Evening star., 1948-12-12
New SET Of Regulations
To Curb Auto Loan
Practices Prepared

A new set of regulations to save
borrowers large amounts of money
by taking the tricks" out OF the
automobile loan business and other
''neon-sign" money lenders here Is
about to 60 to the District Com
missioners.
Assistant Corporation Counsel
Chester H. Gray said yesterday he
will hold the last of a series of
hearings into company prac-
tices at 1:30 pm. Tuesday at the
District Building. After that rec
concentrations for new regulations
will 60 to the Commissioners
promptly, he added.
The new regulations will put an
end to practices of some companies
which often result in q borrower
paying more than 300 per cent in
terest, Mr.. Gray explained.
Varied Insurance Required.
For example, if q person borrows
on an automobile, any lender to
protect himself requires him to
insure his car against fire, theft
and collision. But the unscrupulouS
lender adds the following types of
insurance: term life, health, acci-
dent, tornado, cyclone, windstorm
and unemployment.
Also there are the service
charges such as notary fees, in
vestigation costs and O variety Of
Others.
It is then that the borrower finds
himself paying back the original
sum he received plus interest of
ABOUT 300 per cent. MIR. Gray said.
Mr.. Gray declared that the pro-
posed regulations will prevent this
by providing that the total of the
charges for the use of the money
including insurance and interest
shall not exceed the legal rate Of
interest.
Would Redefine Interest"
The Districts loan shark act" re-
ouires no license for loans on which
interest no higher than 6 per cent
is charged, but requires q license
for persons smaking loans on which
interest of up to 8 per cent Is
charged. A special provision of the
act allows l per cent a month in
terest on loans under 5000.
BY defining interest as the diff
ference between the amount loaned
and the amount repaid, the new reg
ulations would eliminate all varieties
of service charges"
The proposed regulations would
spell out exactly just what charges
might be expected and will limit
the types and amount of insurance
q lender can force his customer to
buy.
To Limit Insurance.
Mr.. Gray said the proposals will
limit the insurance necessary on q
car loan, for instance, to $50 or
800 deductible for collision, fire or
theft to protect the lender. In
case the car is wrecked, the lender
shouldn't get the whole amount of
the insurance, he said, but only
enough to cover what is still owed.
In actual practice in many firms,
the borrower never sees the policy
although he pays for it.
The regulations will take the
Fantastic profits out of the loan
business here which Is estimated to
gross $25,000,000 a year, Mr.. Gray
said.
The regulations would prevent q
money lender-who also is an in
surSnce agent or broker from
charging fees for business he
transacts with himself.
30 Cases Dropped.
Assistant Corporation Counsel
Clark King, who is in charge of the
Municipal Court Criminal Division,
said that in the last year he has
been prepared 80 times to prosecute
loan companies for making excessive
charges. But in every case the COM
panies settled. The complaining
witnesses thus were lost and Mr..
King had to drop the cases.
The high finance charge isn't the
chief problem in Washington since
unscrupulous lenders here specialize
In loading clients with insurance in
stead. Some money lenders who
are brokers keep as much as As per
cent of the premiums for themselves.
The Commissioners held a public
hearing in November on the regu-
lations which were drawn up by the
Corporation Counsel's Office In COL
laboration with the small loan COM
mittee of the District Bar Associa-
ton. So many technical and legal
points were raised in opposition to
them, that the Commissioners re-
ferred the regulations back to the
Corporation Counsel for further
study.
Tisse hearings have been held
witt -rohasis on finding out just
what goes on in the loan business
and Tuesdays will be the fourth.