By David Kurlander

Bitcoin prices fell almost 13% on January 21st, highlighting the continued volatility of the controversial cryptocurrency. On this week’s Now & Then episode, “The Culture of Cash,” Heather Cox Richardson and Joanne Freeman discussed other moments when new forms of American capital spurred debate. Joanne reflected on how credit has often been at the center of domestic economic controversies, all the way back to how colonists handled the wild competing currencies of the 1700s: “It was about relationships and it was about credit in every meaning of that word.” The tumultuous role of credit came to the political fore in 1967, when debates over the exploding availability of credit cards led to a fierce congressional examination of how the new plastic would change the nation.

In March 1967, President Johnson appointed Betty Furness as Special Assistant to the President for Consumer Affairs. Johnson had created the position upon taking office in 1964, and Assistant Secretary of Labor Esther Peterson had recently left the post to focus on her primary role.  

Furness was a 51-year-old actress and advertising figure. In her twenties, she had a small role in the iconic 1936 Fred Astaire-Ginger Rogers vehicle Swing Time and some 35 other Golden Age films. In the 1950s, she became the official spokeswoman for Westinghouse Refrigerators, hawking the appliances during ad breaks in the Democratic and Republican National Convention broadcasts and developing a passion for politics in the process.  

Furness brought irrepressible energy to the post. When a journalist asked her, after a few months on the job, whether she thought Johnson had appointed her to “bury” the post, she replied, “Then it’s the goddamnest burial that’s ever been had.” 

In her first months on the job in mid-1967, Furness railed against costly and shoddy repair plans for appliances and cars, appeared on Capitol Hill to support a bill to regulate flammable fabrics, and increasingly zoomed on the growing problem of credit card debt.  

Banks only began issuing credit cards in the late 1950s. Their efforts were a response to the growth of Diner’s Club, American Express, and the Hilton Credit Corporation, all of which offered members access to hotels, stores, and shows on full credit—and at the expense of banks, who saw an immediate decrease in high-interest personal loans. 

The first two bank credit card programs, spearheaded by Bank of America in San Francisco and Chase Manhattan in New York, quickly multiplied. In the years 1966 and 1967 alone, 129 new bank credit plans were initiated nationwide. Many banks put a steep 1.5% monthly interest rate—or 18% annual rate—on their credit card payment plans. The banks were joined by expanded credit card programs from oil companies, airlines, and department stores.

The explosion of the credit card market reflected—and contributed to—a broader shift in America’s relationship to debt and credit. Between 1946 and 1966, consumer credit ballooned from $18 billion to over $100 billion. In late 1968, commercial banks had around $1 billion in outstanding credit in their card plans. In the decade preceding 1967, the national personal bankruptcy rate tripled, with many economists blaming increased reliance on credit. 

As Furness settled into her role, she weighed in on credit disclosure issues. She appeared on August 7th, 1967 alongside Undersecretary of the Treasury Joseph W. Barr before the House Banking Committee’s Subcommittee on Consumer Affairs. The Subcommittee was chaired by the passionate Missouri Representative Leonor Sullivan, who was working on a “truth-in-lending” bill called the Consumer Credit Protection Act. The bill would require creditors of all sorts to lay out their annual interest rates more clearly. 

Both Furness and Barr backed virtually all of Sullivan’s proposals, but found themselves having to answer for a different issue: unsolicited credit cards. Republican New Jersey Representative William Widnall, somewhat suddenly during the interest rate disclosure conversation, pivoted to his concerns over the deliveries: “Today you sit home and all of a sudden you receive in the mail, without even asking for it, credit cards…somewhere along the line is a place where we must investigate.” 

Furness then asked, “May I interrupt, Mr. Widnall?” Furness revealed that she had received a card the previous week at her New York residence. The plastic was the recently launched “Everything Card,” from First National City Bank (now CitiBank), which consolidated many more types of purchases on a singular card than other banks had been able to bundle. “They are just sending them out and saying, ‘Come on fellows, spend,’ and I bitterly resent having the card,” Furness continued. “I did not ask for it, I did not want the card, and when you think of the unwise hands those cards fall into, it is a shocking thing.” 

Furness’s condemnation of the cards was the result not only of her personal experience, but also the flurry of consumer complaints that she received about unsolicited credit cards upon taking office. 

Some concerned Americans found the cards inconvenient to safely destroy. Others recounted stories of thieves stealing and using their cards. Many Americans simply didn’t recognize the difficulty of budgeting for credit card purchases and ended up deeply in debt. In 1966 alone, banks and financial enforcement groups reported around $100 million in fraudulent credit card charges. Almost half of the approximately 10 million unsolicited cards that had not yet been claimed had been sent without prior credit checks. 

