It took a lot longer for consumer credit reporting agencies to catch on in the United States, the first being Retailers Commercial Agency (RCA) of Brooklyn, New York, in 1869. It was many years later though, that they started proliferating. The Credit Clearing House was established in 1888, and was effectively the first successful national wholesalers’ association. In 1897, James Chilton formed the Chilton Corp. in Dallas, Texas, and collected information from merchants on shoppers’ payment habits, in a notebook he called his ‘Red Book’ (the Chilton Corp. was purchased by TRW in 1989). Later, in 1899, Cator and Guy Woolford in Atlanta, Georgia formed the Retail Credit Company (RCC). RCC purchased RCA in 1934, and in 1975, it changed its name to Equifax.
During the first half of the twentieth century, the number of American credit bureaux increased phenomenally, but these almost always focussed upon a specific industry and geographic area.
The National Federation of Retail Credit Agencies was thus formed on 24 February 1906, to promote sharing across these barriers, and grew rapidly. Membership was less than 100 bureaux in 1916, but grew to 800 by 1927, and 1600 by 1955 (Staten and Cate 2004).
Most of the credit bureaux in 1919 represented retailers, who at the time provided 80 per cent of consumer credit. This was largely because usury legislation prevented other lenders from competing with retailers, who were disguising their finance charges in the prices
charged for goods sold on credit. In 1916, many states had relaxed their usury laws, which brought banks and finance companies into the market—some of whom were offering revolv-ing credit.
Growth in the number of credit bureaux was also aided by American legislation limiting branch banking, as there were few risks of increased competition and even the sharing of positive information between banks was common at this early date ( Japelli and Pagano 1999).
Over time, the retailers’ share of consumer credit reduced from 1919’s 80 per cent, to 67, 40, and 5 per cent in 1929, 1941, and 2000 respectively. In spite of the reductions, retailers were still able to benefit from the 1920s explosion in instalment credit demand for consumer durables. This was accompanied by a surge in the number of credit bureaux, and the onset of the depression did not kill the trend. The Michigan Merchants Co. was formed in 1932, which later became Credit Data Corporation (purchased by TRW in 1969).
This is not to say that all was smooth sailing during the depression. The competition between R.G. Dun and John M. Bradstreet in the trade creditor’s market was been fierce, and the depression caused Dun’s CEO—Arthur Whiteside—to broker a merger between the two companies, to form Dun and Bradstreet (D&B) in 1933.
2.3.3 1960s onwards
The American post-war boom saw further growth of consumer credit reporting (Furletti 2002).
Little had changed in the prior 40 or so years though: they were still small community-based companies, or co-operatives, that served a specific type of lender—bank, finance company, or retailer—and they would provide information over the phone on delinquencies and defaults.
The agencies would also comb through newspapers for ‘notices on arrests, promotions, marriages, and deaths’, and include them in people’s files.
These practices continued through the 1960s, and by 1969 there were 2,200 credit bureaux in the United States, collecting data from public records and 400,000 creditors, that main-tained files on 1.1 million consumers.12Advances in computing technology during the 1960s led to the automation of countless labour-intensive back-office functions. This extended to credit bureaux and aided industry consolidation, which brought the number of credit bureaux down to about 200 by 2005, in spite of continuing credit growth. Credit Data Corporation was the first to automate in 1966.
TransUnion was founded in 1968, as the holding company of the Union Tank Car Company (UTCC). One of its business areas was business intelligence, and it sensed broader opportunities in credit reporting. In 1969, it diversified by taking over the Credit Bureau of Cook County, which at the time had 3.6 million card files in 400 seven-drawer cupboards.
48 Module A : Setting the scene
12 The Consumer Reporting Reform Act of 1994, 103 S. Rpt. 209 103 Cong. 2 Sess. (1993), cited in Cate et al.
(2003).
The UTCC is the railway equipment leasing company, which owns the UTLX tankers and hoppers that abound in North America.13Its genealogy can be traced back to the Star Tank Line, founded by J.J. Vandergift in 1866, to ship oil from the Pennsylvania oil-fields to Chicago. John D. Rockefeller’s Standard Oil bought it in 1873, and made Vandergift Vice President. The name was changed to Union Tank Line in 1878; and in 1891 the Standard Oil Trust was formed, and UTC incorporated, to avoid anti-trust measures. Standard Oil remained its sole customer though, and the Trust was eventually dissolved in 1911. In 1904, UTCC operated 10,000 railway cars, more than any other private operator, and by the 1920s, 30,000. In the 1930s, it started producing its own tank cars, and shipping chem-icals. The Marmon group bought it in 1981, and in 2005, it had an 80,000-strong railcar fleet—Encyclopedia of Chicago, Wikipedia.
