In 1899, Kays began allowing customers to buy goods on credit. But in a time before computers and credit rating agencies, how did they decide who could be trusted to pay back what they owed, and who might pose too much of a risk?
Kays were far from the only organisation to offer credit before the existence of rating agencies. Hire purchase schemes, for example, allowed customers to take goods home as soon as they had made an initial payment — a fraction of the total price. The rest of the money was paid off in regular instalments.
Anything you ‘purchased’ in this way was technically only on hire until you completed your repayments. If you missed a payment, the retailer could reclaim their goods, regardless of the amount of money you might already have paid.
Retailers using hire-purchase schemes generally limited themselves to items such as furniture, bicycles and household electrical equipment, which they could resell second-hand without much loss of value.
Local shops, too, often offered credit of a sort by allowing their customers to run up a ‘tab’ to be paid off at the end of the week or month. People may not have seen this in the same way as other sorts of credit — which could be perceived as shameful — but it still involved going into debt.
Local shops would mainly have sold goods such as food or fabrics, with little or no value at second hand. They relied on their knowledge of local people to choose where they would offer credit, avoiding anyone who seemed like a bad risk. They also relied on the community to ensure that most customers would repay their debts. If you failed to make repayments, your neighbours would soon find out, and could make things pretty unpleasant for you socially.
Kays sold a much wider range of goods than was available on hire purchase, and offered credit on different terms. They didn’t generally try to reclaim goods once they were in the customers’ hands. Moreover, as national firm, Kays didn’t have local shop keepers’ knowledge of their customers. They did, however, find a way to utilise local knowledge and community networks.
They recruited local people to act as their agents. These agents would circulate Kays’ catalogues, arrange purchases and collect payments, in return for a small commission or money off their own purchases from Kays.
Like a local shop keeper, agents would use their knowledge of the people around them to judge who should or should not have access to credit. They probably also helped to make owing money to Kays seem less shameful. Instead of a stranger at the door, the person collecting your debt would be a neighbour and perhaps a friend, who might pop in for a chat in the morning, and tactfully pick up your weekly instalment as they left.
It may sound less sophisticated than modern, computerised credit ratings, but the agency system seems to have worked well for Kays for a large part of the twentieth century. They were one of the largest mail-order firms in the UK, and competed effectively with other forms of retailing at least until the 1980s.