excluded previously legal practices which a majority of Americans had come to perceive as immoral. Functionally, the FCRA accomplished this by enumerating what rights consumers had with regard to their personal data, established limits on the use of their data, and provided avenues of recourse in the event of misuse or error.11

The 1970s saw CRAs aggressively adopt computer technology to aid their data-heavy activities. This lead to an increasingly consolidated field, driven by the immense gains to be had in such a data-oriented environment through computerization. As computerization was extremely capital intensive, only the largest of the agencies could quickly adopt the technology, and those soon became the dominant players.12 However that decade of computerization proceeded the early securitization of the industry, an exploration into the causes of which will flesh out our use of the concepts of the commons and exclusion, and reinforce the technology-agnostic nature of securitization.

References:

  1. Nigel Watson, An abridged version of the Experian: the story so far, Experian Inc. 2013.
  2. Andrea Ryan, Gunnar Trumbull, and Peter Tufano, “A brief postwar history of US consumer finance,” Business History Review 85, no. 3 (2011): 461–498.
  3. Mark J Furletti, “An overview and history of credit reporting,” Available at SSRN 927487, 2002
  4. Ibid.
  5. United States., Consumer credit industry: hearings before the Subcommitte on Antitrust and Monolpoly
    of the Committee on the Judiciary, United States Senate, Ninetieth Congress, first session, pursuant to S.Res. 26. (Washington: U.S. Govt. Print. Off., 1967), 3 v., //catalog.hathitrust.org/Record/008515191.
  6. New York Times, British Finance Companies Map Credit Ratings for Consumers, November 29, 1960.
    80.
  7. New York Times, Senate Investigators Examining Reports of Faulty Credit Ratings, May 23, 1968, 12.
  8. States., Consumer credit industry: hearings before the Subcommitte on Antitrust and Monolpoly of the Committee on the Judiciary, United States Senate, Ninetieth Congress, first session, pursuant to S. Res. 26.
  9. United States., Consumer Credit Protection Act and Truth in Lending Act (United States. Congress,
    May 1968).
  10. Landau, Listening In: Cybersecurity in an Insecure Age, 14.
  11. Furletti, “An overview and history of credit reporting.”
  12. Ibid.
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