Workers Trapped in Strange "Loan" in 1920s, June 1, 1926

Steer Clear of Salary Loan Sharks

By International News Service

Atlanta, Ga., June 1—He earned $60 a month and he owes only $75.

This indebtedness is to “salary buying” loan sharks to which each month he pays $21.85 interest—more than one-third of his wages. And he never touches the principal.

He has been paying interest at this rate for three years. The amount wasn’t so enormous until last year when the necessity of satisfying the demands of the money lenders forced him to go and borrow more.

For the loan sharks know that the working man’s job will be forfeited by the corporation for which he works when they go to his employer with their claim.

This was only one of the cases described by J.L.R. Boyd, general counsel for the Atlanta Legal Aid Society, who is preparing to file an injunction suit against the workingmen’s creditors.

The injunction suits filed for this workman and others are based on the contention that “salary buying” is merely a device to cover a loan at rates which otherwise would be deemed usurious.

Editor’s note: In the 1920s, “salary buying” was a common way for loan sharks to get around state usury laws. Instead of calling the transaction a loan, the lender claimed to be purchasing part of a worker’s future wages. A man might receive $75 in cash, but the lender would say they had “bought” $100 or more of his upcoming paychecks. Because it was framed as a sale rather than a loan, the lender could charge extremely high monthly payments without ever reducing the principal.

Workers often paid these fees for years, trapped by the threat that the lender could go directly to their employer and demand the wages they had “purchased.” Employers disliked the practice, but many felt legally obligated to honor the assignment. Legal Aid groups in cities like Atlanta eventually challenged these contracts, arguing that “salary buying” was simply a disguise for illegal interest rates. Thanks for the explanation, Copilot.

From the front page of the Concord Daily Tribune, June 1, 1926

newspapers.digitalnc.org/lccn/sn92073201/1926-06-01/ed-1/seq-1/