Very interesting book demonstrating that lots of business practices of collecting private data and using it for financial benefit we think of as new has roots a century and a half old, albeit with less well organized technologies. Credit based on assessment of moral characteristics and behavior, its proponents said, was necessary to allow people without capital to take risks and make it big, in contrast to corrupt European aristocrats where access to credit relied on capital reserves. With the decline of trust and personal relationships in a larger commercial economy, credit reporting was a way of replacing those guarantors of good behavior, first by the credit bureau’s own personal knowledge/knowledge attained from local merchants and later from more formalized statistics. Some resisted this “espionage”; libel suits were always a threat.

The credit reporting industry was fragmented until the 1980s, enabling the more pervasive surveillance of today, but the old surveillance tried for comprehensiveness and had some sophisticated features, including targeting those who showed up as good risks for more offers of credit by the 1920s. Nineteenth-century sellers were just as aware as those today that offering credit makes buyers spend more liberally. At the same time, many retailers really wanted cash only policies, because of the risks of extending credit; the ability to extend credit and take a few losses along the way provided larger businesses with a comparative advantage, and retail credit management was intimately connected to the rise of department stores. By the 1930s, stores were studying good customers’ habits and sending them letters directing them to departments they might’ve overlooked—a way, Lauer argues, of restoring personalization to what had become impersonal relationships, but without needing a helpful clerk on the seller’s end. Which sounds a lot like today’s automated targeting, too.

Creditors’ and potential creditors’ intrusions into privacy were justified because of the moral claim of the creditor against a debtor. And the absence of consumer resistance to these privacy intrusions then, as now, “baffled credit bureau officials and credit managers,” especially given business resistance to disclosing similar information in the nineteenth century for business-to-business credit purposes. While many consumers resisted disclosing negative information in personal interviews, they’d tell a lot more to an impersonal form.

Credit bureaus also evaluated creditworthiness and classified people by relative risks, almost from their inception—creditworthiness isn’t as much about ability to pay as it is about readiness to pay. “Since wealth ensured nothing and character was a variable impossible to isolate or measure systematically, credit professionals turned to other metrics to predict trustworthiness.” Occupation was a primary one—teachers good, policemen and firemen not so much because “they feel that the public is under obligation to them and hence they take all the time they want to pay their debts.” Race (and nationality, determined by checking the applicant’s first name) was another standard means of classification.

Formalization came as part of the 19th century vogue for statistics and accounting; it was supposed to make differently worded, qualitative reports of reputation more reliable and comparable. Ratings came from no one in particular and appeared objective. Similarly, installment contracts with standardized wording displaced informal credit relationships between local retailers and trusted customers. Later, information culled from sources like newspaper clippings was dropped from credit reports as statistical credit scoring emerged, relying on preselected categories and not trying to get “a full picture” of the individual consumer. Social and economic stability—having a telephone in the house, having a savings account—could be measured directly where character could not. Quantifying credit risk also allowed lenders to begin experimenting with variable interest rates, so even late-paying customers could be made profitable. Early statistical systems, unsurprisingly, were distrusted by experienced “credit men” (and sometimes women), but there just weren’t enough of those trained professionals to cope with the exploding demand for credit. Credit scoring promised to reduce subjectivity and bias, even as it encoded the larger effects of bias into credit scores: “statistical credit scoring could not end discrimination by excluding superficial personal characteristics because gender and racial inequalities were woven directly into the fabric of American society.”

Local data often outstripped the information available to the (much smaller) state, and the FBI and IRS, among others, turned to credit bureaus for help. Lauer also discusses the self that credit reporting tried to construct: one engaged in monitoring itself-as-consumer, especially its capacity for repayment of debt. And creditworthiness is a moral judgment too; consumers’ beliefs in its morality helps get them to pay. Or at least, the professionals Lauer studied believed that—he points out that his focus on their justifications and practices doesn’t say much about what credit evaluation was like for consumers.

As it turned out, the free market alone didn’t drive the adoption of statistical credit scoring. Lauer points to government antidiscrimination mandates in the 1970s—which, perhaps ironically, drove the practice of using “impersonal” statistical pools to avoid charges of deliberate discrimination—as well as to Fannie and Freddie, which wanted to be able to compare scores of mortgagors in guaranteeing home loans in the 1990s. These government mandates forced previously diffuse sources of credit scoring to come together. But now we have new risk models for everything—whether someone will pay their gas bill may not be the same as whether they’ll pay their phone bill. Coming on the heels of the Equifax breach, Lauer offers a timely reminder that the system has now shifted to consumers the responsibility not only of monitoring their own credit-related behavior but also the responsibility of monitoring their own credit reports.

Creditworthy is a book about the history of the credit reporting bureaus in the United States. Starting in the early 1800’s, the book talks about the credit culture that existed between merchants and consumers at the start of our country. The legacy is interesting to anyone with a love of history, but it could have been handled more briefly by the author.

The book takes the reader through American history from the perspective of credit bureaus. Starting out in the 100’s, the credit service provider field has now been narrowed down to 3 major players, Equifax, TransUnion, and TRW. Everyone is probably familiar with Equifax as it was recently in the news for a database breach. Personal information, social security numbers, and driver license numbers from 143 million American consumers was stolen. Equifax, who earns millions of dollars from the sale of consumer financial information, has, to date, avoided financial liability to the people whose credit reputations have been compromised.

