What is the Morris plan Bank’
Morris Bank plan was the type of Bank first established in 1910 to lend money to people who couldn’t get loans from main banks. Fidelity Savings And Trust Co. the first Morris plan Bank; it was founded by attorney Virginia Arthur Morris. By 1931 were 109 Morris plan banks to work through the Morris plan company of America; however, this number declined after the economy recovered from the great depression and commercial banks began offering similar loans.
Breaking down the ‘Morris plan Bank’
Morris plan banks were notable for their unique lending strategy, which benefits the poor and working class borrowers. Morris banks do not require collateral for loans, but instead take into account the nature and social status of applicants by requiring the applicant to submit two letters of recommendation from colleagues of a similar nature and financial position. All three were required to fill out an application, covering the character, financial history, employment and wages; references had to say on the creditworthiness of the borrower as well.
If the loan was granted, the borrower will pay interest and fees from the top, and then make purchases of the class C certificates, a donation weekly to repay the loan. For example, suppose a borrower takes out a Morris plan loan for $150, six per cent, one-dollar fee. The customer shall pay interest in the amount of $9, and a fee of $1, top, and so gets $140 in credit. He then acquired a certificate class C every week during the entire term of the loan. At the end of the loan term, the borrower will use the class c certificates for cash, which it will use to repay the loan.
Other services offered by Morris plan banks
Morris plan banks were among the first banks to offer car loans to consumers, in partnership with the Studebaker Corporation. They were also one of the first banks to offer credit life insurance to allow repayment of the loan in case of death of the borrower during the loan period. These policies were offered through Morris plan insurance society.
The decline of the Morris plan banks
During the first Morris plan banks started to operate, a consumer credit for the poor and working class borrowers was not available from other banks. By 1924, other commercial banks began to offer small loans to the poor and the working class. The economic recovery after the great Depression, most commercial banks offer consumer credit products. The growing popularity and availability of installment credit and credit cards in the postwar period further provided by the Morris plan banks obsolete.