A sign of economic depression or, as the financial wizards persist in euphemizing it, the economic downturn, is the proliferation of notorious lending practices by loan companies and other credit sources such as banks and mortgage companies. I guess during this holiday season is as good a time as any to address this topic.
The following article from a January 1952 Tribune front page could have been taken out of last weeks newspaper and it highlights the vulnerability of a severely underpaid work force, like the Silver People, to the inhuman practices of a rapacious group of business people like the loan companies of the time.
Local Loan Sharks Fatten on Gullible Women Victims
Loan Sharks and unconscionable persons in the capital city are revealed to be gouging the unfortunate and less intelligent members of their group in these days of economic difficulty, by charging interest in many cases, at the fantastically exorbitant rate of 480% per year. That is, a person who borrows one dollar would owe forty eight dollars in interest at the end of a year if the one dollar borrowed remained unpaid for that time.
Most of the sharks fatten off the fears of girls and women who, in a troubled moment or to satisfy a passing desire for some necessity or, probably unneeded luxury, negotiate small loans, and of ignorant workmen who borrow mainly to gamble on chance numbers of the weekly lottery. These small loans ranging from $3 to $10 are made at the highly excessive rate of 20% the amount to be repaid within 15 days.
In a moment of urgency, many of these poor and deluded persons borrow the amount of $5 and think nothing of agreeing to pay back $6 in two weeks. However, if the payment cannot be met on the date specified, the usurer progressively doubles the interest. On this basis, a $20 loan yields $4 interest in two weeks, $8 monthly and $96 per year; the borrower owing for the $20 he got, a total of $116.
To avoid prosecution, since the viciously high rates charged are in violation of the law, the usurer does not make out a contract nor state in writing the amount of interest charged but threatens a scandal and sometimes physical force if the borrower does not meet the demands.
Our staff also learned that the loan sharks seem to have an organization, or some sort of union to extort the public, as up to a few months ago the interest was collected monthly, but now the usurers charge interest on a 15 day period to coincide with the payday of the Panama Canal company, and the Canal Zone Army and Navy Forces.
Many of the victims are women, employees of the commissaries, hospitals and laundries who obtain loans unknown to their husbands or relatives, and so as to keep the matter secret are compelled to pay the high interest without liquidating the capital, thus remaining indefinitely in the grip of the usurer.
Our staff was informed that some contract workers on the Canal Zone only work for the loan sharks, having to pay as high as 80% monthly on a loan.
Receiving their pay on a weekly basis, these men receive loans of $5 on the promise of paying back $6 on their pay day. If the loan runs for a month they owe the sum of $9 or almost double the amount borrowed in 30 days.
It is believed that Canal Zone officials and the Panama authorities will begin a sweeping investigation of this sweeping practice which is impoverishing a large number of hard working, but gullible persons.
Doesn’t this sound totally familiar? Very little has changed today in our Panama except that now a more diligent consumer protection agency called ACODECO, Autoridad de la Protección del Consumidor y Defensa de la Competencia, offers help to consumers in protecting themselves from falling into the clutches of loan sharks.
This story continues.