New York City about three years ago with $25,000. Recently he was offered $60,000 for his three offices, and in the meantime he had placed $74,000 to his credit in the bank, making $110,000 clear profit, in addition to his living expenses, in three years upon a capital of $25,000. Several of the men who have a large number of offices and TABLE SHOWING TOTAL CHARGES EXPRESSED IN TERMS OF AN INTEREST RATE, UPON SELECTED LOANS MADE BY ONE REPRESENTATIVE SALARY LOAN COMPANY are doing a very extensive business began with a small amount of capital and have been in the business only a short period of time. It is the belief of a number of the employees of D. H. Tolman that he began the business of loaning money on salaries a few years ago with practically no capital, and today he is many times a millionaire with offices in all the principal cities of the United States and Canada. 170. EFFORTS AT REMEDIATION1 BY ARTHUR H. HAM The evil of the loan shark is bad enough in connection with the emergency borrowings of those in temporary distress; but it is made worse by virtue of the fact that many of the victims are victims of their own improvidence and extravagance. This is shown by the fact that the backbone of the usury business is furnished by city employees and employees of large public service corporations whose pay is regular and above the average, and whose positions are more 1 Adapted from "Remedial Loans as Factors in Family Rehabilitation,” Proceedings of the National Conference of Charities and Correction, 1911. or less permanent. Many of these men have no cause to borrow except a fancied need to which the loan shark caters by his alluring and misleading advertisements. Once infected with the borrowing germ, a man will often borrow from every possible source till at last he gets into deep water, his family suffering as a result of his transactions and he himself finally becoming a veritable slave with his entire earning capacity mortgaged for months to come to the loan shark. Such conditions in our cities have brought about the organization of remedial loan agencies founded on three distinct bases: (1) philanthropic competition, (2) voluntary protective effort, and (3) money-making desire. The first class includes semi-philanthropic societies which have been organized by prominent men desirous only of improving loaning conditions and who are satisfied with a very moderate return on their investment. An example is the Workingmen's Loan Association of Boston, established in 1888 by Robert Treat Paine. The second class includes co-operative savings and loan associations organized by the employees of certain large establishments for the purpose of replacing the loan shark with an institution that offers loans at reasonable rates and affords an opportunity to the workman to deposit small portions of his earnings in a savings account which returns him an interest greater than that paid by regular savings institutions. An example of this is the Savings and Loan Association of the Celluloid Club, Newark. The third class is made up of companies formed to loan money at reasonable rates by men seeking a good return on their investment and who recognize the value as an advertisement of a plan which, though largely money-making, is a great improvement over the loan shark system. Because of their effect we are forced to include the latter class among remedial loan agencies, yet we realize they fall far short of the requirements of the ideal remedial loan society which the Russell Sage Foundation and the National Federation of Remedial Loan Associations are attempting to organize in every large city in the United States. Extending financial aid to applicants is only one of the functions of the Remedial Loan Society. It seeks also to secure adequate legislation and its enforcement, to give publicity to loaning conditions in its city, to secure settlements on an equitable basis for the victims of the usurers, to discourage ill-advised borrowing, to give helpful advice, to encourage thrift and saving, to secure employment for appli cants who are out of work, to fill the gap existing in our financial world between the banks and the organized relief societies. By extending relief to the deserving and by helpful advice the remedial loan association aims to prevent its clients from starting on the downward road which leads to dependence. The remedial loan field extends to all families who by force of circumstances, by improvidence, by bad management, or by whatever cause have fallen below the somewhat vague line of normal standard of living. The successful remedial loan agent must understand the needs and resources of each applicant, and keeping in mind the factors which go to make up a normal standard must thoroughly investigate the elements of each applicant's distress. Unnecessary borrowing is discouraged, legitimate borrowing is made inexpensive and a valuable experience to the borrower. 