§ Mr. Poulett Thompson,in rising to move for leave to bring in a bill to amend the Usury Laws, said that, in laying his proposition before the House, he did not intend to go fully into the general question; but, as there were many hon. gentlemen now in the House who were not members when the subject was last discussed, he felt it his duty to make a few general observations. He much regretted that the task of bringing the question before the House had not fallen to the lot of an individual more competent than himself; but when he considered the crimes and evils which those laws produced, he was anxious that some course should be adopted to mitigate their severity. Honourable members were aware that, in the year 1818, when Mr. Serjeant Onslow brought forward a similar bill, a committee was appointed for the purpose of examining into these laws; and to the evidence taken before that committee he should have occasion to refer. He much wished that his majesty's ministers had redeemed their pledge of bringing forward some measure for amending the state of 817 these laws; but, as they had not thought proper to do so, he trusted that he should be backed with their support and authority, in carrying the bill he had now to propose through the House. When he looked at the evidence taken before the committee of 1818, composed, as that committee was, of individuals of all parties and all ways of thinking, he did hope that a different result would now be arrived at. It would be seen that, on that occasion, twenty-one witnesses were examined; of these eighteen were of opinion that the laws as they stood were inoperative, and required alteration; and of the remaining three, two were melancholy instances, how far old prejudices could pervert and enchain men's minds. The third Mr. Gurney, had, with a candour becoming his honourable mind, allowed him to name him as one whose opinion had since suffered a change. That gentleman had acknowledged that if called to their bar, he would, after what had occurred in a period of such difficulty as that of 1825, give a very different opinion as to the propriety of repealing the Usury-laws. It was fortunate for his motion, that at this moment several circumstances conspired to vender the experiment safe. Amongst others, the rate of interest on money was lower considerably than the legal rate of interest. In 1826, lord Liverpool said, in the House of Lords, that he was, notwithstanding all that had recently occurred, aware that there were many obstacles in the way of abrogating these laws, as they were connected with a particular interest in the community. The question was not one of any difficulty whatever on principle, and it was obvious to all, that the present state of the law could be defended on no solid basis." The truth was, that the enactments against usury had originated, not so much out of a regard to commerce, as to religious and pious scruples. It was adjudged, by the tenets of the Romish Church, to be impious to take a higher rate of usury than that sanctioned by law. In process of time the legislature consolidated the laws on the subject. This act, passed in the time of queen Anne, was intended to keep down the rate of interest; the preamble of it stating, that as the present rate of interest in England was known to be higher than it was abroad in maritime countries, it had induced persons to withdraw themselves from foreign trade and commerce. The argument so often referred to in 818 similar cases, as to the antiquity of the law, was one to which he could not, in these enlightened times, give much weight. No one would, in these days, contend that, because a law had been in force for three or four hundred years, during a state of society which might, as respected trade and commerce, be considered almost a primitive state of society, it should be continued, on the ground of its being an ancient law of the realm. At that time there were religious scruples afloat on the subject, more particularly as the lending of money, or usury, was confined to a despised and outcast people—the Jews or Lombards. In our improved state of commercial intercourse, money had changed hands. It was then known, that there were no persons so reckless of consequences as the prodigal, and the laws were framed to save that class from the rapacity of the Israelites in that day. In order to show the pernicious operation of the Usury-laws, the hon. member referred to the case of Howard and Gibbs. That firm, now bankrupt, had made 20,000l. or 25,000l. a-year by lending money to prodigals. No less than two hundred causes had been brought into court as connected with their transactions, and fifty or sixty respectable individuals wholly ruined by lending them money at rates of interest which they were not aware was illegal. But the unjust operation of the Usury-laws would appear more distinctly, by putting a case. Suppose a man were to die, leaving three sons, and to each of those sons 10,000l.; the first in land, the second in houses, and the third in cash: the consequence would be, that the two first might make as much interest as they could of their property, while the last would be thrown into jail and ruined, if he took a single farthing over the rate allowed by law. It was in vain to think of keeping down the rate of interest by legal enactments, as every day's experience proved. At one period, the legal interest in Livonia was six per cent, and the market interest was six per cent also, till the government reduced the legal rate to five per cent, and then the market rate rose at once to seven. Besides, as necessitous men must obtain money upon almost any terms at which it could be got, if there were laws to be evaded they must pay for that evasion. A man who wanted to borrow 8,000l., applied to another, who sold out to lend it to him, the debt being secured by an an- 819 nuity of 766l. There occurred between the gale and the conclusion of the transaction, a difference of 1,202l. in the value of the stock, which he had to make good, besides a sum of 504l. for legal expenses. In Hamburgh and Mecklenburgh, where the landed interest were still more in the habit of mortgaging their estates than here, there was no legal