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Senators Jump at Request to Kill Shark Bill AUSTIN Under the guise of siding with some of the men who have fought loan sharks longest and hardest, the Texas Senate this week killed what was undoubtedly the last chance to pass loan-regulatory legislation this session. The senators who wanted no shark legislation had a perfect excuse for effectively killing the legislation that left the state affairs committee, for by doing so they could claim to be following the appeal from Harvey L. Davis, chairman of the sub-committee on legislation of the Texas Committee to Eliminate the Loan Shark Evil. The very morning the committee met, Davis released to the press and to the Senate through Sen. Culp Kueger, a long plea ending, “. . . rather than supporting a bill which is really only a sham to protect rather than defeat loan sharks, we should kill H.B. 7 before it is too late.” Kill it the Senate did, with a willor rather, it killed the subcommittee substitute to HB 7, a substitute which Davis considered even worse legislation, allowing, by his mathematics, possible charges of more than 900 per cent a year compared to possible charges of more than 800 per cent in HB 7, the so-called Criss Cole bill because it was sponsored by’ the Houston legislator. But what was apparently forgotten in the rush to heed Davis’ advice at this point in the bitter shark battle was this: Davis, whom the senators now accepted as an expert and whom several praised by that title, had earlier urged the Senate, just as earnestly, to pass a regulatory bill with a flat interest rate of 36 per cent a year or three per cent a month. That plea was disregarded. This had been Davis’ advice from the first meeting of the House committee that first considered shark legislation this session: set a ceiling to all charges on a loan, preferably 36 per cent, at worst 40 per cent, allowing no extra charges of any kind. Davis is a professor on the SMU law faculty. The Texas Committee to Eliminate the Loan Shark Evil, of which he is one of the most effective spokesmen but does not always represent the committee as a whole, is comprised of about 100 bigwig attorneys and educators across the state. The House had disregarded his advice to the extent that in addition to the interest rate, a special service charge was permitted as was a charge for credit insurance. Other amendments to the Cole bill hashed up its effectiveness until, according to Davis, a borrower could wind up paying 879 per cent interest on a loanand even more than that on loans under $25. The bill that came out of the Senate committee this week, authored by Sens. Hardeman, Parkhouse, and Kazen, had been hashed up even more, with the help of the Legislative Council. Under this bill, the borrower would pay $4 every three months service charge, plus $2 a month service charge, plus penalties for late paymentsplus the interest itself which amounted to 10 per cent plus three-fourths of a cent per month per dollar. In addition, on loans of more than $100, the borrower would be required to pay as security for the loan: life insurance, health and accident insurance, and property insuranceall premiums for which would be taken out of his loan. The Cole bill, ostensibly to hold back a flood of out-of-state corn panicsalthough it was such a generous restriction the out-ofstate chains could not have felt greatly hobbled by it -required that persons applying for a license must be a citizen of the state, and that corporations must have 51 per cent of their stock owned by citizens of the state, and that no chain could have more than 50 offices. As a gesture of consolation to the big loan companies, the Hardeman-Parkhouse-Kazen substitute removed all these restrictions. But then as a gesture of consolation for the small-small loan which dread the competition of the small loan companies \($100 Kazen substitute required separate licenses for both types of lending, forbidding both types of licenses to the same company. The Cole bill had had only the one license for all loan companies. As for the service charges allowed by the Hardeman-Parkhouse-Kazen substitute, that was consolation for all size lenders. Francis K. Miskell of the Legislative Council, who wrote the substitute at the behest of the subcommittee, said that the bill would, for both charges and interest, cost a borrower $4.80 on a $25 loan for two months, for example. But the legislative sub-committee of the Texas Committee to Eliminate the Loan Shark Evil and its corps of mathematicians put the rates in the proper \(that Wrote Professor Davis: “The new rate sections follow the common loan shark practice of deception, setting forth the nominal interest rates and then adding high