Provident Loan Societies

The long-standing English and American concerns about usury and empathy for the poor provided the moral foundation for the creation of provident loan societies (PLSs) in the US in the latter part of the nineteenth century. The PLSs were intended to help the labouring classes obtain access to credit while avoiding the very high interest rates charged by loan sharks. Given the frequency and severity of financial panics, it is not surprising that loan sharks who operated primarily in large cities, such as New York, grew rapidly in the latter part of the nineteenth century, though accurate data on their growth is impossible to obtain. Although economists might suggest that competition among loan sharks could bring interest rates down, in practice this was unlikely to be the case. Information on consumer creditworthiness was difficult to obtain (credit cards for consumers did not exist) and the markets were highly segmented. Loan sharks operating in the New York City borough of Manhattan did not have to worry about competition from loan sharks in the borough of Queens.