rate of interest fixed, and the consequence was, that it was in general more steady than in other countries, though sometimes, in cases of extraordinary commercial difficulty, it rose as high as ten per cent. He was aware it might be said, that this was a dangerous state of things, for the lender might take advantage of the time when the rate was highest to demand his money. No such occurrence, however, had ever come within his knowledge, though he had made every inquiry on the subject, during a residence of ten years in that country. The fact was, that though, in cases of extraordinary commercial necessity, money might be worth that interest to commercial men, no legal investments were ever made, at such a moment, or upon such terms. This brought him to consider how the Usury-laws operated to aggravate distress at periods of extraordinary pressure. Upon this part of the subject he should refer to the language of the deputation from Manchester in 1826. They declared to lord Liverpool, that they were all substantial men; that they wanted no assistance, if the government would repeal the Usury-laws; and it was only on the refusal of the government to comply with this request that they applied for an issue of exchequer bills. It. was well known also, that during the panic in 1825, as much as fifty and sixty per cent was given for money secured on the public funds. He knew that in the city, though good bills were now done at two and a half per cent, small tradesmen were charged at the rate of twenty or thirty; and he knew of one house alone which made 5,000l. or 6,000l. a year by such transactions. During the panic in 1825, the rate of interest rose in Hamburgh to ten per cent, but as there was no impediment from the Usury-laws, the market soon found its level, and in the course of a few weeks the interest fell to four and a half per cent.—There was another case which he should mention, in reference to the effect of these laws upon partnerships. A banker of his acquaintance had a son whom he wished to suc- 820 ceed him in the firm, from which he was himself retiring. He wished at the same time to leave about 50,000l. in the bank at the legal interest, the better to secure the succession of his son. The whole arrangement was almost concluded, when a solicitor interposed, and cautioned the parties, that it was an usurious transaction, the father having derived from it, besides the legal interest, the additional advantage of providing for his son.—But in addition to these objections was the severity of the penalties upon those who infringed the law. He was himself aware of a case in which a house was committed in the penalties for an usurious error in the sum of 32,000l.; the penalty amounted to 96,000l. In fact, the penalty was not only double the sum on which the usurious transaction arose, it included all other sums which could in any way be connected with that transaction.—In point of fact, so severe were these laws, that it was with great difficulty they were carried into execution. Judges might charge juries to convict under them, but these latter were generally found slow to comply. In a case which came before lord Ellenborough, the guilt of the defendant, upon a charge of usury, was beyond doubt. The jury however, found the man not guilty. Lord Ellenborough, in surprise, told the jury, that it was a case of undoubted usury, and that he could not understand their verdict. The foreman, who was brother-in-law to an hon. member of this House, replied, "We know not what your lordship may call usury, but what is charged upon this defendant is no more than every merchant in the city of London does every day."—For the repeal of laws so injurious and so unwise he hoped he should have the support of his majesty's government. He did not propose to repeal the Usury-laws altogether, but to modify them. Under these circumstances, the plan which he should propose was, to do away with that part of the law which voids the engagements entered into upon any rate of interest above that which the law admits, and to change the present penalties, allowing persons only to sue for the legal interest of five per cent. The immediate effect of this would be, to afford great relief to persons whose necessities might require immediate advances. The next advantage would he, that individuals, being no longer liable to pay the enormous penalties given by the present laws, but only the 821 additional rate of interest above the legal rate of interest, would be ready to advance money, on higher terms than the fixed rate, to those individuals of whose moral character they were secure, and whom they believed to be too honourable to take advantage of the law over them. The next, and perhaps the greatest, advantage of all was, that it would put the transactions of commerce on a footing of security, and would give them a stability which it was impossible they could acquire under the present law. Besides this, no one, under the amended law, would be able to turn the misfortunes of individuals to his own profit, and to procure from them grinding engagements for a long term of years; because individuals thus called upon to pay money might at any time bring their cases into court, and get the usurious interest avoided. A prodigal, too, who was anxious to raise money, would not render himself a beggar for life by borrowing money at an extravagant rate of interest, which was to continue for years. He would no longer be obliged to resort to Jews and money-lenders, who did their dirty work in corners; but, by the open competition in the market, would be able to get rid of his necessities without allowing any body to take advantage of them. He was aware of the value of precedent in all legislative measures, and therefore he would say, that he found precedents for the course which he was going to pursue, not only in this country, but almost in every nation of Europe. In the court of Chancery a plaintiff was often told, "You shall be entitled to no usurious interest, but to your capital with the legal interest calculated from the day on which the debt was originally contracted." In all foreign countries the Usury-laws, if not formally, were at least virtually repealed. In