of the loan, and such insurance is not a collateral sale, purchase, or agreement, when the policy is payable to the borrower or any member of his family, even though the customary mortgage clause is attached or the licensee is a coassured, provided that such insurance is sold at standard rates, through agents or brokers, licensed by the superintendent. Sections 1321.01 to 1321.19, inclusive, of the Revised Code do not affect the authority of the superintendent in granting, revoking, or renewing licenses. Subject to the provisions of sections 3918.01 to 3918.13, inclusive, of the Revised Code, a licensee, at the request of the borrower, may obtain credit life insurance providing for death benefits only, on one borrower, but only one of them if there are two or more obligors. The premium or identifiable charge for the insurance may equal but shall not exceed the premium rate filed by such insurer with the superintendent of insurance and not disapproved by him. The licensee may add to the charges enumerated in section 1321.13 of the Revised Code an amount equal to such premium or identifiable charge, subject to the refund requirements of sections 3918.01 to 3918.13, inclusive, of the Revised Code. Notwithstanding any other provision of sections 1321.01 to 1321.19, indusive, of the Revised Code, any gain or advantage in any form whatever to the licensee or to any employee, affiliate, or associate of the licensee from such insurance or its sale shall not be deemed to be additional charges in connection with such loan, and any transaction made in accordance with this section is not prohibited by any other provision of those sections. No credit life insurance shall be required, sold, or offered by the licensee in connection with any loan except as authorized by this section. If a borrower obtains any credit life insurance from or through a licensee, the statement of loan shall disclose the type of insurance and its cost to the borrower. SECTION 2. That existing sections 1321.02, 1321.07, 1321.11, 1321.13, 1321.14, 1321.15, and 1321.16 of the Revised Code are hereby repealed. ROGER CLOUD, Speaker of the House of Representatives. Passed June 20, 1961. JOHN W. DONAHEY, President of the Senate. IN THE HOUSE OF REPRESENTATIVES: Passed notwithstanding the objections of the Governor, July 11, 1961. Yeas-96; Nays-32. IN THE SENATE: Passed notwithstanding the objections of the Governor, July 11, 1961. JOHN W. DONAHEY, President of the Senate. The sectional numbers herein are in conformity with the Revised Code. OHIO LEGISLATIVE SERVICE COMMISSION LAUREN A. GLOSSER, Director Filed in the office of the Secretary of State at Columbus, Ohio, on the h day of July, A. D. 1961. I hereby certify that the foregoing is a true copy of the enrolled bill. Ted W. Brown TED W. BROWN, Secretary of State. e No. 255. Effective October 11, 1961. VETO MESSAGE AMENDED SUBSTITUTE HOUSE BILL No. 365 I am returning herewith, without my approval and without my signature, amended substitute house bill No. 365. This bill has been the subject of a great deal of study by me since it is a subject which has been controversial for a number of years. The subject matter of the bill could very well lend itself to a great deal of demagoguery. I hope that I have avoided this by trying to objectively appraise the bill from the standpoint of the needs of the State for this particular type of money service. There is no question in my mind that there are large numbers of people in Ohio who do not present sufficiently good enough credit risks to be able to qualify for bank credit. There is also a large number of these people who do not have available the facility of a credit union. These people are consumers and they have needs which can only be fulfilled by the type of credit made available by small-loan companies. There has always been an unresolved question on how high interest rates must be in order to induce investment capital to make loan funds available for this particular group of our citizens. The question then before me is whether the rates suggested in amended substitute house bill 365 fall in this category or whether or not they are higher than necessary. I am setting aside at this time the provision in the bill increasing the loan limits from $1,000 to $2,000. I have no objection to this since inflation has increased costs to a point where the higher loan limit might be necessary. Credit unions and banks are usually effective as competition, for the person who can qualify under any circumstances for a loan in excess of $1,000 usually is a good enough risk to be able to borrow from banks or credit unions. I welcome the suggested reduction in interest rates in the loan categories from $100 to $450. I believe this to be desirable. However, the increases in rates from $450 to $1,000 I find higher than I believe to be necessary for the inducement of risk capital in this particular segment of our economy. Under present rates it would cost an individual $76 to borrow $500. the proposed bill, his cost would be $80. I list the following rates under present law as contrasted with the rates under the proposed law: Under The figures compiled by the Division of Securities of the Ohio Department of Commerce indicate that, since 1955, there has been a gradual erosion of net earnings before interest paid on borrowed funds in the small loan industry. The drop is from $6.11 per $100 in 1956 to $5.70 in 1960. The increase in rate proposed in amended substitute House bill 365 would more than restore the net earning figure and, consequently, I feel that it would impose an unnecessary burden on a class of borrowers who are already having great difficulty in meeting their obligations. If this bill had merely proposed to increase the loan limits under the rate proposed in this bill for the categories between $1,000 and $2,000, I would not have objected to its passage. If the bill had proposed the lowering of the rate in the category from $100 to $450 and only slightly increased the rate in the categories from $450 to $1,000, I would not have objected. However, because I feel that the rate proposed in the categories between $450 and $1,000 is excessive, I am forced to veto the bill and request that you sustain my action. MICHAEL V. DI SALLE, Governor. Senator