Yes, women had access to credit before 1974

By Patricia Patnode of CEI.

"March is Women’s History Month, a time to acknowledge and celebrate many “firsts” for women in public life. One of those “firsts” is the ability for American women to open a credit card independently, without a husband or father’s cosignatory, following the passage of The Equal Credit Opportunity Act (ECOA) by Congress in 1974. This bill prohibited discrimination in credit transactions based on sex or marital status and is generally considered a landmark for women’s financial independence. However, this is only partly true.

The ECOA made it illegal for banks to discriminate based on sex or marital status. The law didn’t grant women access to credit but, rather, formalized their ability to sue for discrimination. Much like women had been voting in American elections since the 1700s, before passage of the 19^th Amendment to the US Constitution, women had also been navigating loans, credit, and the financial system long before the 1974 law.

In the 19^th century, both single and married American women relied on local stores and small businesses for credit. These businesses often granted credit based on personal trust and reputation, allowing women to purchase necessary items even without ready cash. A charge account at a general store, restaurant, or similar establishment could be settled at the end of the week or paid periodically. Like in the TV show Cheers, at a place “where everybody knows your name,” it’s harder to skip out on a bill and easier for businesses to give grace to customers who need it. This non-mandated, localized credit access was particularly important to women.

Prior to the 1970s, marriage too often dictated the terms by which women accessed credit. Since married women’s property was also owned by their husbands, “only unmarried women could independently form contracts and engage in litigation…” the author of To Her Credit writes in her book examining the finances of women during America’s 18^th century Revolutionary period. She found that“[women in Boston and Newport] appeared in debt litigation as creditors and debtors in roughly equal proportions,” however, “women’s credit networks were predominantly local.” Women routinely made purchases on credit, signed contracts, participated in court cases, and settled debts. At that time, married women also commonly extended lines of credit to their unmarried friends.

A hallmark example of a Revolutionary-era woman navigating the financial system is Abigail Stoneman, a widow who opened and operated inns and teashops in New England in the 1700s. She also extended lines of credit to other business owners and her own customers. In fact, there are many documented appeals in local newspapers by creditors like Stoneman requesting repayment from debtors.

But credit access differed from state to state. For example, in 1848, the Married Woman’s Property Act passed in New York, and established that a woman was no longer liable for her husband’s debts, could enter contracts on her own, was able to collect rents or receive an inheritance in her own right, and could file a lawsuit on her own behalf. The act became a model for other states.

The rise of department stores and catalogs

By the late 19^th and early 20^th centuries came the emergence of department stores and mail-order clothing catalogs. Larger businesses were able to offer more formalized credit options, catering to women’s shopping experiences. The “charge plate,” akin to an in-store card, was somewhat of a predecessor to modern credit cards. Although single women faced more challenges in securing credit, they could still apply and receive credit by providing proof of financial stability. Over time, these store accounts, costly to maintain and collect on, gave way to portable credit cards managed by banks that could be used at other stores.

Leading up to the ECOA

In the early 1970s, women’s organizations gathered testimony from women nationwide describing their hassles receiving letters of credit and financial services from local banks. These letters were presented in a hearing before the National Commission on Consumer Finance in May 1972. This and subsequent hearings helped inform the 1974 bill.

Although the bill was passed, it did not guarantee that women or women-owned businesses would be considered creditworthy by banks. It merely allowed them to pursue legal recourse for discrimination based on sex.

Women’s banks

Still, in response to the need for women’s creditors, bank entrepreneurs opened a small number of women’s banks following the bill’s passage. The First Women’s Bank in New York City opened in 1975. Principal advocates for the ECOA Stephanie Lipscomb and Jeanne Hubbard were instrumental in its founding. Similarly, The Abigail Adams National Bank, originally known as the Women’s National Bank, was founded in 1977 in Washington, D.C.

Although both banks have since changed their names and pivoted their financial services away from primarily serving women, these banks helped challenge societal perceptions about women’s roles in the economy, enabling women to take control of their economic destinies and contribute more fully to the economy.

Women in finance

During Women’s History Month, it is important to recognize that women had been creatively and successfully navigating the financial system in the United States long before Congress intervened in the 1970s. This historical context underscores the resilience and ingenuity of generations of women who forged a path to success that included access to credit. The passage of the ECOA was a significant milestone, but it built upon a foundation of determined women who had already made substantial strides in business and entrepreneurship."