Consumer Protection in the Credit Card Industry: Federal Legislative Controls

Credit cards have been used as a means of facilitating delayed-payment purchases since early in this century. The first credit card systems were operated by retailers and service organizations in connection with the merchandising of their products. While such programs were used in local markets by department stores, oil companies were the first issuers to recognize the potential of credit card plans in larger geographical areas. In the early 1950's a new phase in credit card development evolved with the emergence of firms engaging solely in the extension of credit.

These firms-Diners' Club, American Express, and Hilton Credit Corporation with its Carte Blanche system-sold no merchandise, but rather enlisted a nationwide system of retail, service, and travel establishments to make credit sales to their cardholders. The convenience of a single card that could be used for a variety of goods and services stimulated considerable consumer interest. Since each issuer of a multipurpose card potentially could reach a greater share of the credit card market, competition throughout the industry intensified.