Sara Mayeux

Frequently I drink iced coffee at a local shop in my Tennessee neighborhood. I could pay with cash, but most often I hand over a credit card issued by a New York corporation (though the sign-up paperwork came from Utah), and later I pay the bill using funds in my checking account at a California bank (which funds I can also access with a Visa-branded debit card, which I could alternatively have used to buy the coffee). In the five minutes it takes to buy a drink in Nashville, both I and the vendor participate a web of financial transactions and legal agreements with banks, corporations, and sub-entities headquartered around the country, both of us potentially paying interest and fees at each node along the way.

How did routine purchases become so complicated? As meticulously chronicled in Plastic Capitalism, the way I pay in 2024 required decades of technological, legal, and policy change to become part of everyday life. The book is not merely a narration of the rise of credit cards, however, although that would be fascinating enough. Blending legal, political, and business history, Sean H. Vanatta uses the card industry as a case study in the eclipse of New Deal liberalism and the erosion of what Vanatta calls “the place-based regulatory order” (P. 292).

Political historians have written extensively about how New Deal-style economic regulation gave way to neoliberalism and deregulation. Plastic Capitalism adds to that literature by providing an especially granular look at the role of legal history in the shift, and by attending to state-level legislative debates and court cases in addition to Congress and federal agencies. This approach presents deregulation as a longer, more gradual and iterative process than is sometimes implied by timelines of congressional enactments.

Plastic Capitalism begins with an overview of the New Deal regulatory framework. That framework was characterized by limits on banking—geographic restrictions, industry silos, and price caps—as well as by a structural arrangement that Vanatta terms “financial federalism.” Depression-era reforms introduced federal deposit insurance and other forms of government backing but nevertheless “preserved the existing structure of primarily small, local banks” (P. 15). Banks remained prohibited from branching across state lines, and the states retained an important regulatory role, particularly with regard to interest rates on loans.

In subsequent chapters, Plastic Capitalism reconstructs how banks innovated new products and legal arguments to pursue profits within (and sometimes around) those regulatory limits. The reader learns about department store credit, travel cards, how metal charge plates became plastic cards, and the buildout of payment card interchange networks, with colorful anecdotes along the way—but also clear explanations of exactly how different forms of consumer lending were structured legally, financially, and even materially.

Interchange networks proved pivotal in transforming credit from localized service into free-floating commodity. Banks began administering small-scale charge account programs within their communities mainly as a service for local retailers. By the 1960s, some bankers had begun to reimagine the charge account as a standalone profitable product that could be marketed directly to consumers, offering revolving credit at relatively high interest rates. Still, even the pioneering BankAmericard, launched in 1958, was initially a regional California offering; Bank of America advertised “statewide shopping convenience” (P. 84, emphasis in original).

Then, Bank of America began licensing its card technology to banks in other states and developing what became a national and ultimately international payment network. BankAmericard was eventually rebranded as Visa (and a rival, Master Charge, became MasterCard). Formally, merchants were recruited, and consumers were issued cards by local banks. But consumers increasingly “associated their credit with the network,” and experienced cards as a deracinated payment technology rather than a loan from a neighborhood banker, especially as banks adopted the practice of mass-mailing unsolicited cards to prospective customers (P. 107).

Credit cards raised novel legal questions. At the time, most states imposed usury limits on money loans; now, attorneys had to litigate whether those laws already applied to credit cards, and legislators debated whether states should specifically regulate credit card interest rates. Given the new varieties of fraud facilitated by cards, policymakers confronted where to locate liability for unauthorized purchases, and whether federal or state prosecutors could handle a potential new tide of cases. Bankers, regulators, and consumer advocates went back and forth over whether to prioritize widespread access to credit (given the history of racial and gender-based exclusion from lending markets) or consumer protection against predatory lending.

In Vanatta’s telling, the first wave of regulatory responses left much of the New Deal order in place, even while accommodating credit cards to that order. By the mid-1970s, most states had capped credit card interest at around 18 percent, while Congress had imposed disclosure requirements and banned unsolicited mailings. These and other consumer protection measures “legitimized the bank card industry by regulating it, in effect binding credit cards within postwar liberalism’s regime of (relatively) low-cost, safe consumer credit” (P. 157).

But the story would not end there: “Bankers … had gotten into the card business to break free of the New Deal order’s onerous restrictions,” and “some would continue to seek and seize opportunities to innovate around the rules” (P. 157). In the New Deal order’s final demise, a key development was the Supreme Court’s 1978 decision in Marquette National Bank of Minneapolis v. First of Omaha Service Corporation, to which Vanatta devotes an illuminating chapter. In effect, Marquette decided which state’s usury laws applied to a credit card: the state where the card issuer was based, or the state where the cardholder lived? Under Nebraska law, the First National Bank of Omaha could charge 18 percent interest on credit cards. But many cardholders lived in Minnesota, which capped interest at 12 percent. The Court held unanimously that the bank was “located” for purposes of banking law in Nebraska, and therefore Nebraska’s more permissive limit reigned.

Citibank took quick advantage of Marquette, announcing in 1980 “that it would relocate its card operation from New York to South Dakota, a state with no applicable usury laws” (P. 265). A deregulatory cascade ensued in statehouses around the country. By the 1980s, almost every state had “either loosened or lifted [its] usury laws” (P. 280), and card issuers gravitated to states that had loosened their usury laws the most. In this new iteration of financial federalism, states still mattered for banking regulation, but in a different way: “By 2003 almost three-quarters of credit card loans in the United States originated from states, including South Dakota and Delaware, containing just 4 percent of the country’s population. Importantly, Citibank’s relocation did not make state interest rate regulation irrelevant; rather, it made the interest rate regulation of a few states national policy” (P. 290).

Another chronicler of this history might have presented a triumphant tale of inventive capitalists upending outdated regulatory structures; Vanatta instead worries about the consequences for democratic control over economic life. Some would argue that overly restrictive usury limits disincentivize banks from extending credit at all. Vanatta acknowledges that state-driven deregulation “opened credit markets and made credit available to underserved consumers,” but he argues that the tradeoffs between “unrestrained markets and consumer protection” are subject to political debate—a debate in which bankers now held the upper hand (P. 280). Indeed, much of Plastic Capitalism is devoted to recounting how bankers, policymakers, and consumers engaged in just that debate over the decades.

While “never perfectly democratic,” Vanatta concludes, the New Deal order “compelled bankers to negotiate the price and terms of credit with local stakeholders”; once banks escaped geography, “consumers lost their grip on the regulatory levers” (P. 297). Beyond its specific insights about credit cards, then, Plastic Capitalism offers much fodder for reflection about the modern disjuncture between the structure of political representation, which has remained rooted in geography, and the structure of economic and social life, in which even a $5 visit to a local coffee shop might involve contracting with entities that have no real geographic location at all, or whose geographic locations are something of a legal fiction.