BENNETT. I would suggest that section 918 of the code, as it was December 1, 1960, be put in the record, and then if it was changed by the legislature, the change be put in as a parallel part so we will have an opportunity to compare the notes. (Sec. 918 of the Ohio Code, as of December 1, 1960, follows:) SECTION 918 OF THE OHIO LAW SEC. 1317.06. Finance charge; rates; service charge; contract for payment of delinquent charges. (A) A retail seller at the time of making any retail installment sale may charge and contract for the payment of a finance charge by the retail buyer and collect and receive the same, which shall not exceed the rates as follows: (1) A base finance charge at the rate of $8 per $100 per year on the principal balance of the retail installment contract. On retail installment contracts providing for principal balances less than, or not in multiples of $100, or for installment payments extending for a period less than or greater than 1 year, said finance charge shall be computed proportionately. (2) In addition to the base finance charge, the retail seller may charge and contract for a service charge of 50 cents per month for the first $50 unit or fraction thereof, of the principal balance for each month of the term of the installment contract; and an additional service charge of 25 cents per month for each of the next five $50 units or fraction thereof, of the principal balance for each month of the term of the installment contract. Such base finance charge and service charges may be computed on a basis of a full month for any fractional period in excess of 10 days. For a fractional period of a month and not in excess of 10 days, there shall be no base finance charge or service charge. Sections 1317.01 to 1317.11, inclusive, of the Revised Code do not apply to any sale in which the base finance and service charge does not exceed the sum of $15. Mrs. LEV. I would like to comment that if we do have adequate legislation in Ohio, we are a very progressive State and I would hope that the rest of the country would be as fortunate in being covered by this bill. Senator BENNETT. You have talked to us about some problems that you have observed in Ohio that exist in spite of the law. Mrs. LEV. That exist in our own city, true. Senator BENNETT. I have one other comment to make, and this is not to criticize your testimony, but as one who opposes the idea that all credit charges can be translated into simple annual interest, I notice that you did not recommend that. The key statement in your testimony is this: "Those provisions in the bill which require a statement of credit cost over the terms of the contract in actual dollars and cents seem to us to have particular merit." And I am happy that that was in your testimony. I have no further comment, Mr. Chairman. Senator DOUGLAS. Thank you again, very much. (Discussion off the record.) Senator DOUGLAS. The next witnesses are Mr. Earl Harris and Mr. John Gosnell, representing the National Small Business Men's Association. STATEMENTS OF EARL HARRIS AND JOHN A. GOSNELL, NATIONAL SMALL BUSINESS MEN'S ASSOCIATION Mr. GOSNELL. Mr. Chairman, my name is John A. Gosnell. I have a prepared statement which, in order to conserve your time, I will submit for the record, if that is agreeable. Senator DOUGLAS. Yes, you may do that. It will follow your presentation. Mr. GOSNELL. I will merely lay a foundation for the testimony of Mr. Harris, whom we have brought here from Indianapolis to give you some firsthand information. We are primarily concerned with this problem because of the impact on credit operations within the small business community. If there is involved here a burden of time on computation in connection with individual sales transactions, even as much as 5 minutes, if it were possible to make these calculations within that time, it would present a great problem to many small business merchants. There is another aspect where we think there is a great potential burden on the small business community, and this involves the matter of administration. Obviously, there will be millions of transactions within the purview of this law if it is passed. These cannot be supervised by any sort of personal investigation, and this to us means inevitably an exhaustive reporting system, so that the matters can be surveyed. This, again, we feel, will result in an almost impossible burden on the small business community. Mr. Harris does a credit business. We have brought him here because he can give you firsthand information on the points which I have brought up. Mr. Harris. Senator DOUGLAS. Mr. Harris. May I say that Senator Capehart asked me to extend his apologies for not being able to be present this afternoon. He is in the Foreign Relations Committee dealing with the question of foreign aid, and wished to express his appreciation to you for coming, and his regrets that he cannot be present. Mr. HARRIS. Thank you. Mr. Chairman and Senator Bennett, my name is Earl Harris. I am president of Paul Harris stores. Our business consists of selling men's, women's, and children's wearing apparel in seven small stores in strip shopping centers in suburban Indianapolis. Senator BENNETT. Will you identify what a strip shopping center is. Mr. HARRIS. It is a nonregional shopping center that does not have a major department store, and probably does not pull from a total population of over 10,000 people. Senator BENNETT. It is one of these situations in which by accident, or for some reason in the past, businesses congregated at a certain crossroads of a pair of streets, or some other area? Mr. HARRIS. No, sir; no, sir. It is a planned shopping center, larger than a neighborhood shopping area, but smaller than a regional shopping center. It does not have malls; it does not have major depart ment stores as tenants. Senator BENNETT. But it is planned; it is a planned place? Mr. HARRIS. Yes. It has parking; it is modern; it is air conditioned. It has all the services that the suburban housewife should require for minor purchases. It is not big-volume business. Senator BENNETT. This is a phrase I have never heard before, and I was curious to know what a strip shopping center was. Mr. HARRIS. It is quite common and accepted in retailing real estate terms, sir. Senator BENNETT. Yes. |