Evening star., 1960-03-02
Gray Predicts
Rates Will Hit
District Firms
BY MIRIAM 0. GUTENBERG
| Star Stafi Writer

NOAAAS HASAAASSo AAA VIZ OioOA ANb'
The bill now goes to the
House floor Committee Chair
man Mcmillan said he planned
to speak with the leadership
for House action in this and
other committee-approved Dis
trict bills next Monday.
Unexpected Action
In an unexpected action, the
full committee amended the
subcommittee approved auto
finance bill in this way:
The finance charge set for
new cars was reduced from So
to 81 per 500 per year.
The finance charge on cars
up to 2 years old was reduced
from $ll to SIS per $1OO per
year.
The finance charge on cars
between 2 and 4 years old was
reduced from $14 to $6 per
$l0O per year.
The finance, charge on cars
over 4 years old was reduced
from SIG to Sc per 100 per
year.
Corporation Counsel Gray,
advised of the committee ac-
ton, said he would confer
with Mr.. Mcmillan as soon as
possible to explain the effects
of the committees action on
the car-buying public.
EXhOrbitant Charges Hit
The bill, which went to Con-
greSs after The Stars Buyer
Beware" series exposing the
used car racket. was aimed at
outlawing exorbitant finance
charges of certain recently Or
ganized finance companies.
These. newer companies, it
was brought out in testimony,
charged as high as so per cent
finance charges after tne auto
dealers with whom they were
linked had lured customers with
81 down" promises
The bill authorizes the Com
miSsloners to write regulations
controlling the auto finance
practices exposed in The Stars
series. 1t also authorizes the
Commissioners to require bonds
OF both car dealers and auto
finance companies.
Members of the committee
interviewed after the COM
mlttee action; apparently were
under the impression that they
were regulating interest rather
than finance charges.
| Court Decisions
On this point Mr. Gray noted
that the Supreme Court held
many years ago that the diff
terence between the time"
price and the cash price of an
article is not interest ano is not
governed by the laws of usury.
More recently, the Supreme
Court opinion was specifically
related to installment sales of
cars in a Municipal Court of
Appeals decision here.
Mr.. Gray pointed out that
auto finance charges in Mary
land are fixed at SO for a new
car, Sl2 for a car up to 2 years
old, and SIS for a car over 2
years old. Since Virginia has
no auto finance law, he noted,
there is no ceiling on auto
finance charges in that State.
If the bill wound UP with
the rates fixed by the House
District Committee, he went
on, while the District would be
a paradise for purchasers it
would be economically unsound
for any finance company and
finance companies would re-
frain from doing business in
the District. To get what they
consider a necessary rate of
return on their investment he
said, "the finance companies
would do business in Maryland
and Virginia rather than the
District, and Washington auto
dealers would be unable to get
financing here"
misunderstanding" Hit
II hope this misunderstand-
ing will be cleared up in the
House for the benefit of the car
buying public, the dealers and
the finance companies" Mr..
Gray said.
"Other District aides pointed
out that the maximum rates
fixed by the committee are
lower than the interest rates
for banks, money lenders and
pawnbrokerS here. The 6 per
cent bank loan rate can go to
8 per cent by agreement in
writing. Licensed money lend
ers here can charge l per cent a
month for sums under 5000,
which amounts to IL per cent
a year. The Pawnbrokers Act
allowed interest up to 2 per
cent a month on sums up to
5000, l per cent a month on
sums between 5000 and $1,000,
and 8 per cent a year over
$1,000. The Commissioners
were given authority in that
act to set the rates higher, if
they deemed it necessary.
Mr.. McMillan's only COM
mite action was that the COM
mittee thought the rates fixed