On September 19th, 1967, Furness, during a speech in Colorado City before the Consumers Bankers Association, officially warned banks to stop sending unsolicited cards. If they didn’t comply, she suggested, they risked congressional regulation. “A bank’s most precious commodity is its integrity, and it shouldn’t take a law to uphold a banker’s reputation,” Furness proclaimed.

On November 8th, 1967, Furness appeared before the House Committee on Banking, chaired by Texas Democrat Wright Patman, a veteran House bruiser long admired and reviled for his aggressive stands against the banking industry. Patman—spurred on by Furness’s concerns—had drafted a bill to outlaw bank-based unsolicited cards altogether.

Patman did not mince words in his opening statement: “We hear a lot of talk these days about how the bank credit card will take us into the golden era of the checkless society. I am probably old-fashioned, but the thought that numbers will displace persons’ names and that debt will replace thrift is repulsive to me.” 

Patman also disputed the oft-heard bankers’ refrain that the credit card mailing system was designed to make lending less onerous. “The name of the game the bankers are playing with these plastic wonders is maximum earnings, not maximum efficiency,” he said. 

Furness followed Patman with an equally scathing testimony, arguing that the banks were engaging in a knowingly predatory practice that needed reining in. “A man isn’t allowed to drive a car until he can prove he knows how,” Furness said. “Why should he be given credit until he can prove he knows how to use it?” 

She also pointed out that credit cards were particularly dangerous for the downtrodden. “The compulsive buyer is not going to be able to resist the chance to have something they can’t afford at the moment. And before he knows it he can be in deep, deep trouble,” she said. “Those least able to handle and understand credit—the poor, the uneducated—are usually the ones who become the most hopeless addicts.” 

The fire and brimstone of Patman and Furness, however, was soon put out by the next witness, Andrew Brimmer. 

Brimmer had gained a national profile the previous year when Johnson appointed him as the first Black member of the Federal Reserve’s Board of Governors. In his testimony, Brimmer first acknowledged regulatory issues in the credit card industry. He also highlighted, however, “the need to avoid discouraging innovations in banking that will contribute to public convenience.” 

Brimmer laid out a plethora of reasons for why the card-mailing campaigns couldn’t be easily extinguished. He suggested that banks had already sent out so many cards that any limit on unsolicited sending would disadvantage those institutions which had not yet tried the strategy. He also reassured the Committee that banks had done “an adequate job of screening their customer lists to remove most of the poor credit risks” from the mailings.  

Brimmer then arrived at his conclusion: he advised against any legislation, arguing that the Fed didn’t see a crisis forming in consumer credit. Kenneth A. Randall, the Chairman of the Federal Deposit Insurance, concurred that regulation was premature.  

The issue thus arrived at a stalemate. Sullivan’s Consumer Credit Protection Act passed with much fanfare in May 1968 and made straight-forward interest rate disclosures the law of the land, but the split between consumer advocates and financial regulators over unsolicited cards continued for the rest of Johnson’s term. 

In July 1968, the Federal Reserve issued a study on consumer credit called Bank Credit-Card and Check-Credit Plans. The report’s data at least partially backed Brimmer and Randall’s relative lack of concern. The Fed found that under 2% of all credit card users were in hock to the banks. They gave the full green light to let banks continue sending the cards to potential adopters. 

As the credit industry continued to boom, however, the forces of reform eventually prevailed in Congress. The dam broke in 1970, long after Furness had returned to New York and Johnson had given way to Nixon. First, the Federal Trade Commission moved to ban the mailing of unsolicited credit cards from oil companies and airlines out of fears of encouraging monopolies. Later in 1970, Congress voted to amend the Consumer Credit Protection Act to outlaw most unsolicited bank card mailings. 

Sometimes, however—through the mailing of gift cards with credit capabilities, through identity theft, or by sheer mistake—an unsuspecting consumer may still find a credit card in their name in the mailbox. 

The late 1960s debate over unsolicited credit cards—with its existential anxiety, claims of overreaction from regulators, and sense of financial acceleration—has much in common with the current tenor of the cryptocurrency discourse. As the volatility and size of the digital currency market continues to grow, similarly rancorous regulatory showdowns may become an ever more common part of the national conversation.   

For more on the credit card explosion of the late 1960s, read Professor Christine Zumello’s fantastic 2011 Business History Review article “The Everything Card and Consumer Credit in the United States in the 1960s.” And for a snapshot at the regulatory credit framework of the early 1970s, read Professor J.C. Weistart’s 1971 Michigan Law Review article “Consumer Protection in the Credit Card Industry: Federal Legislative Controls.” And head to the Twitter account of author and Now & Then Editorial Producer David Kurlander for supplemental archival threads on each Time Machine piece: @DavidKurlander. 

To receive Time Machine articles in your inbox, sign up to receive the CAFE Brief newsletter sent every Friday.  

The Time Machine Archive 

Catch up on the Time Machine’s deep dives into history, which offer context to understand our present challenges, including these recent pieces:

 

Time Machine