Information from credit bureaus is useful to credit providers. Having worked as a credit manager of a major bank, I know how that credit information is ordered and used every time that a new credit application is received, and annually thereafter until the debt is paid. Credit reports assist credit providers by helping them determine the likelihood that a debt will be repaid in a timely manner. If credit bureaus kept to the basic function for which they were designed, providing credit information to entities with a valid credit information needs, their usefulness would be indisputable. When credit applicants supply a bank or creditor with financial information, they expect that information to remain confidential.

Credit bureaus subsequently got into the business of selling mailing lists based using certain credit benchmarks that marketers provide. Those lists are then used to bombard consumer mailboxes and email accounts with credit card and loan offers. The selling of mailing list is a large money maker for credit bureaus. Historically according to Creditworthy, consumers were appalled when they found out that their payment information had been shared. Today, consumers accept that their payment information will be shared with credit bureaus. However, it is not a credit applicant’s intent that the information shared be taken advantage for the financial benefit of third parties to whom they made not credit request. This is misuse and that needs to be regulated. Creditworthy makes the point that the type of surveillance that credit bureaus engage in is something citizens of this country would rail against if done by our government. Yet they seem to accept it from institutions like credit bureaus that are accountable to no one.

Creditworthy’s release at this time was not planned to coincide with a data breach but it comes out with perfect timing. This is the book to read if you’re curious about what credit bureaus like Equifax do and how a company like that could amass so much personal information on American consumers without much notice.

Creditworthy opens up in 1913 when oil magnate John D. Rockefeller is denied access to credit in a Cleveland department store. The clerk, who didn’t trust the appearance of his customer, insisted on calling the credit department before authorizing Rockefeller’s purchases. The story shows that at the time already, even one of the richest men in the world, could not escape the gaze of a surveillance apparatus that will remain under-studied for decades to come.

The book ends 100 years later when his great-grandson Senator John (Jay) D. Rockefeller IV initiates a senate investigation into the business practices of the U.S.’ leading data brokers. The results were divulged a few months after Snowden’s NSA revelations. Talking about privacy, the senator said:

" What has been missing from this conversation so far is the role that private companies play in collecting and analyzing our personal information. A group of companies known collectively as ‘data brokers’ are gathering massive amounts of data about our personal lives and selling this information to marketers. We don’t hear a lot about the private-sector data broker industry, but it is playing a large and growing role in our lives.

Let me provide a little perspective. In the year 2012, which you will recall was last year, the data broker industry generated $156 billion in revenues–that is more than twice the size of the entire intelligence budget of the United States Government–all generated by the effort to learn about and sell the details about our private lives. Whether we know it or like it or not, makes no difference."

In this book, professor of media studies Josh Lauer describes how U.S. citizens became objects of intensive surveillance. He investigates how financial identity became a key marker of our personal trustworthiness and how increasingly centralised and invasive systems for monitoring an individual’s behaviour and credits enabled the ascent of consumer capitalism in the U.S.

Many of us think that modern surveillance appeared after 9/11 but its history actually started in the late 19th century when a disembodied doppelganger of the American consumer started materializing inside the files of retail credit departments and local credit bureaus.

The credit reporting industry was an omnivorous collector of personal data. It cultivated trusted informants, connected with hospital and utility companies, placed phone calls to employers, landlords and neighbours in order to amass as much information as possible about American individuals. Many credit departments and bureaus even maintained separate ‘watchdog’ cabinets where they stored all sorts of information that may affect an individual’s ability to pay: divorces, lawsuits, bankruptcies or accounts of immoral behaviour gleaned from papers court and newspapers clippings, etc. The data gathered was so extensive that in the early 1960s, FBI agents, treasury men and the NYPD visited their offices when they needed to fill in gaps in their dossier.

The credit surveillance industry not only quantified the value of citizens, it also functioned as a disciplinary machine, attempting to control their behaviour, shaming them into paying back what they owed and enforcing the doctrine that a person who abused his or her credit must should be shunned from business and society. To the point that, over time, an individual’s financial identity became an integral dimension of their personal identity.

Trustworthy explores a very American phenomenon. We do have credit surveillance systems in Europe too but they are probably not as sophisticated as the ones described in the book (note to self: please investigate the European situation.) I’d definitely recommend this book to U.S. readers. It is impeccably researched and makes for a compelling read. I particularly enjoyed the parts describing the array of human and mechanical techniques employed to extract and manage credit information. From the personal interviews that subjected consumers to intrusive scrutiny to the new technologies that enabled the collection and archiving of data. That’s where i learned about the existence of the telautograph, a precursor to the modern fax machine that was developed to transmit drawings to a stationary sheet of paper. It was used in credit bureau, banks and doctors for sending signatures over long distances.

Credit surveillance systems placed individuals at the center of an invasive information and communication network. Its complexity, its reach and the impact it had on society was (and is still) alarming. Yet, most American consumers have long remained unaware of the private surveillance system that facilitated their credit purchases. This lack of knowledge and control is something that most of us -U.S. citizen or not- have often deplored since Edward Snowden revealed the extent of the NSA mass surveillance infrastructure.

Interesting account on a matter many take for granted. I found the text both fascinating for a historical perspective and enlightening for how to handle my finances in the future.

This is a fascinating and deeply detailed account of a subject most of us do not think about, Consumer Credit and how that information is tracked. While it was interesting to learn the history of credit tracking and rating in America I felt that the the non-linear narrative made the book hard to get in to as the timeline would advance and then retreat to pick up some point from previous years. While thoroughly researched with an unquestionable eye for detail I felt that some of the detail could have been condensed for the benefit of the casual reader who may have find the more minute details unimportant to the overall story.