Consumer Credit and the American Economy examines the economics, behavioral science, sociology, history, institutions, law, and regulation of consumer credit in the United States. After discussing the origins and various kinds of consumer credit available in today's marketplace, this book reviews at some length the long run growth of consumer credit to explore the widely held belief that somehow consumer credit has risen "too fast for too long." It then turns to demand and supply with chapters discussing neoclassical theories of demand, new behavioral economics, and evidence on production costs and why consumer credit might seem expensive compared to some other kinds of credit like government finance. This discussion includes review of the economics of risk management and funding sources, as well discussion of the economic theory of why some people might be limited in their credit search, the phenomenon of credit rationing. This examination includes review of issues of risk management through mathematical methods of borrower screening known as credit scoring and financial market sources of funding for offerings of consumer credit. The book then discusses technological change in credit granting. It examines how modern automated information systems called credit reporting agencies, or more popularly "credit bureaus," reduce the costs of information acquisition and permit greater credit availability at less cost. This discussion is followed by examination of the logical offspring of technology, the ubiquitous credit card that permits consumers access to both payments and credit services worldwide virtually instantly. After a chapter on institutions that have arisen to supply credit to individuals for whom mainstream credit is often unavailable, including "payday loans" and other small dollar sources of loans, discussion turns to legal structure and the regulation of consumer credit. There are separate chapters on the theories behind the two main thrusts of federal regulation to this point, fairness for all and financial disclosure. Following these chapters, there is another on state regulation that has long focused on marketplace access and pricing. Before a final concluding chapter, another chapter focuses on two noncredit marketplace products that are closely related to credit. The first of them, debt protection including credit insurance and other forms of credit protection, is economically a complement. The second product, consumer leasing, is a substitute for credit use in many situations, especially involving acquisition of automobiles. This chapter is followed by a full review of consumer bankruptcy, what happens in the worst of cases when consumers find themselves unable to repay their loans. Because of the importance of consumer credit in consumers' financial affairs, the intended audience includes anyone interested in these issues, not only specialists who spend much of their time focused on them. For this reason, the authors have carefully avoided academic jargon and the mathematics that is the modern language of economics. It also examines the psychological, sociological, historical, and especially legal traditions that go into fully understanding what has led to the demand for consumer credit and to what the markets and institutions that provide these products have become today.

This text examines the economic, psychological, sociological, historical, and legal traditions behind the demand, supply, institutions, and regulation of consumer credit in today's marketplace and how and why they have evolved.

The growth of the American economy in the post-War era has been characterized by a growth in the consumer economy as a fundamental driving force in the economy. In turn, this growth in the consumer economy has been driven by a growth in usage and spread of the use of consumer credit. Yet the relationship between consumer credit and the American economy remains little understood and little explored by economists.This book explores the institutions, history, and economics of consumer credit, focusing especially on the causes and consequences of the growth of consumer credit in the post-War era. Focusing primarily on consumer, non-mortgage debt, we identify the reasons for growing use of consumer credit and public policy responses to it. Starting with the basic question of “Why do consumers borrow?” we consider the evolution of consumer credit institutions and the manner in which these evolutions have co-evolved with other elements of society and the economy and the ways in which these factors have transformed American society. We also discuss contrary hypotheses, such as the long-standing research efforts to study consumer behavior from the perspective of consumer psychology (recently taking the form of so-called Behavioral Economics) and the ways in which these views have been incorporated into the study of consumer credit. Most important, as the government stumbles through efforts to respond to the most recent financial crisis, we argue that a proper understanding of how consumers actually use consumer credit and the impact on the American economy is essential for sound policy-making.We present here Chapter 1, the Introduction to Consumer Credit and the American Economy, which provides an overview of the book and frames the discussions to follow.

This is the first comprehensive account of the development of consumer credit. Consumer credit is a vital force driving the development of our economic system. Rather than look at consumer credit solely as an economic phenomenon, Klein examines the social impact of the consumer credit industry within the framework of economic and cultural change. His analysis offers a concise examination of the industry from the perspective of marketing, the creating of material and experiential products, and the product distribution mechanisms. The discussion of changes within the bankruptcy structure accounts for the creation of overzealous consumer spending and the implementation of controls over individual consumer credit. This will be of interest to scholars or students concentrating in economic sociology, stratification, and cultural studies.

As both the twenty-first century and the new millennium opened and the old eras passed into history, individuals and organizations throughout the world advanced their listings of the most significant people and events in their respective specialties. Possibly more important, the tum of the clock and calendar also offered these same observers a good reason to glance into the crystal ball. Presumably, the past is of greatest interest to most people when it permits better understanding of the present, and maybe even limited insight into the outlook. In keeping with the reflective mood of the time, the staff and friends of the Credit Research Center (CRC) at Georgetown University's McDonough School of Business noted that the beginning of the new millennium also marked the beginning of the second quarter-century of the Center's existence. The Center began at the Krannert Graduate School of Management at Purdue University in 1974 and moved to the McDonough School of Business at Georgetown University in 1997. The silver anniversary of its founding offered the occasion for creating more than another listing of significant past accomplishments and milestones. Rather, it offered the opportunity and, indeed, a mandate for CRC as an academic research center, to undertake a retrospective and future look into the status of research questions pertaining to consumer credit markets. For this reason, the Center organized a research conference which was held in Washington, D. C.

The first consumer credit bureaus appeared in the 1870s and quickly amassed huge archives of deeply personal information. Today, the three leading credit bureaus are among the most powerful institutions in modern life—yet we know almost nothing about them. Experian, Equifax, and TransUnion are multi-billion-dollar corporations that track our movements, spending behavior, and financial status. This data is used to predict our riskiness as borrowers and to judge our trustworthiness and value in a broad array of contexts, from insurance and marketing to employment and housing. In Creditworthy, the first comprehensive history of this crucial American institution, Josh Lauer explores the evolution of credit reporting from its nineteenth-century origins to the rise of the modern consumer data industry. By revealing the sophistication of early credit reporting networks, Creditworthy highlights the leading role that commercial surveillance has played—ahead of state surveillance systems—in monitoring the economic lives of Americans. Lauer charts how credit reporting grew from an industry that relied on personal knowledge of consumers to one that employs sophisticated algorithms to determine a person's trustworthiness. Ultimately, Lauer argues that by converting individual reputations into brief written reports—and, later, credit ratings and credit scores—credit bureaus did something more profound: they invented the modern concept of financial identity. Creditworthy reminds us that creditworthiness is never just about economic "facts." It is fundamentally concerned with—and determines—our social standing as an honest, reliable, profit-generating person.