Life’s Lessons Learned #46: Installment Loans
As a management trainee I spent time in many different departments. One of these was the installment loan department. LCFNB was the first bank in Lancaster County to have an installment loan department. John Jones, a banker “imported” from Philadelphia, brought this about. However, after several years living and working in Lancaster, he was lured back to the City of Brotherly Love to run the installment loan department of a major bank. I met John Jones prior to my accepting the position with LCFNB. You see, he fell in love with Lancaster, and when he once again took a job in Philadelphia, he decided to commute by rail. Over the years I have met several others who currently do the same. John Jones was instrumental in guiding my decision to take the LCFNB management trainee offer.
When I got there, the installment loan department was directed by, Gene Kline, John Jones’ former assistant. The department was located on the lower level of the bank building (basement). It shared space with the mortgage department, the coin vault, a document room, a good deal of storage space, and the building’s utilities. The department consisted of Gene Kline, his assistant, and three loan managers. Each loan manager had a filing clerk, and Gene and his assistant shared a secretary. Finally, there was a receptionist. This was a very profitable department. They financed (floor planned) inventory for car dealerships and appliance dealers. The department also made car and appliance loans to the bank’s existing customers (whether or not we were financing the sellers inventory). And, they made loans to new customers referred to the bank by our floor plan customers. Finally, the department wrote personal loans for our customers for other purposes (for example, debt consolidation). All of these loans were with a payment coupon book, most were secured by personal property, and all carried an interest rate about double that of a personal note written for the bank’s “better” customers.
Each of the loan managers had a portfolio of dealers for whom they wrote loans. Each also took loan applications from walk in customers. It was not uncommon for a loan manager to pick up his phone when he spotted a walk in so that somebody else had to do the loan interview. I learned how to take loan applications. Since I did not have any lending authority, I would then have to review the applications with either Gene or his assistant. The loan managers also had to do periodic inventory checks on their retail customers. If the bank was financing a car on a dealer’s lot we needed to verify that the dealership had not sold the car without paying off their bank loan used to purchase that particular car. I helped do a bunch of these inventory verifications. We would drive to the dealership and check the serial numbers of every car on their lot against our list of financed cars. The same was done with appliances. For items without serial numbers we used a simple “count”. The other accounting process involved was “curtailments”. As a car, for example, sat unsold on the dealer’s lot, the dealer was required to pay down a percentage their loan.
When a customer’s installment loan was not properly repaid, and after some significant effort to work with the customer, the time finally came when the bank felt that it had to repossess the collateral for the loan. Quite often this involved a new or used car. At that point the loan manager who was assigned the loan would, in essence, go out and pick up the car. First, with the aide of the dealership, a new set of keys would be made. The local police would then be notified that the bank was about to repossess the vehicle. The bank would try to gain the assistance of the delinquent borrower in the process, but often they would resist turning over the car. They might hide the car, and then the bank would need to search throughout their neighborhood, or perhaps visit the borrowers place of employment to locate the car. On occasion I accompanied the loan manager at night, after people were asleep, to basically steal our collateral from the borrower.
One of the memories, that stays with me to this day, is about a systematic process of discrimination against minority customers. In those days, as I noted in an earlier blog entry, there were no computers. Each loan had a manila file folder wherein various loan documents, along with the loan application, were stored. In the upper corner of a minority applicant’s application you would find a number “2”.
The bank, at that time in 1968, had only one African-American employee. His name was Barney Ewell, Jr., and his was an interesting story. He was mentally disabled, and walked with a limp. He worked for the bank for a while in several different jobs before he was let go. His father, Henry Norwood “Barney” Ewell, was a Lancaster and American hero, and the bank felt moved to hire his son. The following about his father is taken from Wikipedia (https://en.wikipedia.org/wiki/Barney_Ewell)
“Henry Norwood “Barney” Ewell (February 25, 1918 – April 4, 1996) was an American athlete, winner of one gold and two silver medals at the 1948 Summer Olympics. Born into poverty in Harrisburg, Pennsylvania, Barney Ewell was one of the world’s leading sprinters of the 1940s. Mr. Ewell attended John Piersol McCaskey High School in Lancaster, Pennsylvania. McCaskey High School honored Mr. Ewell by dedicating their stadium in his name. Mr. Ewell was also inducted into the J.P. McCaskey Athletic Hall of Fame during the school’s 50th anniversary year in 1988. He was the state’s greatest high school sprinter-jumper in the mid-1930s, but he first achieved renown while a student at Pennsylvania State University, running the 100 m and 200 m races and winning 12 gold medals and championships in collegiate meets between 1940 and 1942. He also won 11 gold medals in AAU national meets between 1939 and 1948. He was an outstanding long jumper as well, leaping 25 feet 2 inches (7.68 m) in 1942.
He served his country during the years 1941 – 1945, returned to the university and received his B.S. degree in 1947. He surprised everyone by making the 1948 Olympic team, equaling the world record of 10.2 in the 100 m dash at the 1948 AAU championship, which was also the Olympic trials. At the Olympic Games in London, he thought he had won the 100 m only to learn the victory was given to teammate Harrison Dillard. In the 200 m, Ewell had another close finish and again finished second – this time to teammate Mel Patton. He was added to the 4 × 100 m relay when Ed Conwell became sick and the American team rolled to an easy victory. However, the exchange between Ewell and Lorenzo Wright was ruled out of the zone and the American team was disqualified. After viewing a film of the race, however, officials reversed the ruling, and Barney Ewell finally had his Olympic gold medal.
The New York Times obituary for Barney Ewell (April 5, 1996) had the following rather ironic quote:
“A son, Barney Ewell Jr., said that Ewell had died from complications following amputations on both legs.”