171. THE LOAN SHARK CAMPAIGN' BY MALCOLM W. DAVIS The most extensive organization which is carrying on the work of driving the loan shark out of business at present is the National Federation of Remedial Loan Associations, with which the Division of Remedial Loans of the Russell Sage Foundation co-operates in gathering information and in publishing bulletins on the progress and phases of the work. Founded in 1909, this federation has grown until it embraces thirty-one of the important cities from the Atlantic to the Pacific Coast and has thirty-five companies in active operation. New York, Syracuse, Rochester, Buffalo, and Utica, N.Y., Boston and Worcester, Mass., Providence, R.I., Portland, Me., Newark and Paterson, N.J., Washington, D.C., Baltimore, Md., Louisville, Ky., Cleveland, Cincinnati, and Youngstown, Ohio, Indianapolis, Ind., Chicago, Ill., St. Louis and Kansas City, Mo., Detroit and Grand Rapids, Mich., Minneapolis, St. Paul, and Duluth, Minn., Milwaukee, Wis., Sioux City, Ia., San Francisco, Cal., and Seattle, Wash., are the cities already officially connected by companies, while in Dallas, Tex., Portland, Ore., Philadelphia, Pa., Lynn, Mass., and Colorado Springs, Colo., people are organizing companies, and in Jersey City, N.J., Dayton, Ohio, Los Angeles and Oakland, Cal., and San Antonio and Houston, Tex., they are actively interested and will undoubtedly Adapted from "The Loan Shark Campaign," New York Evening Post, April 11, 1914. start companies soon. These companies generally loan small amounts of money on mortgage of personal property as security, although a few also accept pledges, endorsed notes, or salaries as a basis. The rates of interest vary from per cent a month in a few cases to 3 per cent a month, with varying schedules of special fees for investigation of claims and registration. What these companies have done toward putting the loan shark out of business may be indicated by the experience of one of them. The Detroit company started its work in 1906, after the passage of the Michigan law on loan agencies, and at that time there were over twenty-five loan shark companies operating in the city. For a time no effects of the reliable company's activity were discernible. Then suddenly things began to happen, and within half a year company after company closed up its office, until there remained only one concern which loaned money on salaries, and which was not complying with the law. There were two other companies which accepted the legal limitations, but the rest were put out of business directly through the efforts of the prosecuting attorney, whose first evidence was furnished to him by the remedial loan company. A common practice among employers has been to adopt a rule discharging all employees who are found to be dealing with money lenders. The remedial loan associations have sought to and in many cases have succeeded in breaking down this practice by making the employers see that they were doing harm by turning their men out into the streets when they were found to have borrowed money without any investigation of the reasons for the borrowing. In addition to fostering a new spirit among employers, an important part of the modern constructive campaign is the development of co-operative loan societies among employees themselves. This is one of the most effective ways of dealing with the problem of need for money in emergencies on the part of a man who is dependent on a salary. A great deal of the expense of an ordinary commercial company is avoided in the employees' associations, for the men know each other and the recommendation of a credit committee is sufficient warrant for a loan without the costly investigation of personal cases that a company has to make. The men themselves, contributing to the association and managing it, feel a pride in it, and are able to use it with dignity, while by making it a savings association as well, with an office in the company's building ready at hand when the men draw their pay envelopes, it can be made a powerful influence for thrift. 172. THE MORRIS PLAN OF LOANING ON PERSONAL RESPONSIBILITY1 There was established in New York on December 31, 1914, a bank under the name of the Morris Plan Company of New York. The Morris Plan had been tried on a minor scale for about fifteen years. The purpose of the bank is to make loans of small sums on the basis of mere personal responsibility. It aims to accommodate the man of small income who has no bank account—that is, the man with an income of from twenty to thirty dollars a week. Such a man when in need of a loan of from fifty to one hundred dollars cannot get one from any bank merely on his note, even though his note be indorsed by one or more of his friends. One reason is the smallness of the amount-too little for the bank to bother with. And yet this poor man's note, with its indorsers, may be quite as good in its relation to the amount involved as the note of some much larger borrower who, having an account with a bank, can with no difficulty secure a loan of some thousands of dollars. The man with a small income when pressed for fifty or one hundred dollars finds his usual recourse to be the loan shark or a lender on chattel mortgages. A third recourse which ought to be open to him—that of credit at a moderate rate of interest-has long been closed. On the opening day there were 83 applicants for loans, on the second day more than 100, the third day 200, the fourth day between 350 and 400, and on January 11 more than 1,000. During its first two months, January and February, the company made 509 loans, aggregating $61,780, an average of $121.38 each. At the end of that time there were but seven delinquencies in weekly payments, only two of which were for as long as one week. Of the borrowers, 476 were men and 33 women. The average weekly income of the borrowers was $27.10. The favorite amount for loans was $100, of which there were 206; 132 loans of $50 were made. The number of loans made by all the Morris-Plan institutions up to December 31, 1914, was 54,515. The average amount per loan was $123.50. Losses from bad credits have been less than one-tenth of I per cent. In less than 2 per cent of the loans have the indorsers been called upon to pay anything. Profits of the banks have been at the rate of 7.8 per cent. The plan of making the loans is simple. The applicant must furnish references as to his character and must give information as to 'Adapted from the Literary Digest, May 15, 1915. |