Evening star., 1929-12-16
NEW USURY LAW
URGED BY CAPPER
!. IS BEING DRAWN
Bill to Remove Defects in
Existing Statute Is Pre-
pared by Attorneys.
LEGlSLATION'S FORM
IS NOT DISCLOSED
Measure to Be Aimed Primarily at
loan Sharks" Who Now
Evade District Curb.

Plans of Chairman Capper of the
Senate District committee for a new
usury law Tor the District were dis
closed today, when it was learned that
the United States attorneys Office and
the Office of the corporation counsel
are cooperating in the preparation OF
a bill to remove the defects in the
existing uSury law.
Drafting of the bill was undertaken
at the request of Senator Capper, whose
attention was called several months
ago to the need of an effective penal
statute to enforce the prohibition
against usury in the District, the lack
of which has been held to be the msjor
defect of the present law. The ex-
isting statute. as set forth in section
1180 of the District Code. it was point
ed out, contains no penalty Tor usury'
but the forfeiture of the whole OF the
interest. the prohibitive effect OF which
is considered slight.
May Follow State Laws.
Although neither the corporation
counsel's office nor the district attor-
news Office has indicated the form the
proposed legislation would take, 1t Is
believed it may follow the So-called uni
form small loan law now in effect
in a number of States. The Russell
Sage Foundation, it was said, sponsored
this legislation in the States where IL
has been adopted
The new legislation is to be aimed
primarily at loan sharks" who are able
TO evade the penalties of the present
usury law, it was explained, py the
simple Subterfuge of procuring license
AS a real estate broker The so-called
'loan shark" law specifically eXceptS
banks. trust companies, building ana
loan associations and real estate
brokers.
The need of a new usury law was
stressed several months ago by grand
Jury which reported to United states
Attorney Leo A. Rover that there nae
arisen in the District a number OF
organizations that lend money on staple
articles and finance the purchase OF
such articles at rates much in excess
of those legally permitted. The legal
rate of interest in the District IS
per cent, but by contract an per cent
rate is permitted.
Character Loans May Be Covered.
In cases where the rates of interest
have exceeded per cent, the grand
iIrv pointed out. the financing was
done generally under the guise of brok-
erage fees, which are in no sense based
on services rendered in procuring the
loan, but on the risks thought to be in
volved
The new usury bill. it was indicated,
may contain a special provision re-
lating to so-called character loans"
where small loans are made without Sc
curity The attention of Mr.. Rover
was called to the fact that the rate OF
interest permitted under existing law is
not sufficient to make this type OF loan
attractive as a legitimate business, be-
cause of the great risk involved.
The cost of making these loans, 1t
was said, is too great to permit
profitable return If the business is con-
Quoted in a legitimate manner, and as
a result money lenders are forced to
resort to subterfuge to make the busi-
ness profitable.
The uniform small loan law. accord
ing to Louis Rothschild, director OF
Washington's Better Business Bureau,
who is interested in the proposed new
legislation, permi IS loans up to $500 to
be made under an interest rate rang
ing from TO 81 per cent month,
the rate varying il the different States.