France, Holland, and Russia, there was a fixed legal rate of interest; but he believed that in all of them the discount of bills was permitted at a much higher rate of interest; indeed, in the government Bank of Russia the discount was whatever they could get; which, however, was regulated by the market value of money at the time. If such a system had been advantageous in other countries, he hoped it would also prove advantageous in this. He trusted that the observations he had urged would be sufficient to induce the House to give him the leave for which he was then moving. He had endeavoured 822 to anticipate all the arguments which might be urged against his measure; and he believed he had now left none of them unrefuted, except that which stated, that this was not the proper time for bringing it forward. Not the proper time! Why, if ever there could be a proper time, it was the present. The market-rate of interest on mortgages was only four per cent, and on good bills only two or two and a half per cent. It was so much below the legal rate of interest, that he did not conceive that any change in the law could create a detrimental rise in it. He therefore submitted his bill to the House in the hope that it would be found worthy of its support. It was either a good bill or a bad one: if it were a good bill no time ought to be lost in carrying it into effect; if it were a bad one, the sooner the House got rid of it, the better. The hon. member, after recapitulating the advantages which he anticipated from his bill, and after drawing a pathetic picture of the misery, poverty, and ruin, which the existing law had inflicted on many opulent and respectable persons in the year of the panic, concluded by moving for leave to bring in a bill "to amend the Usury Laws."
The Chancellor of the Exchequersaid, that having intimated to the hon. gentleman, that it was not his intention to oppose the introduction of the bill, he should not have said a word on the present occasion, had he not been informed that it was the determination of some gentlemen, who were opposed to any change in the Usury-laws, to enter that evening into a discussion of their general policy. Now, with all respect to those gentlemen, he would advise them to postpone the discussion until they had the measure in a distinct and substantive shape before them. He thought that it was impossible for any man who had attended to the speech of the hon. member, to shut his eyes against the great inconveniences which resulted from the Usury-laws. It was impossible to hear of commercial men being innocently subjected to the payment of enormous penalties, without feeling that the hon. member had made out a case, which rendered it imperative on the House to consider whether it could not devise some amendment for so defective a state of law. For these reasons, he should offer no opposition to the motion. In making that declaration, he reserved to himself the 823 right to discuss at some future period the amendments which the hon. member proposed to make in the existing laws, with a view of seeing how far they were calculated to meet the object which he had in view, and to avoid the evils which others anticipated from the total repeal of them. With these observations he should have ended, but as the hon. gentleman had thrown out a censure upon government for not introducing some measure upon this subject, he would make one or two remarks. The hon. member would do him the justice to admit, that when he had first asked him whether it was the intention of government to come forward with any measure to effect that object, he had not given the hon. gentleman a decided refusal, but had told him that, as he had been recently placed in his present situation, he had too many engagements to fulfil, to give the measure the consideration which it deserved; but that, if the hon. member would postpone the agitation of it till next session, he would, in the interval, consider it deliberately, and be prepared to point out the means by which the evils of the Usury-laws might be avoided, or the laws themselves repealed. He consented to the introduction of the bill, stating at the same time, that it would be satisfactory to him if those who favoured the Usury-laws would defer the discussion of their policy to another opportunity.
Sir R. Heronsaid, he was ready to agree to the mitigation of the Usury-laws, provided that mitigation did not amount to an actual repeal of the laws themselves. It appeared to him to be quite impossible to pass a bill like the present, without affecting the landed interest most materially. Mortgages must be affected by the change which would take place in the value of money on the repeal of those laws. The impression made on his mind by a perusal of the evidence taken before the committee in 1818, was unfavourable to the repeal of the Usury-laws, and was principally created by the evidence of Mr. Preston; no mean authority on such a subject. If there had been no Usury-laws, he believed that, during the panic of 1825, some individuals might have escaped from the ruin in which it involved them; but he likewise believed that more persons would have been ingulfed in it, who, owing to the existence of the Usury-laws, were saved from it by the benevolence of their friends. Those kind-hearted persons knew 824 that, under the existing laws, money could not be raised by those for whom they felt interested, and therefore they came forward liberally; but had they known that their friends could raise the money at forty or fifty per cent., they would never have raised a finger to help them. In Holland, where there were no Usury-laws, men of opulence, on retiring from business, became, as it was termed, insurers: they left their capital at immense interest in the firm from which they retired, and thus realized a great profit without incurring any risk. The same would be the case in England, were the Usury-laws repealed. The public would then lose the security of the great merchants in whom they confided at present, and would get in their stead an inferior set, in whose hands the commerce of the country would fall to decay, as it had done in Holland since the repeal of the Usury-laws.
