CREDIT: How to Get Out of Debt

Two smart young Detroiters, Morris Crawford Purdy and Robert Frederick Rouse, fresh out of the University of Michigan, in 1937, had an idea for a business: to take over the affairs of people ear-deep in debt and set them on their financial feet.

The Purdy-Rouse plan was simple. A dunned, garnisheed, bill-racked client turned his paycheck over to their Credit Adjustment Co. or had his employer mail it to them. Then he signed a pledge not to contract any more debts without C.A.C. approval, and agreed to live on what it doled out. C.A.C. then prorated the rest of the client’s pay among creditors.

For instance, a client who has been climbing out of debt steadily may tele phone Purdy & Rouse, to ask whether he can buy a living-room suite, or a suit of clothes. The firm looks over his affairs and his needs, tells him yes or no. For the service, C.A.C. charges a small fee (averaging about $4 monthly), staves off garnishments and judgments, does the worrying.

Credit & Naiveté. In their first six months, Purdy & Rouse had more troubles than clients. But they learned the credit business the hard way. Credit managers refused to accept C.A.C. checks (they thought they could squeeze more money out of debtors themselves). Sharp-dealing installment houses cold-shouldered C.A.C., preferred to keep customers in debt buying shoddy goods at high prices. Loan sharks fought them as competitors. Detroit companies, suspicious of a racket, refused to mail them employes’ checks.

Said Purdy: “If we hadn’t been so naive, we never would have tried it.”

But Purdy & Rouse kept plugging. They sold credit managers: “You won’t get any money at all if there are 15 judgments ahead of yours.” They sold employers: “The boy who spends all his time worrying over bills can’t do his job.” Opposition faded. Some 70 companies agreed to mail checks. Dead-broke clients streamed in.

Most fantastic: A Detroit municipal worker, earning $35 weekly, ran up bills of $1,500. To get cash to quiet his most pressing creditors, he bought refrigerators on $10 down payments, sold them to neighbors. He was in jail when his boss called C.A.C., asked it to take over.

Funniest: A credit man who had bat tled C.A.C., came to it dolefully one day, hat in hand. His own affairs were a mess.

But after C.A.C. straightened him out, he promptly resumed his feud, demanded that C.A.C. squeeze more out of debtors, pay off faster.

The Cure. Last week, Purdy, 30, & Rouse, 30, passed a minor milestone.

Their first client, a backsliding policeman who once owed well over a year’s salary and was about to lose his job, paid off his last nickel. For services to him — and up wards of 700 clients — Purdy & Rouse netted about $15,000 last year. Although the system is no sure cure for spendthrifts, Purdy & Rouse are pleased that 75% of those who take the cure, stay cured. Why debtors come to C.A.C. instead of trying to puzzle their way out of their tangles is simply explained by Purdy: “It’s always easier to take someone else’s advice about money than to advise yourself.”

Best example: Purdy’s wife handles his affairs.