USURY LAWS. (Hansard, 6 May 1830)

Mr. Poulett
Thomson moved the Order of the Day for the House to resolve itself into a Committee of the whole House on the Usury Laws.

The Solicitor General
said a few words, which were not audible in the Gallery, but were understood to imply an assent to the Motion, not pledging himself to support the Bill.

§ Mr. Gilbert J. Heathcote
declared, that it was his intention to oppose the Bill at every stage of the proceedings. The former laws, it had been said, were made by the borrowers; this Bill, it was evident, was drawn up by the lenders. Never did he see a measure that, in its enactments, carried more distinct marks of its parentage. He considered it, contrary to what the hon. Member had stated that he meant it to be, as a Bill hostile to the landed interest, and therefore he should oppose it at every stage.

The Attorney General
supported the Bill. The old laws, he admitted, had been made by borrowers; but they were necessitous and unjust, as well as injurious borrowers. He did not agree in the opinions of his hon. friend, who had declared it to be his intention to oppose the Bill. He begged to call the attention of his hon. friend to the principles of that legislation from which the country was just emerging; and which was the delight of our ancestors, and of which the Usury Laws were parts. It was once supposed that the Legislature could regulate the price of articles; but it was now well known that prices were beyond its control. In pursuance of that principle, however, the Legislature made laws regulating the prices of many things, such as labour and bread; and the practice of making such laws was continued down to the time of Elizabeth. Then the Usury Laws were held to be sacred, like a part of religion. Then, too, laws were made regulating the price of food and other things, which, notwithstanding the terrors of the country gentlemen, the Legislature had been obliged to abandon. All laws made for such purposes were made by the buyers, and not by the sellers, as they all had for their object to keep down prices. For his own part, he saw no reason why any restriction should be laid on the use of 494 money more than on the use of houses or land. The country gentlemen might, perhaps, object to a man using other things freely. What would they think of a law to prohibit letting land beyond a certain rate, or prohibiting them from selling corn beyond a certain price? Perhaps his hon. friend would bring in a bill for that purpose. Eating and drinking were very simple but necessary acts, and would his hon. friend bring in a bill to regulate the price of provisions? Formerly there was an assize of bread, but this was obliged to be given up. A man having a house that was worth 1,000l. might let it for 70l. a-year; but if he had 1,000l. in money, he must not receive for it more than 50l. He might lend the money, and receive 50l. for it; the borrower might buy a house with it, and receive 70l., even 100l., or any sum he could get for his house. There was neither sense nor justice that he could see, in the distinction. A man might buy furniture to the amount of 500l., and might hire that out at a profit of twenty per cent; but if he lent the same sum of money, he was only to obtain five per cent. He must say that he saw no reason for such a difference. As the law now stood, the borrower was at a great disadvantage, whether he paid in the shape of premium or annuity. If a person wished to borrow money without security, he would now have to pay from five to seven per cent more interest than if the Usury Laws were abolished. When borrowing on annuities was adopted, the borrower was always obliged to pay at the rate of twelve or fifteen per cent, at least, for the use of the money; and he believed that the annuity system had ruined more fortunes, and inflicted more misery on families than could well be conceived. There were certain parties, no doubt, in the event of the Usury Laws being repealed, that still ought to be protected—as, for instance, persons under age—so as to prevent them making away with their property before they came into the fair possession of it. In such cases, however, at present the Court of Chancery actively interfered, and no doubt the same method might still be retained, so as to afford such persons protection, as it was notorious that those who raised money on expectations always had to deal at the greatest possible disadvantage.

§ Mr. Sykes
also supported the Bill, be- 495 cause, under the present system, it appeared to him that the whole disadvantage was on the side of the borrower—it was he that was made to pay for every thing; and the only consequence of imposing penalties on the usurious lender was to make the burthen fall still more heavily on the needy borrower.

