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Sen. Criss Cole of Houston said during this year’s Senate hearing, “I practice no law, represent no loan companies, because I’m not a lawyer.” He also says, “I have never received any retainer for handling this legislation. My hands are clean.” A senator who has not been involved directly with the loan legisla A BASIC CHANGE in the small lenders’ “image” has been affected by Vernon Lemens, chief lobbyist for them as counsel for the Texas Finance Institute, the association of 300 or so lenders of loans of $100 or less. Prosecuted from office to office on usury charges, they had become so leery, as a 1958 Texas legislative council report said, they tended to regard providing any information about themselves as self-incriminating. When Wilson cracked down, Lemens called his members together in an Austin motel-hotel and told them to stop ducking. They had not violated any laws except the usury law, he said; they were legitimate businessmen who paid their taxes and had to make a living, like other businessmen; they should start availing themselves of their constitutional rights of petition for redress of grievances. Lemens instructed the small lenders in basic rules for approaching officeholders, and during the 1959 session, many of them began talking to their legislators. During the regular 1961 session, 145 persons registered as interested in the small loan issue, and 103 of them said they represented themselves. These were the small lenders. Their basic contentions are two: The business of making loans of $100 or less is economically and socially necessary and desirable. Such business cannot be financed on the basis of percentage interest charges. Lemens and his members maintain, in general, that the cost of handling a small loan for the small lenders is not much less than $4 per account per month. When you allow for a little profit, a figure presents itself as a reasonable charge per-account-permonth. If someone figures up the in 4 The Texas Observer tion said to the Observer: “This thing has been going on so long that there’s not a single member who’s not involved, one way or another, in one corner of the trianglebanks, the outof-state chains, and the little operators. I don’t believe anybody has been able to escape influence from some part of the financial world.” terest charge that this means and it’s, say, 245 percentso much the worse for the reformer. In addition to Lemens, the principal lobbyists for the small lenders are former Senator Floyd Bradshaw of Weatherford and Dell Diamond of Houston, a finance office supervisor. Bradshaw represents, on the lobbyist register, E. L. Bryant of Midland; in fact, he works closely also with Lemens and has cooperated with Virgil Moore, the Florida small loan specialist who has been prosecuted and ruled against for usury many times, as has his nephew and associate, W. Lee Moore, Jr., of Dallas. R. P. Cummins, secretary-treasurer of the Texas Finance Institute, testified before the Senate’s hearing on three loan bills this session. “I am in the small, small loan business,” he said. “There is a need for loans of $100 or less by people who have no collateral. When people need $25 or $50, they come to such a company as mine.” He favored Senate Bill 15, introduced by Senator Bruce, Reagan of Corpus Christi. The Reagan bill allows lenders to charge, on small loans, 10 percent a year, plus $2 monthly service charge for the first six months, plus threefourths of one percent each month. Charles Lyman, a Corpus Christi attorney representing some small loan clients, also advocated Reagap’s bill, whereupon Senator Franklin Spears, San Antonio, told him that it would legalize 245 percent a year on small loans. “Do you think that we owe an obligation to keep in business people who are charging 245 percent and above?” Spears asked him. “Yes, sir, because he is serving a need,” Lyman said. “You would have us legalize that rate?” “. . . you are going to have to have the lender get a sufficient return,” Lyman replied. Spears asked, “Why should we prefer an organized business charging 250 percent and over to a hip-pocket lender charging more than 250 percent?” “Because,” Lyman said, “you can keep tabs on him.” When’ Lucien Dean, who runs Wilson Finance Co. in Austin, appeared to support Reagan’s bill, he said his costs are $3.58 per account per month, and Reagan’s bill would let him do business, “if this group will quit hollering about 245 percent.” “Some’in’ to holler about, isn’t it?” Spears said. “No, sir, it isn’t!” Dean exclaimed. Senator Don Kennard of Fort Worth asked Dean if his company had been sued by Wilson. “We were sued two years ago, and a judgment was taken against us by the former attorney general,” Dean answered. Pressed, Dean said that Wilson had contended “that our brokerage was not a true brokerage.” Under the brokerage plan, a small lender charges a fee for obtaining funds to lend from a third party. He contends the brokerage fee is not interest and therefore cannot be usurious. Thus, the small lenders who have been prosecuted for usury during the last five years are now openly lobbying the legislature for a small loan regulatory law that will permit them to charge rates they admit would be 25 or so times higher than the constitutional limit of 10 percent. That 10 percent limit is still in effect, and will be until and unless the legislature passes a law setting a higher rate. In private this month, some of the legislators are regretting that they cleared the way for its repeal before the legislature passed the law to replace it. OTHER INTERESTS in the money market have swarmed into Austin to protect present practices and enlarge their safe options. The New Image