Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-12-19
BY /. 4. FLEMING.

ESdHkNTS ASShClul lrIl the S'tpJrNt ~
conversation had to do with the
problems connected with the lend
ing Of cash with adjusted compensa-
ton certificates as collateral
After January /, these certificates
will. under Government regulations,
become available collateral for loans
from banks to former service men.
These regulations, all important IN
making loans, are sponsored by the
Veterans Bureau.
They are so complicated that the
head of a prominent savings bank
moved, in spirit of fun. that only
national banks and trust companies
be allowed to make loans on TINS
collateral.
Mr.. Howe, treasurer OF the Amer
lean Security and Trust TO, eS'
planned at some length the Varons
forms and rules. lie made II pam
that great caution would have 10 be
used in loans to veterans, urged the
necessity of personal acquaintance
with the applicant for accommoda-
tions with especial care in the mat
ter of accepting duplicate certlhchteS
as collateral
A digest of the regulations ana
opinion thereon Is presented mere
with for the benefit of the banks OF
the city. prepared under guidance OF
Mr.. Howe.
The Nub Of the Matter.
The regulations recently issued by
the United states Veterans Bureau
relating to loans on adjusted service
certificates, provide that those Ger
tificates dated January /. 1928, can
be made available as security Tor
loans on and after January !, 1917.
Since this act was passed add
tional legislation has provided tna'
the time for making applications Tor
these certificates has been extehueo
to January /. 1928. No application
will be granted after that date. ohly
the veteran named in the ceruncate
can lawfully obtain loan on tnese
certificates. Neither the oehenclaiE
nor any other person than the VET
eran has any right In this respect.
ANY national bank, state bank OF
trust company is authorized to make
loans to veterans opon their promis'
sorv notes secured by these service
certificates. Each certificate con-
tatns on its face table for deter
mining the loa ming value and the con
ditions and terms upon which II is
issued. Upon making such loans tne
lending bank shall promptly notiIy
the bureau Of the name OF the Vet
eran. the number of the certificate,
the amount and date OF the loan.
These certificates cannot be pledReo
as part collateral to secure other
obligations. These certif1cates can
only be negotiable and assignable by
and between banks and trust com
panies.
Must Know Applicant.
The form of the note as prepared
bv the Veterans Bureau requires not
only that the certificate be described,
but 1t also requires an affidaVlt
by the bank official that the person
who obtained the loan Is well and
favorably known by the banking In
stitution.
There is no provision az to the
length of time for the note to mature,
except that In case the bank desires
the note rediscounted with the FED,
eral Reserve Bank, that note shall
have a maturity not to exceed nine
months from the time the rediscount
was granted. 'T. a,
The rate Of interest to be charged
shall not exceed by more than per
cent per annum the rate charged by
the Federal Reserve Bank of the dis
triet in which the lending bank ts
located-that is to say. II the Federal
reserve bank discount rate Is per
cent, the rate to be charged the vet
eran shall not exceed per cent.
This rate. of course, might vary in
different Federal districts. No other
charge or fee can be made, except
the interest authorized by law.
As to Collection.
An interesting question has arisen,
by reason OF these provisions, among
the banks In Washington. which Will
probably be called upon as collec-
ton agent In many Of these cases. as
to how they may be reimbursed Tor
their services in presenting these
items to the Veterans Bureau for
their various out-of-tOwn correspond
ents. The usual practice with collec-
ton items Is to. charge a reasonable
fee for the services rendered. In
these cases no such fee IS authorized
by law.
Proper provision has been made for
sale or discount of these notes when
held by a bank, especially with the
Federal Reserve Banks. The law re-
quires that in case of sale. or redis-
count the veteran be notified to
this effect. These certificates are not
negotiable except as provided on the
face of these instruments.
II the veteran does not pay the
loan at it's maturity, the bank may.
at any time after the maturity of
the loan, but not before the expiration
Of six months after the loan was
made, present same to the director
Of the Veterans Bureau. The director
may, in his discretion, accept the GER
tificates and notes and pay the bank
in full. II, however he Is OF the
opinion that the bank presenting the
same is not a bona fide institution,
but APPARENTLY organized primarily 10
svade the intent Of the law in dis
counting these certificates, the d.
rector may. in such cases, refuse to
redeem the same. OF course. 1t Is the
policy Of the bureau to redeem all OF
these loans, except where the note Is
held for a period Of six months after
the date of maturity. In this case the
director may revoke the authority in
vested in him regarding the redemp-
ton Of these certificates.
If the veteran dies before the ma
turity of the loan, the amount OF the
unpaid principal, and the unpaid in
terest shall be Immediately due and
payable. The form OF demand for
nayment must be executed by the
beneficiary or his representative, In
case Of death. This form of demand
however, is not necessary when a
hank requests payment Of the note
before the death Of the veteran,
separate affidavit being required for
this purpose.
$4,000 Certificates In City.
We have been informed that the
number of certificates held by the vet
Grams in the District of Columbia eX
ceeds $4,000. The law provides that
when an adjusted service certificate
has been lost or destroyed, the di-
rector shall issue a duplicate thereof
for q like value in all respects OF tn"
original certificate. The regulations