Evening star., 1928-05-04
Loans on Installment Plan.

With household articles ranging from
rugs to automobiles available for pur-
chase or the nstallment plan IN the
United States, it was only natural that
sooner or later that most necessary Of
al things, cash money would like
wise be placed at the disposal Of the
family whose collateral is confined TO
steady employment, good intentions and
common honesty. The announcement
Of the National City Bank. the worlds
largest financial institution, that here
after it viii offer loans to Salaried men
without collateral, to be repaid IN
monthly installments at six per cent,
comes as the forerunner of a system
that, no doubt, IN future will be an ac-
cepted business practice by many bank
ing institutions.
Driving the loan shark out Of busi-
ness. a crusade periodically undertaken
with more or less success in almost
every community, accomplishes great
good But. as is often pointed out, it
sometimes deprives the head Of fam
fy. whose only assets are his job and
his honesty. Of convenient, il expen-
sive. means OF securing cash. There are
times when cash becomes the absolute
necessity. The national banks, prohib-
tied by their charters from entering
this type Of business, and other repu-
A~hga ha~t-~ v,-tsat, H,ax,a v,ns Snara Ef n
take it up, have left the field almost
exclusively TO individuals and institu-
tons specializing IN the small loan.
which extract the maximum legal rate
Of interest. and by adding service fees"
investigation fees" and other fees often
make the price Of their money extor-
tionate. Nearly every hue and cry
raised against the loan shark has been
accompanied by q demand that the
banks themselves step in and usurp his
vantage point by conducting this busi-
ness on a legitimate basis. But few
banks have done this. The action OF
the National City Bank has come at
time when Attorney General Ottinger
Of New York. after having driven the
loan sharks out Of the metropolis. was
considering the advisahility Of calling 8
conference OF bankers In an effort to
adopt some plan which would make
the absence Of the loan sharks less
ac1tely felt.
The bankers Of the Nation viii watch
with interest the National City Banks
experiment. That bank has announced
that it viii require no collateral, viii
charge six per cent interest on the loan,
but VIII pay three per cent interest,
compounded monthly. on deposits made
70 pay back the loan. The borrowers
note must bear the names OF two repu-
table co-makers. and he must give ev!-
denca Of his steady employment and
residence within the city. Beyond that
no form Of collateral is necessary. The
announcement Of the bank is accom-
panied by a statement from Charles E.
Mitchell. its president, who says that
the system has been inaugurated as a
part Of the banks services 70 people OF
moderate means and 10 stimulate In
terest in It's savings department II Is
not founded on altruism- Altruism In
banking Is apt TO be bad business.
What the bankers Of the country will
want 70 know is whether this small-loan
business pays for Itself and whether its
installation as a regular part Of bank
ing service viii turn out TO be an asset
or a liability. The National City Bank
Is well fitted 10 make the experiment.