Business: Small Loans

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Credit Unions. Co-operative savings and loan societies run for the benefit of members who pool their savings by pur- chase of stock and by direct deposits are known as credit unions. About 1,020 of them in the U. S. do a $62,000,000-per-year business. Their great sponsors are Edward Albert Filene. Boston merchant, and his 20th Century Fund.

Remedial Loan Societies. Semi-eleemosynary, these societies sprang up in great numbers around 1915, backed by philanthropists who wished to combat usury. They have a $60,000,000-per-year volume. Leader is Provident Loan Society of New York, doing 66% of the business. Last week Provident reported it had made 530,000 loans involving $41,000,000 last year.

Special Departments of Regular Banks. This branch of the business does a volume of $40,000,000 per year and is a very recent development. Hudson County National Bank of Jersey City claims to have opened the first small loan department in 1924. But far & away the leader is National City Bank which handles half the total volume.

Axias. Somewhat like credit unions are the axias, formed mostly among foreign language groups in big eastern cities. They differ in most cases from credit unions in that their managers take profits. They do a $50,000,000-per-year business, most of it unregulated and at high rates.

Company Loans. Large and progressive companies have started to formulate definite policies regarding loans to em-ployes at low rates of interest. The business is thought to run at over $20,000,000- per-year and is an effective means to combat usurers and "salary-buyers."

Pawnbrokers, Usurers. Although many pawnbrokers operate legally, in this division a tremendous undercover business is done at shockingly high rates. The average borrower is a wage-earner, usually a railroad or factory man. From the time he leaves work he is beset by usurers in person and in advertisements. Salary-purchasers claim they do not lend money, but pay $50 for a $55 pay check soon due. Unscrupulous pawnbrokers lend at the highest legal rate and then sell the borrower $1 worth of merchandise for $10, thus augmenting their fees. On a $50 loan usurers may extract interest payments of $10 a month for years. If the borrower complains they threaten to tell his employer and family, to let all the neighbors know. Most distasteful angle to this busi- ness is that the same victims are trapped again & again. Bankruptcies among families of small means often show that they have been blood-sucked by usurers for many months, often years.

The Interest Argument. In most cases the borrower has no conception of what he is paying. The Morris Plan Banks, for example, charge 6% plus a 2% service charge. This is discounted in advance. If the loan were for one year it would amount to 8%, but payments are required from month to month and over a year the interest rate becomes 17.3%.