§ Sir C. Wetherell
opposed the Motion. The provision proposed by the hon. Member's Bill, by which no higher than a certain rate of interest was to be recoverable in a Court of Law, was most extraordinary. It was neither more nor less than enacting that a good, valid, and legal contract should be no better than waste paper. After having given the question much of his attention in that House, and in his private lucubrations, he had come to the conclusion, that the repeal of the Usury Laws would be attended with much mischief. As the law now stood, if money were lent to the trader, and the lender took more than his legal interest, he was, in the event of a bankruptcy, looked upon in the light of a partner, and became liable to the creditors. But the effect of the proposed alteration in the law would be to do away with this most salutary check. Then, if they looked at the landed interest, the case was no better. He believed that he was not exaggerating the fact when he stated, that half the rental of all England went to pay the mortgages that were existing on that property. What, then, would be the drag upon the landed proprietor whose estate was mortgaged, if, in the first rise in the value of money, the mortgagee was to come upon him for a higher rate of interest? The answer was obvious. He could not do otherwise than consent to any rate that was proposed, and his estate would soon become irretrievably involved. As soon as war, or any other unfortunate concurrence of circumstances, should have tended to raise the value of money in the market, he would be entirely at the mercy of the lender, and could have no alternative but that of acceding to his terms, however extortionate. The great oversight of the Bill was, that it forgot that the borrower was not, like the lender, in a state of free agency; for it was not till the debt was already contracted in some other way that he came into the market to raise money on such security as he might have to offer. But there was another point of view at which they ought 496 to look. Suppose that the law was altered, and that an action was brought to recover on a Bill of Exchange, or on a bond, what interest would the Jury have to give? It was evident that the whole question would be unsettled, and left to chance, instead of, as now, when a legal rate of interest determined in a moment the amount to which the plaintiff was entitled. It had been said that this alteration would do away with annuities. He should be glad if it were so; but he could not see how that was to be effected by the Bill. The reason why a person resorted to borrowing on annuity was, because he was unable to give any better security. How, then, when a law was passed enabling the lender to get what he pleased for his money, would the man with a bad security be able to improve his position? The reverse appeared to him much more likely to be the case. He had read Mr. Bentham's book, and he had read the evidence that had been given before the committee; but that was not enough for him; they were nothing but dicta, and what he wanted was a little argument to support them. It was true that the rate of interest had once been higher in this country; and that it had by degrees been lowered; and it was also true, that that lowering had taken place at the instance of the borrower; but what did all that show? Why, that the borrower found himself in need of protection against the lender; and he saw nothing from preventing his situation now being just the same as it was formerly. The law allowed a legal rate of interest, and affixed a taint of impropriety upon any one who took more. The consequence was, that no conscientious man would take such interest as would subject him to that taint, and in that way the law established a moral standard of propriety. The moral effect, and the difference between a fair and extortionate loan would be destroyed by the abolition of this law. He did not wish to press the question to a vote now, but he gave notice that he should oppose the Bill in every stage.

§ Lord Milton
was happy that this was not a Parliamentum indoctum, and that the future Parliamentary Historian would not have to say, that on that account "no good laws were passed thereat." They had the benefit of the learning and talents of lawyers, but he must say, with all due deference to the hon. and learned Member 497 as one of that body, that his speech was rather inconsistent with common practical good sense. All the learned Gentleman's difficulties arose from his knowledge of law—from his practice of law—and from his love of law; and throughout his speech he seemed to suppose that there was a kind of moral impossibility of repealing the Usury Laws, and thus avoiding entirely the difficulties which the present legal practice created. By the existing system a distressed landholder was injured rather than benefitted; for, as five per cent was the legal standard of interest, and as no conscientious man would take more than that amount, it followed of course that, in a time of distress, the landed proprietor, or the extravagant heir, was thrown upon persons whom no conscientious motive restrained, and who would, as a matter of course, make the most of the advantages they possessed. In trade, too, the amount, whether small or large, was taken from the profits of the business; and whether the man who took it was, as by the present law, a partner, or a mere lender of money on interest, the amount taken from the trader was still the same. The learned Gentleman had, however, raised a moral difficulty as well as a legal difficulty to the removal of the present laws. Surely he must have remembered, that there was one country in which twelve per cent was the legal rate of interest, and it would be not a little difficult to show that the permission to take such a rate of interest made the Hindoos more immoral than other people. In fact, he was neither convinced of the immutability nor of the wisdom of those laws, and should therefore vote for the Bill which his hon. friend had introduced.

The Solicitor General
disapproved of the Usury Laws as they now stood, and was ready to assist in altering them, but he did not think the laws ought to be entirely done away with. In the first place, he would prevent the existing penalties from attaching in bona fide transactions; in the next, he would diminish the amount of the penalties themselves; and in the third he would make the legal rate of interest higher. He thought that the laws had, to a certain extent, worked beneficially, as he could assert, that though the members of his own profession had, the best knowledge of the opportunities at which they could invest capital at more than the legal interest, there was no honourable man among them who had taken advantage of the knowledge 498 he thus possessed. Men who began to borrow continued the system throughout their lives, and many such persons, though they agreed in their distress to pay fifteen per cent interest, would rather go through all the Courts of Westminster Hall than pay it, if the market-rate was below that sum. He should wish to see the Bill in the committee, to know exactly what was intended to be done.

§ Lord Althorp
expressed his intention of supporting the Motion.

Mr. Maxwell
said, that if he agreed to the committal of the Bill, he wished to reserve to himself the right of afterwards resisting it.