The Washington herald., 1913-01-11
If the Dyer Bill Becomes Law
the Capital Will Be Sur.
rounded by "Sharks."
LOOPHOLES FOR LENDERS
One Plan Is to Lend Credit at the
Bank Instead of Actual
Money.
By JOSEPH p. AMIN.

"Washington-A national capital par
| TALLY surrounded by loan sharks"
If the threats of loan companies which
come under the provisions of the Dyer
| loan shark bill, which probably will be
enacted into law before the end of the
month, issue forth into acts. the above
will be an accurate identification OF the
National Capital
Declaring that the Dyer bill will make
| II impracticable for virtually all loan
companies now doing business in the
city to operate at a reasonable profit.
representatives Of some of the larger
firms threaten to withdraw from the
District and set up establishments at
| various locations Immediately over the
District line in Maryland and there dole
out their loans at whatever rate of in
| terest they desire.
While the Maryland law holds that any
rate of interest greater than per cent
per annum is usurious. the law leaves
loopholes as a result of which loan sharks
may charge almost any rate OF interest
they desire through the lacking on Of
NUMEROUS and heavy charges under the
guise of brokerage and notarial fees, COM
missions for obtaining the loan and SO
forth. These charges are specifically for
hidden in the Dyer bill. which requires
that the per cent per month permitted
fees except in the case of foreclosure.
The influences which were responsible
for the first loan shark agitation which
eliminated in legislation in both houses
Of Congress last session. are frankly dis
appointed over the action of the House
in reducing the interest rate from to
! per cent a month. under which rate
they believe it to be extremely doubtful
il the loan brokers will be able to oper-
ate at a reasonable profit. The per
cent rate was fixed after a careful study
of the question as the lowest interest
rate which in justice to these loan brok-
ers should be required in view OF the
prohibition against the charging OF
brokerage or notarial fees. The question
OF the interest rate was referred to the
Sage Foundation in New York. which
has recently published the result OF an
extended study into the loan shark ques-
ton. The per cent rate was approved
as fair to public and brokers providing
no further charges were permitted in
connection with the loans.
Ways of Evasion.
The ! per cent provision will not fan
as heavily upon pawnbrokers. as the
margin of risk assumed by this class of
money lender is not as large as in the
case of the other money lenders In
the case Of pawnbrokers. too, all the
business in connection with a loan is
transacted within the Office. There Is
no inspection or appraisal requiring out
side assistance or extended trips and no
legal forms to be gone through for the
mutual protection of borrower and lend
er. and which consume time and require
some expenditures. The loss rate for
loan brokers is admittedly much greater
than in the case of pawnbrokers
The Dyer bill, with the amendments
tackled on in the House and Senate and
agreed TO by the conferees, is assured
OF enactment within a few days The
conference report probably will be pre-
scented to both Houses to-day and adopt
ed. That President Taft will sign the
bill Is taken for granted.
Another plan being discussed by COM
panies aimed at in the bill involves a
possible means of evasion within the
law. The plan Is to lend credit instead
of money and charge whatever rate of
interest the transaction permits. Under
this system loan companies would leave |
on deposit large sums Of money in local
banks. A prospective borrower would be |
told that the company could not lend |
money. but would be willing for a con-
sideration to indorse a note for the |
amount desired and have II discounted |
at a local bank. Then the broker would |
take the note with its Endorsements to !
tine bank where he had deposited his |
money, have il discounted, and, de- |
iucting the first payment, return the |
balance to the borrower. having first |
exacted such security for his Endorsement |
as would protect him. While this plan \
might be practiced for a time. it surely |
would have to defend its legality in the |
court, and, in the event OF its being /
held to be legal, would be the object of
lnother and more certain legislative at
Ia tai, +hor.on