Page 18


Pr WE’LL TAKE YOUR’ APPLICATION OVER THE PHONE BORROW UP TO $50,000 For Debt Consolidation Auto, Homeowner or Personal Loans “At Associates You’ll Get an Honest Shake.” BENEFICIAL FINANCE LOANS CIT FINANCIAL SERVICES AETNA FINANCE to $5000 BUT WE CAN HANDLE YOUR NEEDS FOR FIFTY DOLLARS TOO. s t CREDITHRIFT LOANS SIC CREDIT COMPANY “Where’s the money con lg from? . SIC, that’s where,” FINANCING & L6ANS Auto Furniture Appliances Home Improvements Debt Consolidation LOANS C.I.T. the Money. Off ices Coast. Loans to $5,000 PACIFIC FINANCE ASSOCIATES FINANCIAL UP to $2500 GFC CORPORATION ?.1 0 ed C 1.7 0 One for Over 1,000 Coast to ASSOCIATES SINCE 1914 A sampling of loan firms from the yellow pages Consumer finance companies, again By Paul Sweeney and Jim Hightower Austin The loan sharks are back. Today’s finance companies are not just local suede-shoes making a buck by lending to their neighbors. They are big chains, with names as familiar and innocent as Beneficial or Liberty Loan. Or they are the unrecognizable subsidiaries of some of the world’s largest conglomeratesFord Motor Co., ITT, Gulf & Western, Transamerica, Citicorp, and BankAmerica. Through the aggressive Texas Consumer Finance Association, an Austinbased lobbying group, and joined by some of the state’s largest banks, loan companies are pressing the Legislature with their biennial demands for higher interest rates. To the newspaper browser, the battle taking shape in the capitol is a remote political drama, seemingly removed from the affairs of ordinary people. But, victory for the loan lobby in the form of exorbitantly higher interest rates would adversely affect the lives of two million Texans. By the loan industry’s own reckoning, the majority of borrowers are blue-collar workers with annual earnings of $15,000 or less. They borrow to consolidate debts, to buy or repair automobiles, to purchase appliances, and to meet medical and hospital billsin short, to pay for the necessities of life. At present, Texas law allows finance companies to charge interest rates up to 19.5 percent on $1,000 loans; up to 16.5 percent on $2,500 loans; and as much as 240 percent on loans under $100based on a 37-month installment agreement. So, the less a person can afford to borrow, the more he or she will have to pay for a loan. Think of yourself as one of these borrowers. Pinched by utility bills, an increase in rent, and auto payments, you walk into your neighborhood finance outfit to get yourself a quick $1,000, which is about average for a small loan. What happens next? First off, they’ll no doubt sell you life insurance, an accident and health policy, and personal property protection. \(It’s part of the package, but it’s not always made clear that you don’t have to sign mediately reduce your $1,000 loan to $858.89 \(and if you’re married you’ll take home even interest on the entire $1,000, though. Next, you’ll probably sign a three-year note; monthly payments are smaller that way, you see. By the time you’ve struggled through the three yearsassuming you aren’t in worsened straits and forced to refinance your debt you’ll have paid $1,339.17 for a loan that netted you only $859 in cash. \(Legislation defeated in 1975 would have raised that total note to $1,425.50, upped the insurance premiums and thus reduced the effective cash value of a $1,000 loan to $837.50 for a single perThe insurance policies are tricky. The coverage is in force only for the duration of the loan and is really designed to protect the finance company and not the beneficiary. The life insurance policy, too, merely pays off the loan in case you have the bad manners to die before paying up, thus relieving your heirs of that duty, but not providing them with any benefits. Finance company lobbyists are not saying at the moment whether the interest hikes they seek this year will be greater than those they sought in 1975. And it’s not certain who will introduce the industry bill, though the smart money is on Sen. Don Adams \(Distration Committee. Adams denies he’ll champion a bill written by the loan companies, though one of his legislative aides met in Dallas with lobbyists for TCFA and 18 members of the association’s executive com mittee Jan. 26. “I am working on some formulas that deal with interest rates,” says Adams. “But if I introduce it, the bill will be born and conceived in my office.” TCFA’s lobbyists are professional, low-key types. Randy Pendleton, for example, is a former state representative from Andrews with experience in the Texas office of federal-state relations in Washington. He was recently described by Stewart Davis of The Dallas Morning News as “one of the youngest and most February 11, 1977 3