CREDIT BUREAU

organization that provides information to merchants or other businesses relating to the credit worthiness of their customers. Credit bureaus may be private enterprises or operated on a cooperative basis by the merchants in one locality. Users of the service pay either a fee based on the amount of service or a flat membership charge. Cooperative credit bureaus, organized for the exchange of credit information among merchants, were known in some countries as early as 1860; most of their growth, however, occurred after World War I. Until then, the small amount of credit granted was usually based on the merchant's personal knowledge of the customer. The primary function of many of the very early credit bureaus was to maintain a list of customers who were considered poor risks. As the use of consumer credit grew and the population became more mobile, credit bureaus were established to exchange information on which to base decisions on whether to grant credit. Their sources of information include the merchants or other businesses that have granted a customer credit in the past, his employment record, his landlords, public records, newspapers, and direct investigation. The development of automatic data-processing equipment has facilitated the accumulation and distribution of information on a nationwide basis; the threat to privacy resulting from these practices has only recently been recognized. The Fair Credit Reporting Act passed in 1971 in the United States, for example, provides that a person has the right to know what information is on file about him and requires that merchants refusing to grant credit on the basis of a credit-bureau report must give the name and address of the bureau used.