rates under the guise of ‘service charges’. These service charges alone permit rates of more than 150 per cent per annum on a typical three-month $25 loan. These deceptive ‘service charges’ are primarily for the benefit of the ‘5 to 50’ lenders where loan shark practices are most prevalent. . “The people of Texas, in adopting the constitutional amendment authorizing the legislature to fix maximum interest rates did not expect the legislature to allow sky-high rates. There 4s no basis for the propaganda of the major loan chains that the legislature has a mandate from the people to adopt a terrible small loan law such as is now proposed which is an insult to the intelligence and intentions of the voters who in good faith called for proper legislation to combat the loan shark evil.” When the substitute bill came up for a committee vote Thursday morning, there were naturally several speeches by senators to the effect that they didn’t “like” the bill but that they wanted to vote it to the floor of the Senate where every member would have a chance to improve it. It was common gossip in the Senate for the rest of the day that one senator who made a speech deploring the bill but helped vote it out was paid $1,000 for his troubles by the loan shark lobby. The vote to send the bill to the floor was 12 to 8 in favor of doing so, with Sens. Doyle Willis, Robert Baker, Dorsey Hardeman, Grady Hazlewood, Abraham Kazen, George Moffett, George Parkhouse, David Ratliff, Bruce Reagan, Jarrard Secrest, R. A. Weinert, Wardlow Lane supporting the bill. A. M. Aiken, Tom Creighton, Loris Crump, Charles Herring, H IJbert Hudson, Culp Krueger, Crawford Martin, and William Moore opposed the bill. Not all those who opposed it did so because they considered it a bad bill. Some of them are known to have opposed it because they are against any loan shark legislation. Moore, for example, has consistently opposed all suggested loan shark legislation all session, and he said of this substitute : “It reminds me of the old colored woman who said, ‘Yes, doctor, I remember you. You’re the man who took off my husband’s foot to cure an ingrown toenail.’ This remedy is worse than the evil.” It was probably the only thing Moore and Prof. Davis would have agreed on, but for different reasons. Two hours later, Sen. Krueger, who was fighting Davis’ fight by proxy, moved on the floor of the Senate that the bill be re-committed to the committee, which in effect meant banishing it for the rest of the session. In making his motion, Krueger roundly denounced Abner McCall, president of Baylor University, for sending out wires to Texas newspapers soliciting their support in winning passage of the loan shark legislation, only to cloud the issue. \(See separate Said Krueger: “Every time you pick up a newspaper you see an editorial favoring the loan shark AUSTIN While the liberals were “falling between two chairs,” the East Texas delegation late one evening this week advanced their bill outlawing sit-ins one more stage toward law. It was well into the hour of the evening meal when the East Texans defeated an adjournment motion and proposed to bring up Rep. Lloyd Martin’s bill. The idea of “breaking a quorum”getting enough member to leave to make further business illegalwas circulated on the floor, and a number of members said all right. When the time came, however, only two walked out. Exactly twothirds, the required proportion, agreed to take the bill up, so had the two who left stayed, the bill would not have come up. “It was another case of us falling between two chairs. We just don’t have any direction,” said one leading House liberal. Rep. Charles Whitfield, Houston, was the only liberal permitted to reach the microphone to oppose the measure. The House knew, he said, the state had ample laws for the protection of property long before the racial question became an issue. He realized, he said, that “some of you from deep East Texas feel compelled to protect your record.” Even so, he continued, “They \(Nemeans. We should not put ourselves in the ridiculous position of the Louisiana legislature and plug up every loophole. We should not stand in the way of the justifiable aspirations of one-third of our people in East Texas.” The East Texans were agreed on an amusing sophistry: that their measure had nothing to do with segregation. “This is a property right protection measure,” Martin of Normangee told the House with a THE TEXAS OBSERVER Page 3 May 20, 1961 legislation, but nowhere do the newspapers print the rates that would be charged. I’m fed up with his telegrams. I’m going to stay after Abner McCall until he makes some statements that will show the people that they have been had. I think Abner McCall has had the wool pulled over his