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December 7, 1958 Right of member banks to make personal loans repayable in installments. Mr, Clayton Mr» Hyatt, General Counsel COPY In response to your memorandum of December 7, 1936 on the above subject, you are advised that I am unable to find anything in the files bearing on the question whether State member banks could m&fce personal loans repayable in installments with maturities tap to three years with the tnie interest running around 9 per cent* Offhand, I know of no obstacle except the State usury laws, and we have a digest of the State usury laws. To do we should be glad to undertake it if the it. to the making of such loans never prepared in this office so would be quite a task, but circumstances seem to justify As you know, the Rand-McNally Bankers Directory contains a brief digest of the State usury laws; but I doubt that it is in sufficient detail to show reliably whether or not there are special provisions for higher rates of interest on personal loans repayable in installments. Inasmuch as it is well-settled by numerous decisions of the Supreme Court of the United States th&t the States cannot in any way Impede the operation of national banks, Congress could, if it desired to do so, amend the National Bank Act so as to enable all national banks to sake personal loans repayable in installments and to charge thereon whatever rate of interest Congress is silling to persit them to charge, regardless of the State usury laws. If Congress should grant such authority to national banks, the states probably would do likewise as to State banks within a very few years because they would not desire to have the State banks placed at a competitive disadvantage with respect to national banks. At present the national Bank Act (section 5197 of the Revised Statutes) title 12 U.S.C. section 85; paragraph 1410 of the Comptroller's recent compilation) provides in substance that national banks may charge any rate of interest allowed by the laws of the State in which they are located, or a rate 1 per cent in excess of the discount rate on 90 day commercial paper in effect at the Federal Reserve bank of the district where the national bank is located, whichever may be the greater. When no rat© of interest is fixed by the laws of the state, u. national bank is permitted to charge a rate not exceeding 7 per cent or 1 per cent in excess of the Federal Reserve discount rate on 90 day commercial paper, whichever may be the greater, and such interest may be taken in advance> If there is anything further I can do to be of assistance to you in this connection, please do not hesitate to call upon me. Very truly yours, Walter wyatt, General Counsel.
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