The Loan-Shark Problem

Abstract

The term has been commonly used to describe those who lend small sums at higher rates of charge than the law allows. It has been associated almost exclusively in recent years with loans to wage-earners. The qualities that give rise to loan-shark transactions-greed, on one hand, and compelling necessity, short-sightedness, or gullibility, on the other-are not new among human beings. Most civilizations for which historical records are available have been confronted with the problem of usury and have attempted to deal with it. Nevertheless, the loan-shark problem is substantially different from the historic problem of usury. To be sure, the loan shark of today has inherited the social stigma that attached to the business of his usurious predecessors, and he has made use of some of the devices which they developed to evade legal restrictions upon interest-taking. But here the relationship ends. The loan shark is essentially a product of modern industrial society. His field of lending and his techniques differ substantially from those of usurers of the past. Earlier usurers made loans almost entirely on the security of tangible and readily negotiable collateral. The money-lenders of Augustan Rome, for instance, secured their contracts with mortgages upon real estate, ships' cargoes, slaves, flocks of sheep, or herds of cattle, or by taking pledges of tools, merchandise, or precious stones. Shakespeare's Shylock dealt with Venetian merchants whose stocks-in-trade presumably provided more effective, if less dramatic, means of enforcing payment than the flesh ot borrowers. Similarly, the skin-flint village note-shaver, whose frustration delighted American theatre audiences of the latter part of the nineteenth century, had a mortgage on the heroine's home or at least upon the family horse and buggy. The fields of lending and to some extent the techniques and traditions of these early money-lenders have been taken over by banks, building and loan associations, pawnbrokers, and other specialized institutions that lend against tangible and measurable property values. The loan shark of today has created a new field and a new technique of lending at which even the boldest of his predecessors would probably have looked askance. While he may secure his loans with mortgages on