In 1910 Arthur J. Morris, a lawyer of Norfolk, Va., after a study of the co-operative industrial banks of Europe with a view to adapting their principles to American conditions, established an industrial loan bank at Norfolk. It was successful, and since then similar banks have been established at an increasing rate all over the United States, until on the tenth anniversary of the Norfolk bank there were 103 such banks. These institutions had, in the ten years of their existence, made 950,000 loans aggregating $155,000,000, and in the last year alone 275,000 loans aggregating $55,000,000. The banks are commonly called after the domiciling city; for example, the New Haven Morris Plan Company, or the Morris Plan Company of Toledo. The New York bank has a branch in Brooklyn, and the Providence bank has branches in Pawtucket and Woonsocket.

These banks are owned and controlled by local capitalists. The capitalization ranges from $10,000 in Charleston, S.C., to $1,000,000 in New York and Chicago. The aggregate capitalization of the 103 banks is $12,500,000. The banks have received the whole-hearted indorsement of the leaders in the communities' activities, and the stockholders include bankers and business men of even national repute. Dividends range from 4 to 8 per cent.

In 1914 Mr. Morris organized, with a capital of $3,700,000, the Industrial Finance Corporation of New York, which acts as a centralizing feature for the local independent banks. It owns from 10 to 25 per cent of the capital stock of the local banks, and in a few cases all the stock; in general it does not have a controlling interest. It acts as propagandist of the Morris plan and has active organizers in the field. It provides service departments for the local banks; attends to legislation, pushing such laws and amendments as are necessary or beneficial to industrial loan companies; rediscounts trade acceptances and notes for the local banks, thus acting as a source of funds; and borrows by sale of national trust certificates sold through the local banks. Among the local independent banks opinion varies as to the advantages derived from the corporation. The locals are also associated in the National Association of Morris Plan Bankers, which makes possible associated action independent of the corporation.

The Morris-plan banks are not pawn shops and do not accept pawns, chattel mortgages, or salary assignments as security for loans. They loan to any person of good character and habits who can get two responsible people to indorse his note. The borrower and indorsers apply for a loan by filling out a certificate that covers the character, financial record, and responsibility of each party, and facts as to his employment and wages. If the application satisfies the loan committee, the makers sign a joint and several note and pledge as security an "investment instalment certificate." The note runs one year. The cashier pays the borrower the face of the note less interest at 6 per cent for one year and an investigation fee of $1 for every $50 borrowed, this fee, however, never exceeding $5. The borrower agrees to buy, for every $50 borrowed, an investment instalment certificate and to pay for it at the rate of $1 a week. After the twenty-fifth week the payments begin to draw interest at 4 per cent, and at the end of fifty weeks the fully paid certificate can be used to cancel the loan or be exchanged for a "Morris-plan full-paid investment certificate," which bears 5 per cent interest and can be cashed on 30 days' notice to the company. These certificates are bought by bankers and others as an investment for their surplus cash.

A loan under the Morris plan is made only for useful purposes, and is regarded as legitimate when it will increase the borrower's efficiency, put his affairs in better shape, provide for his family, meet the sudden expenses that come from illness or misfortune, or develop his earning power. The range of uses is therefore very wide. The borrowers come from all walks of life and are of both sexes.