Mercantile agencies had their origin in the system adopted by several
prominent firms of keeping on record all the information obtainable
relating to their customers. In 1841 "The Mercantile Agency of New
York City" began its history, and was the forerunner of the present
great agencies whose record books of credits and ratings include the
names of all the business houses and corporations in this country and
Canada. The pioneer institution of this character in the United States
was the one bearing at present the name of "R. G. Dun & Co.," an
outgrowth of "The Mercantile Agency of New York City." Since 1860 it
has borne the name of Mr. Dun, who was formerly a partner with Mr.
Douglass when the agency was known as "B. Douglass & Co." Another
popular and influential concern is the one known as "The Bradstreet
Company," familiarly spoken of as "Bradstreet's." Besides these two
leaders there are many others, whose reports on credits are limited to
particular lines of trade. The larger agencies soon found it necessary
to establish branches in all the business sections of the country. A
particular field of investigation is allotted to each branch, and an
interchange of information is in constant progress.
[Illustration: A mercantile agency inquiry form.]
To be a recipient of the valuable information afforded by these
agencies business men, by paying an annual fee, are enrolled as
subscribers and furnished with books of ratings, as they are called.
Besides this book special type-written reports with elaborate details
respecting a firm's credit are sent upon the request of the
subscriber. The volume of information recorded in these agencies
concerning any one's credit is obtained through the effort of
officials of the agencies known as reporters. These men of experience,
integrity, and discernment are seekers after truths. Usually each
reporter has a distinct line of trade assigned him for research and
investigation. This brings him into intimate acquaintanceship with
every trader in his particular field. He is a constant solicitor of
the banker and merchant for facts. His business is not merely to
gather information respecting the resources of business men, but to
investigate rumours that in themselves may be detrimental to one's
credit, and to disprove them where possible and sustain and support
the credit of a house. Too often it is supposed that the reporter is
seeking evidences of weakness when in reality his business is most
frequently that of discovering elements of strength. Information is
freely given him as he interviews men whose businesses and experiences
are the depositories for a wealth of credit information. He soon
becomes a confidant of the merchant himself, who not only tells him
all he knows about the customers and their accounts upon his books,
but his own business affairs as well. Indeed, the relation becomes so
very reciprocal that the reporter often furnishes information to the
merchant in the interview on some matter of credit of pressing notice.
In this way a corroboration of facts or the denial of a rumour may be
effected. He inspects the books of the offices of public record to
find the evidence of mortgages, judgments, and transfers of property,
and have the same recorded on the agency's books. It is the reporter
who finally has gathered the information that determines a firm's
ability to have and to hold a line of credit.
It is essential to the life of the agency that its reports be honest
and free from any element of doubt. The public confidence in the
reliability of the reports will determine the prosperity of the
company. Perhaps at first glance it would seem as if the system of
reporting financial information was a serious discrimination against
the men of smaller capital and in favour of the wealthy. But mere
capital is not the only element entering into an estimate of one's
ability to pay. Character and reputation are powerful forces in
assisting a merchant in determining credit. An agency discloses facts
and not opinions. And it is within the range of possibility of any one
to create and maintain his credit. Capital may grow gradually but
credit is sometimes established or destroyed by a single act.
The facts obtained by mercantile agencies are not public property.
They are given in confidence and for the sole purpose of aiding the
business with respect to the propriety of granting credit. The private
reports are for the eyes of the interested inquirer and not the
curious. Whenever some particular item of interest finds its way to an
agency that would affect one's credit seriously, such as the giving of
chattel mortgage or the confession of a judgment or the sale and
transfer of property, it is customary to send unsolicited a special
report of these facts to all subscribers on the agency's books who
have ever at any time made inquiry concerning the firm. One might
expect that these agencies expose themselves to risk of prosecution
for libel, but since no malice is ever intended in any report
circulated, and since it rarely occurs that damaging reports are sent
out by these institutions unless abundantly confirmed, there is little
opportunity for litigation of this sort.
Another field of usefulness of the mercantile agency is in the
exposure of the absconding debtor and his whereabouts, and also the
dishonest trader who in arranging a fraudulent failure may be striving
to open many new accounts. The unusual demands for reports respecting
such a one lead to careful investigation. Instead of a restrictive
tendency a mercantile agency promotes the expansion of credit and yet
permits of proper conservatism. It opens to the trader as a market for
his merchandise every new and trustworthy account. It curbs
speculation, stimulates diligence in business, habituates punctuality,
and develops character. When we remember that the present annual
internal commerce of our country is estimated at about 800,000,000
tons of merchandise carried an average distance of 120 miles, and that
this volume of trade is worth over $10,000,000,000, we are forced to
admit that the unique system of these credit agencies has done much to
further and make possible this commercial prosperity.