eyes.” Sen. Frank Owen, El Paso, who is an open champion of the smallsmall lender but a foe of the big companies such as Household Finance, pointed to the northwest corner of the gallery, sneered at it as “loan shark corner,” and twitted the lobbyists for “sitting there watching us for three weeks.” And he said that that alone indicated the bill was suspect. Trying to save the bill from recommital were Sens. Baker, Hardeman, Hazlewood, Kazen, Lane, Parkhouse, Ratliff, Reagan, Schwartz, Secrest, Weinert, and Willis. All others but Sen. Martin Dies Jr.who claimed he didn’t know enough about the bill to vote on itvoted to send the bill back, burying it. That afternoon Gov. Price Daniel told the Observer he would include a loan shark regulatory bill on his special session calendar. He said he didn’t know enough about the iniustry to suggest the types of rates, but he drawn, sober face. “This is nothing more than a businessman’s right to work law. Mr. Whitfield intimated this is some sort of a segregation matter. It will be applied without discrimination to any individual . . . “It will protect the businessman from losing his very livelihood and perhaps the livelihood of his employees.” At this point Rep. Oliver of Port Neches moved to shut off debate. The previous question was ordered, 68-50. This meant that none of the opponents could be heard and no amendments could be offered. The defeated members of the House, and a few others besides, bridled, but it was too late. Rep. W. T. Dungan, McKinney, “president of the East Texas delegation,” said only, “This is a business protective act rather than a segregation act.” He refused to yield for questions. Martinalso refusing to yield for questions moved the bill’s passage. It passed 93-44. Whitfield managed to say from the back microphone, “If that’s dog exemption in it, Mr. Martin has integrated every cafe in East Texas when a colored man with a seeing eye dog goes down there.” The bitterness on the floor after adjournment was unusually mordant. “This is nothing but a damn race billa filthy damn race bill,” said one South Texas representative. “All this vote indicates is that the colored people ought to start buying some poll taxes in East Texas.” Published by Texas Observer Co., Ltd. Entered as second-class matter, April 26, 1937, at the Post Office at Austin, Texas, under the Act of March 3, 1879. MAY 20, 1961 Willie Morris Editor and General Manager Bob Sherrill, Associate Editor Sarah Payne, Office Manager Ronnie Dugger, Contributing Editor certainly wanted more regulation than is now possible. Until the legislature passes a new rate schedule, loans will be made under the legal limit that has been in effect for 50 years10 per cent a year, a limit that is openly violated. Violators are faced only with an injunction and a tedious court battle, which is as much a burden on the attorney general’s office as it is on the defendants. Meanwhile, In the House, a special meeting of the banks and banking committee was, called to let Don Kennard introduce a hasty “jailhouse bill,” which alters present regulations and penal sanctions only to the extent of making the charging of interest rates in excess of 30 per cent a year punishable by a minimum of six months in jail. Kennard said his bill would not legalize interest rates of up to 29 per cent. Anything over 10 per cent would still be illegal. But in terest of more than 30 per cent would bring much stiffer and im mediate penalties than are possi ble under the law still in effect. Said Kennard: “We sent the Senate a good bill and they mashed it around and finally killed it altogether. Okay, now we’ll send them a nasty bill.” He said he expected to have it to the House floor by early this week. B.S. “The House of Representatives today was like the seventh hole of hell. You could feel the hate,” he said. “If we’da had Eichmann on trial today, he’da got of f.” Said Rep. John Alaniz, San Antonio, “The House of Representa tives today made international news. All the anti-communists in the legislature just gave the communists more ammunition to shoot at this country and this state.” There was discussion among legislators about the one member who voted against the bill, and then, from the strain, went outside the chamber and cried, and about the East Texas liberal, Rep. Charles Wilson, who took a rough hoo-rahing for voting with the segregationists on this first segregation test of the session. The bill makes it illegal for a person to stay in a private com mercial establishment after the owner makes clear his desire the person leave. It also illegalizes anyone staying in a place of business “as a means of protest” against the owner’s policies. Legitimate labor organizations are exempted; the bill applies