Evening star., 1929-07-01
Jury Would Include All Who
Lend Money at Interest
in District.
REPORT is DIRECTED
TO CHIEF JUSTICE mccoy
Cases of Evasions by Procuring
Realty Broker Licenses Are
Brought to Light.

The District grand jury today recon-
ended to Chief Justice Mccoy that
olations of the loan shark law be
made indictable offenses and that all
persons lending money at interest be
made amenable.
Following upon survey of money
lending practices in the District, the
grand jury, through Eugene e. Thomp-
son, its foreman, deplored the lack Of
criminal statutes covering the activity
and followed the suggestion of United
States Attorney Leo A. Rover in rec
ommending legislation under which the
United States attorneys Office could
ask for conspiracy indictments in cases
of violation involving more than one
person.
The present so-called loan shark law
provides that its stipulationS shall not
apply to national banks licensed bank
ers, trust companies, savings banks,
building and loan associations and real
estate brokers. In recommending that
these exemptions be disallowed, the
grand jury reported that cases had
come to light where individuals evaded
the law by procuring licenses as real
estate brokers.
More Risk in Small Loans.
An increase in the interest rate al
loWable on loans under $500 was rec
commended by the grand jury. The
making of small loans without security
involves great risk, the report said, and
advanced the opinion that the rate Of
8 per cent is not sufficient to make the
type of loan attractive as q legitimate
business.
Mr.. Rover, and Irwin Goldstein. assist
AZ vnfta0
sented evidence in loan cases before the
Jury, pointed out that prosecution IN
loan cases is solely In charge OF corpo-
ration counsel.
The grand jury reported further that
organizations under the guise OF banks
are making loans when, as a matter OF
fact. they are In "only the business OF
lending money, and this at excessive
rates"
Report Directed TO Mccoy.
The report is directed to Chief Justice
Mccoy, and reads:
During its deliberations the grand
jury has heard much testimony and
considered much evidence with refer
ence to the local situation concerning
the lending of money, and finds q great
need for appropriate legislation to cover
this field Of activity. At present, ac-
cording to our information, there ex-
lists no effective penal statute to enforce
the needed prohibition against usury In
the District of Columbia. The local
statute, as set forth in section 1180 OF
the District Code, contains no penalty
for usury, but the forfeiture of the
whole OF the interest. The prohibitiye
effect of the statute is very slight. The
so-called loan shark law specifically ex-
cepts national banks, licensed bankers.
trust companies, savings banks, building
and loan associations and real estate
brokers. and we find that by the very
simple subterfuge of procuring licenses
as real estate brokers, persons are able
to evade the penalties Of this law. The
situation that permits this evasion Of
the law should be remedied. This
evasion is commonly practiced.
I'VE find that there has arisen In
this District number OF organizations
which lend money on staple articles
and finance the purchase Of such ar
ticles. Rates much in excess of that
permitted are charged for placing these
loans and financing these purchases;
and this is generally done under the
guise of brokerage fees, which, by the
admission of officials Of these organi-
cations themselves, are in no sense based
upon service rendered in procuring the
loan, but are based on the risks thought
to be involved, and vary In many in
stances among the different loan or
carnations.
Character Loans" Scanned.
"The grand jury also considered evi-
dcnce concerning organizations lending
money without security, the so-called
character loans These organizations,
under the guise of being banks, are
only in the business of lending money
and this at excessive rates The busi-
ness Of making small loans without Sc
curity undoubtedly involves a great risk
to the lender, and it would seem that
the rate of interest permitted under the
existing law is not sufficient to make
this type of loan attractive as legiti-
mate business. The cost of making
these small loans is too great to permit
a profitable return If conducted in a
legitimate manner. and money lenders
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