wages under penalty of discharge, the money is secured without difficulty. The necessary papers are signed, by which he agrees to pay a certain amount each week until the debt is canceled. If he meets the payments promptly, the transaction is closed, the borrower receives a receipt in full and his signature from the papers signed, and the documents themselves are destroyed. In case of failure to meet a payment when due, he is at once notified that his part of the agreement has not been fulfilled, that the promise of secrecy is no longer binding, and unless the matter is settled at once his employer will be notified. The danger of losing a good position is generally sufficient to force the payment of whatever the loan company demands. When the borrower is employed by a private concern whose attitude toward an assignment of the wages of an employee is unknown, or when the loan company for any reason questions the security offered by the borrower, from one to three endorsers are required as additional security. Should the investigation of the applicant and the endorsers prove favorable, the money is advanced. In this way the wages of several different employees become surety for the loan.

If for any reason the borrower defaults in his payments, within three days a notice of assignment is filed upon the employer for each of the assignees at the same time and for the same amount.

The reasons assigned for loans of this kind are numerous. It is the opinion of a prominent money lender in the city that about 75 per cent of the individuals who borrow from loan companies are men with families who are temporarily in need and are helped out of difficulty by a loan, and that 25 per cent are men who could get along better without the money, as it is spent in gambling, intemperance and vice. The managers of five different loan offices expressed the opinion that a majority of persons who patronize their offices are men with families who are honest and industrious, but who have met with some temporary emergency which the loan helped them

to overcome.

Sickness or death in the home is perhaps the most common cause of temporary need. Another common cause is found in the custom of demanding rentals in advance. This, coupled with the expense of moving, frequently exceeds the savings of a household. It appears, also, to be a common practice among clerks and young employees to borrow a small amount of money when in need of a suit of clothes or anything which requires an unusual expenditure. Life insurance premiums, interest on mortgages, and similar obligations, Christmas

and birthday presents, are some of the less frequent but still not uncommon objects for which money is secured from the loan brokers.

It is extremely difficult to ascertain the number of salary loan offices in New York City. Some of them do not advertise and some advertise under different names. Thirty different offices, however, are known, and it is probable that the whole number is very much larger. Based upon the minimum number of offices there would be about $300,000 capital invested, which would make possible a business of $1,200,000 annually, if the loans were made for an average of twelve weeks. This is believed to be a very conservative estimate.1

The number of persons directly influenced by the loan business includes not only the employee but his family as well. Assuming that the average office has one thousand customers, there would be thirty thousand employees who are making payments every pay day to the loan companies. There are some duplicates included in this number, but they are more than overbalanced by the conservative estimate of the number of offices. Inasmuch as a large majority of those who borrow are married men with families, it is reasonable to conclude that at least one hundred thousand individuals in New York City are directly affected by the salary loan business.

The nature of the salary loan business necessitates a higher rate of interest than that charged by the ordinary banking corporation. In every state which has seriously attempted to regulate and not prohibit loans on salary the legal rate has ranged from 1 to 3 per cent per month, depending upon the amount of the loan. It appears from the following data, however, that the rates charged by these companies are excessive and that the profits in the business are enormous.

Many instances could be cited to give an idea of the profitableness of the salary loan business. The owner of a prominent office in the city recently offered to guarantee a young man $10,000 net profit per year if he would invest $8,000 in an office. He said he was almost certain that the returns would be much larger. A careful examination of the books of one of the offices in the city showed that in one month a net gain of $541.00 was realized upon loans aggregating $1,889.00, a clear profit of 28.64 per cent in one month. Based on this rate of profit the annual net income from an office with $10,000 capital would be $34,368. An owner of two large offices in the city is authority for the statement that a friend of his began business in

I The number of loan offices as well as the volume of business has been substantially reduced in the last few years.-EDITOR.

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

I

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.