Credit bureaux in the United States were largely unregulated, prior to the passing of the Fair Credit Reporting Act in 1970, which according to Cate et al. (2003) ‘was a notably even-handed attempt to balance the need for accessible credit data, with consumers’ concerns about privacy’. This set of ground rules aided both consolidation and growth within the industry, and by the late 1970s, TransUnion and Equifax had emerged as leaders. They were later joined by TRW (today’s Experian) to form the ‘big three’.
TRW (Thompson Ramo Woolridge) first entered the credit reporting industry in 1968, when it purchased Credit Data Corp., and renamed it TRW Credit Data. Its focus was consumer credit, and in 1989 it also purchased Chilton Corp. In 1976, TRW’s IS&S division collaborated with the National Association of Credit Managers, to create its first business credit report. The division grew by acquisition into direct marketing/target marketing, and real-estate information and loan services.
The 1968 purchase was a major shift from TRW’s core technology businesses. Thompson Products (automobile and aircraft engines) and Ramo Woolridge (scientific research and project management) were both engaged in research and development of ICBM missiles for the US government during the 1950s. The latter spawned Space and Technology Laboratories (STL) in 1957, which remained a wholly owned subsidiary when the two merged into TRW in 1958, but later became a division of the parent. [A History of the Department of Defense Federally Funded Research and Development Centres, Office of Technology Assessment, Congress of the United States, June 1995]. Si Ramo championed the development of a ‘cashless’ system in the 1960s, and envisaged businesses offering credit and financial information.
The CCN was formed in Nottingham, England in 1980, when GUS split off its information services division—which had been supporting a mail-order operation, in existence since 1900.
By 1982, they were already offering a credit bureau service (CAIS—Credit Account
13 The author grew up in a small Alberta city called Medicine Hat, and worked for the Canadian Pacific Railroad for two years in the mid-1970s. Two of the major local industries made fertiliser from natural gas, and the UTLX hoppers were a common sight.
Information Sharing), and their credit scoring capabilities were obtained with the purchase of MDS in the United States that same year. In 1984, they expanded their bureau operations through the purchase of the Manchester Guardian Society.
In 1996, as a part of a drive to focus on core businesses, TRW divested all of its credit reporting interests into a new company, called Experian. It was immediately purchased by GUS, and merged with CCN under the Experian name, to enhance brand recognition, and stop ongoing confusion with CNN, the satellite television news service. Prior to 1996, CCN was already established in a variety of countries, including a small office in the United States, but this allowed them a much larger footprint, as one of the American ‘big three’.
According to Furletti (2002), by the early 1980s technology had already evolved to such an extent that credit bureau were able to provide subscribers with more accurate information electronically, than over the phone. They had transformed themselves from paper-based local associations serving specific industries, to high-tech companies serving the broader economy.
2.3.4 International
At the turn of the twentieth century, credit reporting agencies were also being established in other countries outside the United States and the United Kingdom. For example, in 1901, D&B established an office in Cape Town, South Africa, to provide information on local traders to suppliers in the United States. Over time, other agencies were established around South Africa, some as the initiatives of local chambers of commerce (as in Durban, Kroonstad, and East London),14 but almost all of these were acquired by D&B during the 1970s and 1980s. D&B divested in 1986, in a management buyout that saw the local operations renamed Information Trust Corporation (ITC). It was sold to M-Net in 1990, and then to TransUnion in 1993. D&B returned and took a minority stake in 1994. The company was renamed TransUnion ITC in 2002, and dropped ITC from the name in 2006.
The late 1920s saw the establishment of the first private credit bureau on the European con-tinent. Schufa Holding AG was formed in 1927 by a group of banks and retailers, and is today the largest bureau in Germany. The Union Professionnelle du Credit (UPC) was formed in Belgium during the 1930s, the Consorzio per la tutela del credito (CTC) in Italy in 1964, and the Bureau Krediet Registratie in the Netherlands in 1965.
The depression saw the Deutsche Bundesbank establish the first ever public credit registry (PCR) in 1934, as a response to the systemic risks highlighted by the depression. Today the German Evidenzzentrale für Millionenkredite only covers loans larger than €1.5 million.
Other public credit registries were established in: 1946 France, Service Central des Risques;
1950 Chile, Archivo Deudas Generales; 1951 Turkey; 1961 Finland; 1962 Italy, Centrale dei Rischi; 1962 Spain, Central de Información de Riesgos; 1964 Burundi; 1964 Mexico, Servicio Nacional de Información de Crédito; 1966 Jordan; 1967 Belgium; and 1968 Peru, Central de Riesgo. The number of countries with credit bureaux has continued to grow, and in 2005 there were over 50 countries with private credit bureaux, over 70 countries with public credit registries, and 20 countries with both.
50 Module A : Setting the scene
14 Consumer Affairs Committee (2003).