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House, Jr., of Waco, secretarytreasurer of the institute, told the committee he has two offices, one in Longview, one in Killeen, and that in the Killeen operation last year he lost $16,000; in Longview, he said, he lost $4,000. Partisans of the Quilliam bill think it has “a slight chance” of coming out of committee The subcommittee is deadlocked 2-2, with Rep. John Alaniz, San Antonio, the swing vote. A quorum failed to appear for the Houseside hearing on the 16% Texas bankers’ bill. Reportedly, Sam Kimberlin, lobbyist for the Texas Bankers’ Assn., appealed then to Speaker Ben Barnes, and a call was placed to the committee chairman, Don Garrison of Houston, to try to get the committee to meet, but it didn’t. Senate-side last week, however, a full-dress hearing was held on the bill, introduced there by Sen. J. P. Word of Meridian. GOV. PRESTON SMITH wanted Sen. Word’s bill reported favorably at oncethat was “the word” as senators convened to discuss it. The rate provision of the bill states: If . . any bank may contract for and receive on any loan to a borrower which is repayable in substantiallly equal consecutive monthly installments, an add-on interest charge not to exceed nine dollars annum computed on the amount of the cash advanced for the full term of the loan contract.” This means that the $9 per $100 charge is based, not on the money the borrower actually has in hand from the loan on the average during its duration when allowance is made for how much of it he has paid back at different times during its duration; the charge is based instead on how much he has the first day he makes the loan. Therefore, the “true annual interest rate” limit here proposed for Texas banks is not 9%, but 16%. Sen. Franklin Spears, San Antonio, asked if the banks would object if this rate was limited as to the amount of the loan in question. In other words, Spears suggested limiting this rate to smaller loans. Kimberlin, speaking for Texas banks, indicated that they would object. Spears asked if they would object to the addition of a provision to require the “rebate of unearned interest.” Kimberlin said, “I think everybody does that.” who volunteered to the Observer later that he owns stock in a Galveston bank, directed his questions about the bill to its Article 8, which reads as follows: “Art. 8. Loan Fees ProhibitedExcep tion. No bank shall charge or collect any’ loan fee or any other charge, by whatever name called, for the granting of a loan. Provided, however, a bank may require an applicant for a loan or discount to pay the cost of any abstract, attorney’s opinion, or title insurance policy, or other form of insurance, and filing or recording fees or appraisal fees. Expenses necessary or proper for the protection of the lender, and actually incurred in connection with the making of the loan may be charged; and such charges for such costs shall not be deemed a loan fee or interest or compensation for the use of the money loaned.” Schwartz asked Kimberlin, what are the expenses necessary to protect the lender? Insurance on loans has been provided for 20 years, Kimberlin answered. Yes, Schwartz retorted, but that was when banks were limited to the constitutional 10% interest rate. Schwartz agreed the bill was needed because banks are charging “usurious” rates now \(apparently he meant that the rates the banks are now charging should be lethat some banks are going to find some very valuable expenses necessary to protect the lender.” Kimberlin agreed that the language “may be too broad.” JEN. DON KENNARD, Fort Worth, said he wanted to require the banks to express the interest charges not only as an add-on, but also as a percentage . Why, he asked, do banks advertise their dividends as percentages, but not their interest charges on loans? Kimberlin said any bank would inform a borrower of the percentage rate on request, but that borrowers want to know how many dollars their charges amount to. “You can tell him how many dollars and what the rate is,” Kennard said. “Well, it increases your expenses, but you could do it that way,” Kimberlin answered. \(Kennard later said he intends to introduce, as a floor amendment in the Senate, U.S. Sen. Paul Douglas’ standard “truth in lending” requirement that lenders tell borrowers the true annual rate of interest they are paying. Kennard recalled that he got this provision added to the loan regulatory act in 1963 in the Senate, but that it was Sen. Bruce Reagan, chairman of the Senate banking committee, asked if anyone wished to testify against Sen. Word’s bill, and no one rose from among the dozens of well-dressed spectators present. Kimberlin introduced James Aston, Dallas banker and president of the Texas Bankers’ Assn. “There are bankers from all over the state here, they hope to have a chance to visit with you,” Kimberlin said. Word proposed that the committee pass the bill immediately. Kennard asked that it be sent to a subcommittee “for one week,” saying there was going to be some opposition from him on the floor otherwise. Word said its terms had been known to the senators six weeks and copies of it had March 19, 1965 9