Charity workers often complain that, in the poor families known to them, thrift is impossible, because there is nothing to save. More often than not this means that their relations with the poor have ceased as soon as acute distress is past, and that they have stopped visiting at the very time when improved material conditions have made the best friendly services possible.
Any attempt to divide the poor into classes is to be deprecated, because human beings are not easily classified. But, speaking roughly, and using the classification merely as a temporary convenience, charity workers will find that the thrift habit divides the poor into three classes. First, those who are very thrifty, and this is a large class. Misfortune may overtake the most provident during long periods of industrial depression, or they may become temporarily dependent through sickness or some unforeseen accident. The second class includes {112} those who are willing to work when work is plentiful, but who have little persistence or resourcefulness in procuring work. In the busy season they spend lavishly on cheap pleasures and soon become applicants for relief in troubled times. Debt has no terrors for them, and, from their point of view, it is useless to save because they cannot save enough to make it seem worth while. In the third class we find the lazy and vicious, who shirk work, and, living by their wits, are better off in bad times than in good. "It is with the second class that the charitable may work lasting harm or lasting good. To let them feel that no responsibility rests with them during the busy season, and that all the responsibility rests with us to relieve their needs when the busy season is over, rapidly pushes them into the third class. To teach them, on the other hand, the power and cumulative value of the saving habit, and so get them beforehand with the world, is to place them in the first class and soon render them independent of our material help." [2]
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A characteristic of the second class is the habit of buying on credit. The book at the corner grocery not only tempts the purchaser into buying unnecessary things, but the prices are higher than the market rate for inferior goods. A student in a university laboratory, who is also a friendly visitor, had occasion to use some sugar in one of his experiments, and, being hurried, purchased it from the nearest corner grocery, paying more than the usual price. It proved to be badly adulterated, and the user has been more careful since in advising his poor friends about purchasing provisions. The credit system is the natural outcome of uncertain income, and for that reason is hard to avoid, but in a number of instances it is continued long after the necessity that caused the buyer to ask credit has ceased to exist.
Another and less excusable form of the credit system is buying household goods on the instalment plan. The poor are often teased into this by glib agents. An old woman, whose income was not sufficient to keep her alive, contracted to buy a clock on the instalment plan for $8.00 because she needed one when she {114} occasionally had a day's job of cleaning. When her visitor remonstrated that a dollar clock would have done quite as well, she replied triumphantly, "Yes, but this one is only 25 cents a week!" When payments cannot be made, and the purchaser is threatened with the loss of the goods, it is possible to be too hasty in rushing to the rescue. The Fifteenth Report of the Boston Associated Charities records such an experience. "A family had purchased furniture upon the instalment plan, when the husband was suddenly deprived of his job. The furniture was about to be seized, when generous sympathizers came to the rescue, and redeemed the articles. Scarcely had the donors time to realize what a financial relief they had been able to give to the troubled family before the same bit of folly was repeated, and 'parlor furniture' was added to the inventory of goods and chattels to be paid for by the week." [3] When instalment men threaten seizure, it is well to find out whether they are acting within the law. They have been known to take advantage of ignorant clients. But the system {115} itself is bad in that it encourages the purchase of unnecessary things, and at a great advance upon cash prices.
When the poor man would borrow, he is often exposed to the impositions of a class of unscrupulous money lenders, who violate the laws against usury, but hope to escape punishment or loss through the ignorance of their customers. The pitiful part of it is that the self-respecting poor often fall into their traps. A family in pecuniary straits for the first time is naturally attracted by the specious advertisements of the chattel-mortgage companies, which offer to lend money on goods that the borrower keeps in his possession, and promise that all negotiations shall be strictly confidential. This seems an easy way out of present difficulties without loss of self-respect or any painful publicity. But the terms of the contract are far from easy in reality. Through a system of bonuses, extra fees, or monthly payments for "guaranteeing" the loan, interest amounting to from 100 per cent to 200 per cent a year is wrung from the borrowers. Bled dry at last, and unable to pay {116} such extortionate interest and the principal too, their goods are seized, and the members of the household become objects of charity. Whereever these chattel-mortgage companies gain any foothold, many of their victims are applicants for relief. The law usually furnishes ample protection, but the companies flourish through the poor man's ignorance of the law.
As soon as a visitor learns that the goods of a poor family are mortgaged, he should, at once, whether the company is pressing for payment or not, learn the terms of the contract, and get an opinion as to its validity from some friend who is a lawyer. The usual form of contract in Maryland is a six months' mortgage, bearing 6 per cent interest, with the legal charge for recording deducted from the amount advanced to the borrower. But, in addition to this, notes for from $2.00 upward, according to the size of the loan, are made payable monthly to some third party who is supposed to guarantee the loan. Lawyers advise no payments on these notes, and that principal and legal interest be offered at the expiration of the mortgage. If this offer {117} is refused, the company renders itself liable to damage proceedings in seizing the furniture. In each case, however, it is better to have a lawyer's advice, as the contracts vary, and ignorant men, who thought they were signing a six months' mortgage, have been known to sign a one month's mortgage instead.
The law against usury can protect those who know enough to apply it, but the poor man remains unprovided with any satisfactory means of negotiating a loan. The legal rate of interest is too low to make loans on chattels profitable. The organization, by public-spirited business men, of companies that will be careful in taking risks, and will secure special legislation enabling them to charge not more than a reasonable rate of interest, is the only remedy. Companies like these have been organized successfully in Boston and Buffalo by philanthropists who were also business men and wise enough to realize the importance of placing such loan agencies on an equitable business basis. Several advantages are apparent from the working of these equitable loan companies. Those who cannot {118} properly negotiate a loan are discouraged from applying, because the loans are made with great care. Those who get the loans are fairly dealt with, and are helped at the right time in a way that saves them from becoming applicants for charity. Best of all, the other loan companies are forced to reduce their rate of interest, and offer fairer terms.
The habit of pawning goods has never become general among our native population, but among the foreign poor of our large cities it is the common practice; and here, too, the philanthropic pawnshop, started at the instance of the New York Charity Organization Society, has reduced the percentage charged by other pawnshops in New York.
This new interest taken by philanthropy in the poor man as borrower is still in the tentative and experimental stage, but there is an encouraging analogy between its beginnings and the early history of the savings banks. "It is seldom remembered," says Mrs. Lowell, "that the great scheme of savings banks was originally conceived and put into operation as a means of helping the poor. The two first {119} savings banks were started in Hamburg in 1778, and in Berne in 1787, and both were more or less closely restricted to the use of domestic servants, handicraftsmen and the like. The Hamburg bank was part of the general administration of the poor funds." [4]