Mr. Martincondemned the Usury-laws. They took money out of the pocket of the borrower, without putting it into that of the lender; the only person who was benefitted by them was the inferior description of attornies and agents. He wished the government would deal fairly between the landed and commercial interests on this question. The landowner was unrestricted as to price in every article which he produced. If the poor were starving, and corn selling at a guinea a bushel, the government would not pass a law to prevent the agriculturist from selling corn at that price. He did not see how they could continue the present Usury-laws, if they acted consistently, without imposing a maximum on the price of corn, as well as upon the price of money.
Mr. Crippssaid, he had regularly opposed the bill of a learned serjeant on this subject, because it went to the total repeal of these laws, which he conceived would create a perfect revolution in pecuniary matters. But he was inclined to support the present bill; because, without going so far as the learned Serjeant's, it was calculated to correct most of the evils of the present system.
Sir J. Sebrightwas convinced, that of all classes of the community the landed interest was that which suffered most from the present Usury-laws. A landholder, if he wanted money, could not procure it when the funds paid an interest above five per cent. He was, therefore, obliged to borrow it at a higher rate than the legal 825 interest, from some individual who was willing, from the increased profit, to run the risk of the penalties, or to borrow it on annuity, which he knew had been the ruin of many country gentlemen. Why money was not to be dealt with like any other commodity, he could not conceive. Every man was allowed to get as much as he could for his corn, or for the use of his house, or for the rent of his farm; why should he not be permitted to do the same for his money? He would support the motion, because he conceived those laws to be injurious to all classes of the community, but more particularly to the landed interest.
The Attorney-generalsaid, that all the former bills which had been introduced upon this subject went to the total repeal of all restrictions upon the interest of money. They were founded on the theoretical principle, that, as all other articles of trade found their own level, so too would money; and thence it was inferred, that it was unwise and impolitic to fix any certain standard of interest. He had studied this subject with great attention, and was deeply impressed with the conviction, that great oppression and injustice would arise from the repeal of the Usury-laws, and that a right to take interest upon money ad libitum ought to be opposed. Now, the principle of the present bill was, not to take away a fixed rate of interest, but to mitigate the penalties for taking interest above that fixed rate. He was ever open to conviction from the statement of able persons; and the hon. member for Dover had that night established his claim to the title of an able person on this subject, and he would therefore give the hon. member's bill the best consideration in his power. He would confine his observations to the other part of the hon. member's bill. Suppose that you preserve a fixed rate of interest, beyond which your laws permit no one to go, it may be worth your while to consider how you are to enforce your law. At present you can only do it in two methods; the first by suing for the penalties, and the second by rendering void the instrument which secures the illegal interest. He admitted that many cases of grievance had arisen under the existing law, and he should wish to see them remedied. It was one thing, however, totally to repeal the Usury-laws, and another to mitigate their oppressive penalties in particular instances. If he could 826 preserve the principle of the Usury-laws, and prevent their abuse, he would support such a measure of improvement. He could not, however, agree to take away the plan of a fixed legal interest, unless he saw his way clearer than he at present did, to a measure equally beneficial to the public.
§ Mr. W. Smiththought that, if the bill only went as far as the Attorney-general was disposed to give it his sanction, it might as well not go on at all. An hon. baronet had alluded to a case in which, at a period when the difficulty of raising money was extreme, the friends of the individuals in distress had come forward to their relief, to prevent them from being compelled to accede to the terms of the usurer. But he would ask the hon. baronet, did he not consider that there was still in this case a loss and risk? There was a loss and risk to the friends of the parties.
Sir R. Heronbegged to state that he never did say any such thing. What he did say was simply, that at a particular period of great commercial distress, the friends of the sufferers had come forward to save them from the misfortunes consequent upon that period of distress, but that if the Usury-laws had been repealed, those persons would have been left to their own resources.
