Evening star. [volume] (Washington, D.C.) 1854-1972, 1959-03-29
Loan Interest
Bill 10 Face
Maryland Test
BY CHARLES L. HOFFMAN
Star stan Writer

by CHAHLES Il. HUFFMAN
star stan Writer
ANNAPOLIS, Mar. "a
Forces are at work In the Mary
land Legislature to push
through a bill that would cost
borrowers about SO per cent
more interest on loans above
$500.
The bill. however. may hit its
first stumbling block at $3.50
PM. Monday when 1t gets a
public hearing before the House
Ways and Means Committee.
Representatives Of organized
labor are expected to oppose it.
The measure. sponsored by
Senate President George Della.
whisked through the upper
chamber without difficulty.
Opponents Of the measure
within the lending business
had only about two hours adj
vance notice Of a hearing when
the bill was before the Senate
Banking and Insurance Com
mittee March 20. But they are
geared for the hearing Nom
day before the House group.
The House committee al
ready has rejected another loan
bill. The first bill was blasted
as "legalized usury' by Dele
gate Blair Lee III. Democrat Of
Montgomery. The Senate bill
provides even higher interest
charges than the previous
measure on q $3.50 loan which
was the ceiling under that
proposal.
True Interest Rate
The Della bill would provide
a true interest rate Of 26.5 per
cent on all l2-month loans up
to $1,000.
It would increase the inter-
est rate discounted in advance
from 6 per cent to 8 per cent
and would raise the service
charge from 4 per cent to 5 per
cent. The service charge cell
ing would be increased $50 per
cent from $40 to $50 per loan
and would be nonrefundable.
The result Of the non-refund-
able service charge would be
that a borrower would be pay
ing a true interest rate Of $50
per cent on a $500. 12-month
loan if he paid 1t I'D at the
end Of one month; 4l.2 per cent
at the end Of three months, or
sos per cent at the end Of six
months.
These interest rates do not
include credit insurance pre-
miums. The Della bill allows
premiums of 81 per 500 on in
surance sold to borrowers to
cover their loans.
The Della bill is being pro-
NOTED as one primarily increas-
ing the ceiling on loans from
500 to $4,000 under the In
dustrial Finance Act.
Some Opposition
But the bills chief benefit
would be 10 the lender IN the
$500 to $1,000 loan category
where true interest rates would
Jump from about an average
IL per cent to 26.5 per cent.
The loan companies do So per
cent of their business in this
loan category.
Although the bill is being
backed by some large and small
loan companies, one of the
largest. Household Finance
Corp, is opposed to it. This
company does more than one
third Of the business under the
Industrial Finance Act.
Nat w. Barber, who repre-
sents HFC, charged that the
proponents of the Della bill
ARE the same interests that
drafted and sponsored the de-
feated House bill.
"If that bill was conceived
| in greed this one was at least
conceived in an atmosphere of
deception and is being nurtured
by Misrepresentation" he said.
Mr.. Barber said the interest
rates proposed in the Della bill
are comparable to the rates
under small loan laws in many
states. The risk involved UNI
der small loan laws is much
greater than that under the
Industrial Finance Act.