Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-13
SMALL LOAN DEALER EXPLAINS
WHY RATES ARE OFTEN SO HIGH
Business Man Notes Wide Difference In
Methods-Claims New Law Is
Needed In District

point of capital, It Is necessary for deal
ers in small loans to charge anywhere
from IL to 81 per cent month, de-
pending on the manner In which the
loan Is made.
More Loan Sources Needed.
investigations have also revealed the
disconcerting fact that these discount
ing companies and such banks as are
willing to do the expensive individual
loan business, are able to meet but q
pitifully small portion of the existing
need for emergency funds. Some au-
thorities think that more than half of
, the people in our cities, when they run
up against hospital bills, funeral ex-
penses, periods of unemployment or
other emergencies which demand i'm
mediate funds, are unable to secure
accommodation from these agencies be-
cause even where as much as Is per
cent year is being charged there is
not left to the lender q sufficient fund
to enable him to cope with any loans
except those which are not going to
involve heavy expenses of collection.
Naturally, it is this mass of unsatis-
fled borrowers which becomes the prey
of the high-rate lenders against whom
you write for in his dire need a man
can be made to agree to pay almost
anything for the funds he cannot get
along without. Frequent contact with
this situation In connection with its
charitable work led the Russell Sage
Foundation of New York some years
ago to draw up the uniform small loan
law, which has since been adopted in
rs States. This law was designed to
enable people who were unable to es-
tablish bank credit, offer collateral or
endorsers to obtain money in time Of
al hat 80 ct
Such rates, the foundation learned
after much study Of the situation, had
to be considerably above those charged
by banks on large, well secured COM
mercial loans. Banks, too, admit, as a
rule, that they are not making q direct
profit on small loans made to indi-
viduals. Three and a half per cent a
month was found to be essential to
keep enough capital in the field to sup
ply the demand for loans. That does
not mean that all lenders operating
under the law were expected to charge
3l2 per cent, but that none was to
charge more than that. However, no
fees were to be added, and interest
charges were not to be discounted in
advance, but to be charged from month
to month and only on such funds as
were actually in the customers hands
Capital Needs New Law.
"It is our belief that Congress made
grave mistake when it defeated the
uniform small loan law for the Dis
trict of Columbia. Washington's people
do, as you say, face a real problem in
the illegal lender, who is charging what
the traffic will bear
THE small loan business is full of
pitfalls and paradoxes-there are COM
pick social and economic considerations
| involved. and 1t Is natural that those
who have not given it deep study re-
act against the business. However, we
do ask you to believe that practically
every thinker who has taken the time
to go into the subject rather carefully
has concluded that the Russell Sage
Foundation uniform small loan law Is
the most progressive and effective re-
medal legislation yet devised to rectify
an age-old problem"