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most of the states, and the lenders make out under it.” Rep. David Crews, Conroe, wanted to know if Quilliam’s proposed rates would be in line with other states. “No, they’re higher,” Davis said, explaining his committee was trying “to compromise” with the Texas legislature. There was an interesting exchange between Rep. Henry Grover, Houston, Rep. Bob Bass of DeKalb, and Professor Davis: Grover: “Have you ever been in the loan business?” Davis: “No sir.” Grover: “Have you ever worked for a loan company?” Davis: “No sir. And I’ve never been paid by one, either.” Grover: “Well, I didn’t mean to imply anything like that.” Davis: “I know, but I wanted to make that clear.” Bass: “Well, what’s your interest in it [the legislation] ?” Davis: “The public interest.” Bass: “You’ve never loaned money from them?” Davis: “No, and I hope I never have to.” Rep. Maurice Doke, Wichita Falls, who indicated he is opposed to Quilliam’s approach, asked if Quilliam had seen any of the small loan companies’ loss ratio and average return figures. No, Quilliam said; Quilliam conceded that they may not be able to make profits at his proposed schedule of charges, but asserted that they should probably expand their loan portfolios and in part underwrite their smaller loans with income from larger ones. After Ben Pickering, Dallas attorney and president of the State Junior Bar three years back, endorsed Quilliam’s bill”I think the 320% is too high,” he said, and went back to Dallasformer Atty. Gen. Will Wilson, whose sensational prosecutions of loan sharks attracted statewide attention a few years back, appeared before the committee. Speaking as one might from the bench he being also a former member of the Texas Supreme CourtWilson said the small lenders’ rates could be adjusted without doing damage to their business. “I wrote one case while on the Supreme Court that the return should be enough to attract capital into the business, but it may be that in the public interest particular segments of the rate structure do not carry their full load,” he said. “A rate structure that encourages real small loans is not in the public interest because it encourages toward the irresponsible individual. . . . If you provide a rate that permits a very large loss ratio [because of loans not repaid], you are encouraging irresponsibility in our people. . . . It’s not a segment of the [loan] market that ought to be encouraged.” Doke asked if it is not so that these borrowers have car payments and medical bills come due and can’t meet them. People should live within their means, Wilson said: “It’s a matter of character.” Doke and Quilliam then had this exchange: Doke: “What is the reason you’re arguing the rates should be lowered?” 8 The Texas Observer Senators and Banks Austin Off-the-cuff remarks by state senators and lobbyists indicate that there is a curiosity among them about the application of the conflict of interest principle to voting in the Senate on the bankers’ 16% legislation. Sen. Schwartz mentioned his own ownership of stock In a Galveston bank. He supports the 16% interest rate, but is harshly criticizing some of the other terms of the bill. “There is a real problem for those of us who own bank stock,” Schwartz said when questioned on this subject. Another senator had told the Observer he owed large sums to banks. Asked about this as a general proposition, Schwartz said, “I don’t know whether that represents a conflict in interest.” Schwartz had not decided what course of action he would follow on this bill. Quilliam: “Because they’re too high. From a consumer standpoint they are much too high. From the lender standpoint it is true he is going to have to make larger loans and invest more money.” Fritz, for the committee against unreasonable rates, presented two witnesses “from the folk.” The first was Mrs. Alice Reed, assistant interior decorator for a Dallas construction firm. She told a long and lamentable tale of needing a little money to meet an emergency bill, going to a small lender, without her husband’s knowing, when she could have borrowed from her sister or her employer or ‘a bank, and then getting led down the garden path of more loans with higher and higher balances due. Finally, she said, she almost had a nervous breakdown, confessed to her husband, and went to a lawyer, who referred her to Fritz, who is widely known as an attorney who specializes in prosecuting small lenders on behalf of borrowers. “They [the lenders] kept telling me they were gonna call my husband and tell him,” Mrs. Reed said. “They helt this thing over my head.” One lender called her on the job and gave her heck, she said. “One time he said, ‘I’m gonna give you two minutes to get over here.’ I said, ‘Why have you got so bad ?You were always mean.’ He said, `I’m legalized now. The law is protecting me. They won’t let me charge so much interest, but I can harass all I want to.” Grover wanted to know why Fritz didn’t take the case to the loan commissioner, Frank Miskell \(who was out in the hall ent reluctance that he had written Miskell about two cases, had been told he was still organizing his office, and had heard no more, so had not written him about subsequent cases of this kind. Ray Butler, a salesman in Dallas, told of getting deep in debt to small lenders, of being sent from one lender “down the street” to another for additional small loans. Asked if the harassment has continued since the 1963 law went into effect, he replied, “Oh, hellworse.” Rep. Tony Bonilla, Corpus Christi, said harassing small lenders should be prosecuted, but it’s not proper to blame all small lenders for the actions of a few. “I know in Corpus Christi we have some outstanding gentlemen operating these loan companies,” he said. Doke said $1 more a month on a balance of $11.50 wouldn’t sink Mrs. Reed all by itself. Fritz replied it would help sink her, especially when compounded and duplicated in other small loans. “No state in the union operates like Texas. Nobody allows 320% per annum except us-uns,” Fritz said. “We’re talking about letting a man lend $100 and get back $320 in a year. . . . There are some things we should not let a man make a reasonable profit onif there is economic damage and other types of damage to the public.” IT’S REAL SIMPLE,” Lemens told the representatives. “You put out your money and they’re supposed to pay it back.” As for the new law, he said, “Our institute assisted as best we could in writing the Texas Loan Regulatory Act two years ago.” Section 17-B uses the same principle for small lenders that is used by utilities and insurance companies and business in general, “a standby charge,” he said. “I am selfish enough to hope that Texas has built a plan that will become a model for all the states,” Lemens said. He asked for a legislative armistice on small lenders’ rates to give the new law “time to work.” “Don’t get on the people who are doing their dead-level bestget on those hippocket operators!” he exclaimed. The commissioner, Miskell, has “staggering responsibilities,” Lemens said. “I’m pleading you to give our commissioner some support. I’ve written the commissioner giving them the names of some of these outlaws. The job that he has done is nothing less than phenomenal. He’s fair and square. . . . I will say this, he’s been on the hard side. But all the licensees will say he’s fair, and I’d like to congratulate him.” Doke asked for the institute’s companies figures on their loss ratios and rates of return. “I don’t know what they are. We need more time. We don’t have any figures to submit, and we don’t know of anybody who does,” Lemens said. He went on to say that the commissioner had received just 50 complaints a year against small lenders under the new act. Doke was outraged. “You tell me you have 300 or 400 members and you have no idea what anybody makes?” “That’s it we don’t know ourselves,” Lemens said. “You’re bound to knowyou’re in business you pay taxes!” Doke exclaimed. “Our own thought is we should give it two years to get the figures,” Lemens said, and tried to sit down. Rep. John Alaniz, San Antonio, asked Lemens how many companies had gone out of business. “I’ve heard of half a dozen or so,” Lemens replied. Under the new law, he added, competition “is worse.” Cummings of San Antonio said he owns two small loan offices. He had never been sued for harassment, and the industry