Evening star., 1922-03-02
Loan Legislation.

Discussion goes on in Congress over
the enactment of remedial loan legis-
lation. 1t is a subject that has aroused
debate in the District at various times
during the past twenty years. When
the exactions and methods Of loan
sharks became a public scandal there
was organized effort to bring about a
correction of their ways Of doing busi-
ness. A bill was introduced in Con-
gress for this purpose, but it was
amended to provide a rate of interest
SO low that the business of lending
money In small sums on notes could
not be honestly carried on at all. By
amendment the law was also made to
include pawnbrokers, whose business
was licensed and well regulated by the
Diss.ie. authorities. and. against whose
methods of doing business there had
been no complaint. The law, instead
Of preventing extortion and correcting
sall the abuses suffered by small bor-
rowers. merely drove the money lend
ers to Virginia, where they carried on
their business, it is believed, in the
old way. The legal interest was so low
that the business could not be carried
on by fair means in the District, and
an incentive was given to lenders to
operate outside the law and in ways
in which the borrower had no protec-
ton. The effect was also to drive the
pawnbrokers out Of business or out of
the city,
All these results were foreseen when
purpose for which it had been pre-
pared and introduced. When President
Taft signed the act, February 4, 1913,
he said:
ST have concluded to sign this bill
because its general purpose is one
with which every good citizen must
sympathize. 1t has been pressed upon
me that the rate of interest to which
pawnbrokers are limited is too low.
and this is urged as an objection to
the bill, not because of any sympathy
with pawnbrokers. but because it is
pointed out that if the limitations of
the bill are so severe as to discour-
age the legitimate pawnbroking busi-
ness it will drive some pawnbrokers
into Virginia and Maryland. where
they will ply their business without
to live in the District and put the law
at defiance. and SO subject those vino
are forced to resort to them to an ex-
tortion beyond the protection of the
law altogether. l am not satisfied,
however. that pawnbrokers with suf-
fcient capital cannot do q Legitimate e
business at the rate of l per cent a
month. Companies of this kind seem
to be successful in other cities. The
subject is one in respect to which an
experiment in legislation may proper
ly be made. and If it turns out that 1
per cent Is too great a restriction,
Congress in it's wisdom may increase
the rate to ! " or per cent"
President Taft did not sense all the
public disapproval of the 1 per cent
interest rate. It was not altogether that
1t would prevent pawnbroking in the
District, but that it would also defeat
the aim Of regulating the lending of
small sums Of money on personal
notes.
There are bills pending to correct
the errors Of the law Of 1913. A bill
prepared by the Commissioners, in
collaboration with numerous civic as
sociations, provides that per cent in
terest per month may be charged. 1t
contains various provisions which pro-
tect borrowers against the abuses
which the law of 1913 was planned to
correct. The District needs such legis-
lation.