§ Mr. W. Smithcontended, that, even with his explanation, the hon. baronet had only shifted the burthen; for it was perfectly evident that there was both loss and risk in the transaction. He could not see that the slightest degree of injury would result from the modification or repeal of these laws. It was beyond dispute, that the man in extreme distress must get money at whatever rate he could.
§ Mr. Robinsonsaid, he was anxious for the repeal or modification of the Usury-laws. The former he should prefer, and he hoped his hon. friend would not get into greater difficulties than those he wished to avoid, by consenting to take a qualified course. From a twenty years knowledge of extensive commercial transactions, he could speak to the injurious tendency of these laws. They operated most injuriously both upon the commercial and landed interests. Why not leave money, which was the very essence of trade, like any other commodity, to be regulated by the necessities of the borrower and lender respectively? Each, could bargain accord- 827 ing to his sense of the value of the money to him at the moment; and what would there be unfair in the principle of such a regulation? In arguing this question, it would be wrong to throw out of view the great difference between the scale of the money transactions of the present day and that which influenced these laws in the reign of queen Elizabeth. If he understood the hon. gentleman's proposal, it was that nobody should be compelled to pay more than the legal interest in a court of law, but that there should be no penalty upon demanding more; and that in the event of an agreement at a higher rate, there should be only an honourable obligation to pay this higher rate of interest upon the part of the borrower. This, he feared, would prove a temptation to a fraudulent party to such a transaction, to bring the matter into a court of law, and so get off the obligation.
§ Mr. Calcraftsaid, that if he had not, on a recent occasion, declared his intention to oppose the repeal of the Usury-laws, he would not—finding that the proposal of the hon. gentleman was so different from what he had expected—have thought it necessary to say anything. He would give the hon. gentleman's proposal a fair and deliberate consideration, and as it did not touch upon that part of the subject which he had feared it would, he should support it if he could. At the same time, he considered himself perfectly free. The subject was surrounded with difficulties. He was decidedly opposed to the repeal of that part of the laws which applied to loans of money upon mortgages. The cases stated by the hon. member were extreme, and should be regarded as exceptions, rather than examples; but still, if that part of the laws to which he had alluded was preserved, he saw no objection to the proposal of the hon. mover.
Mr. Baringsaid, he had always voted for a repeal of these laws, and would support this measure, though it did not go to the full extent of former motions for a similar purpose. He hoped the middle course taken would conciliate the opponents of this measure, and therefore effect some practicable good. Indeed, he thought the proposed alteration preferable to the previous application for a repeal. If he understood his hon. friend right, he meant to retain the legal standard of five per cent interest, but to repeal the obnoxious and severe penalties, of leaving 828 it open to individuals to make what bargains they pleased, with the knowledge, however, that courts of law would still recognize the maximum of five per cent, but without the infliction of penalties. It was strange that, while bargains at any rate of price could be managed in the market, this absurd exception should prevail regarding money, which was the medium of payment for every thing. He hoped that the sort of compromise held out would ensure the concurrence of all parties, and thereby operate as a wholesome reform in the old law.
§ Mr. Sugdenconsidered the proposition of the hon. mover worse than an open avowal that his design was a repeal of the Usury-laws. What was that proposition? To leave five per cent still the legal standard of interest, but to abolish all the securities and penalties against those who violated the law. His opinion was, simply, that the law should either be repealed or enforced; but the hon. mover would not compel a dishonest man, who agreed to pay twelve per cent for the use of money, to perform his contract; he would allow this fraudulent party to go into a court of law, and cut down the creditor's demand to the legal standard. This was worse than the total repeal of all regulations on the subject. He wished the hon. gentleman would leave this question in the hands of government, who would digest a plan which might be produced next session, and would probably call forth the approbation of all parties. He would not consent to the repeal of the Usury-laws; as he was afraid it would be productive of great mischief both to the commercial and to the landed interest.
§ Mr. Brightcould not see how the real difficulties would be met by the proposed arrangement of the hon. member; he was friendly to the motion, but would reserve his opinion until the bill was introduced.
Mr. Maxwellhoped, that the people of Scotland, which was more a debtor country than England, would have ample opportunity of knowing the nature of the intended change.
§ Lord Althorpsaid, he should have preferred an entire repeal of the Usury-laws to the measure now proposed; he nevertheless thought it would be a great improvement upon the old law. He could not agree with the learned gentleman, that it would favour dishonest at the expense of honest men, but the reverse.
§ Leave was given to bring in the bill.