§ [SECOND READING.]
§ Order for Second Reading read.
§ *THE SECRETARY TO THE LOCAL GOVERNMENT BOARD (Mr. T. W. RUSSELL,) Tyrone, S.
I beg to move the Second Reading of this Bill, and in so doing perhaps I ought to explain how it is that I come to be in charge of such a measure. It has nothing to do with local government, and I move the Second Reading because for two sessions I presided over the Select Committee which inquired into the whole matter. Apart from that inquiry and the light thrown by it, I have no special knowledge of the subject. I took Shakespeare's advice: I have never been a borrower or a lender. But when I went to preside at that Committee, I went believing as a free trader, that there should be free trade in money as in everything else, and that if a man chose to be a fool it was impossible to save him from his own folly. I entered the Committee holding those views very strongly, but I must confess that two sessions upstairs of rather exciting work cured me entirely of these heresies. I found instead of representing free trade in money it frequently represented free trade in rascality and fraud. The provisions of this Bill are not aimed at legitimate money-lending, with which no one desires to interfere. I will give the House two illustrations that came before the Committee of the system against which the Bill is directed. An unfortunate Irish landowner named Finlay 682 borrowed a sum of £300 from a money-lender, for which he gave a promissory note for £456, the money being repayable in monthly instalments. Mr. Finlay paid several instalments regularly, and then for a subsequent instalment the cheque was sent a single day late. The cheque was returned and the whole amount claimed. Default interest was charged, and when Mr. Finlay came before the Court he had been compelled to pay, besides £114 in instalments, a sum of £600—£714 in all—for the loan of £300 from 13th November, 1890, to 20th February, 1892. All that was done within the four corners of the law. This was not one of the Gordon cases, but the second case was. In the other case an English farmer named Adams borrowed £50 from Isaac Gordon in November, 1892, and signed a promissory note for £200. Further advances were made of £50 in February, 1893, of £20 in June, and of £50 in November, 1893. Between November, 1892, and September, 1894, Mr. Adams paid £461, and in October, 1894, Gordon claimed that £500 was still owing in respect to an advance of £220. This shows what is possible under the present law. Gordon took proceedings in the County Court at Birmingham on one promissory note. Whilst these were pending a bailiff came and took possession of Mr. Adams's property, Gordon, who had an office in Glasgow, having proceeded against Mr. Adams there without his knowledge in connection with a second promissory note. By a proceeding which, I believe, is called "summary diligence," Mr. Adams was sold up and ruined. The Committee listened to many other cases of a similar character to these. It has been made a matter of complaint that they had not heard cases of legitimate money- lending, but that was because they were only commissioned to inquire into these cases of hardship. After hearing the evidence the Committee came to the following conclusion—After carefully considering the evidence which has been given in regard to particular transactions and the general expressions of opinion of persons so well qualified to form a judgment as Sir Henry Hawkins, Sir James Charles Mathew, Sir George Lewis, the Inspector General in Bankruptcy, and the County Court Judges, your Committee have unhesitatingly come to the conclusion that the system of money lending by professional money-lenders at high rates of interest is productive of crime, bankruptcy, unfair advantage over other creditors of the borrower, 683 extortion from the borrower's family and friends, and other serious injuries to the community.And although your Committee are satisfied that the system is sometimes honestly conducted, they are of the opinion that only in rare cases is a person benefited by a loan obtained from a professional money-lender, and that the evil attendant upon the system far outweighs the good.They therefore consider that there is urgent need for the interposition of the legislature with a view to removing the evil.That being the view of the Committee, and the Government as well, the question arises is the Bill adequate, and does it proceed on proper lines? There are clauses to which, I believe, no objection can be taken. There are clauses dealing with the registration of money-lenders, which seek to enact that a money-lender must be registered and must trade under one name only, as it was proved that a favourite mode was to carry on business under different names in different towns. But the real issue is not in these clauses at all. The first question is, should there be legislative interference? I say the Bill answers that. The second question is, ought the principle which is embodied in the Bill in Clause 1—the principle which enables the Judges of the country to review and revise certain contracts— to prevail? The Committee came to a very clear pronouncement upon that. The Committee consisted, I think, of fifteen members, and there was one dissentient to the paragraph I am about to read. They state—After considering the whole of the evidence your Committee have arrived at the conclusion that the only effective remedy for the evils attendant on the system of money-lending by professional money-lenders is to give to the Courts absolute and unfettered discretion in dealing with these transactions.Section 1 of the Bill carries out this recommendation. It is important to bear in mind exactly what Section 1 proposes to do. There is an idea that Section 1 provides that if a money-lender lends money at a rate of interest exceeding that which is in the schedule of the Bill he will break the law, and that it will be impossible for him to recover. This is not the case. First of all, no case can come up for review unless the rate of interest set out in the schedule of the Bill has been exceeded; but that is not all. No case can come up for review and revision unless, in addition to the interest being in excess of the scheduled rate, the Court has reason 684 to believe that the transaction in itself is harsh and unconscionable. The House will bear in mind that there are two conditions; first, the rate of interest must be beyond the rate provided in the schedule, and secondly the court must come to the conclusion that the transaction is a harsh and unconscionable transaction. I believe these terms are known to the law, although I am not a lawyer. If these two conditions are fulfilled, and only in such case, the court may set aside, vary, or cancel the contract. I am aware that there are hon. Members in the House who deny that there ought to be interference, and who have the same view to-day as that with which I started on the inquiry, but if there is to be interference at all, and if we are to be saved from the scandal under the present law— because it is a scandal—I do not think any Bill could be more rigidly and more closely safeguarded than this Bill is. The outstanding question, and I admit it is a fair one to argue, is—Is this power of revision and review a power which ought to be conferred on the 'Judges of the country? The Committee at all events practically decided with one dissentient that it was a power which ought to be given. It was strongly recommended and supported by Lord Brampton, then Sir Henry Hawkins, who was examined before the Committee, by Sir George Lewis, who, perhaps, has had more experience in matters of this kind than any living man, and who gave the strongest and clearest evidence that this was the only principle which would at all touch the evil. It was recommended by Judge Lumley Smith, a most experienced county court judge, Sir Frederick Falkiner, Recorder of the City of Dublin, the Chief Registrar in Bankruptcy of Ireland, and by Mr. Roxburgh, assistant judge at the Lord Mayor's Court in London. The Committee quite recognised that this was a serious power to confer, but they were greatly strengthened in recommending it by the fact which was proved in evidence by every lawyer who was examined, that this very power is now exercised in the Court of Chancery in regard to expectant heirs, and I believe, at least the evidence stated, that the principle has been carried very much further in the courts than that. It is not a new principle that is introduced by the Bill for the first time, and I am bound to say that in the Courts where these cases are principally 685 heard there is the widest discretion already existing and which is sometimes used in a way that is open to question. I refer to the County Courts. The County Courts are largely in those matters courts of arbitration, and what is happening every day in these places? These hard bargains come before the County Court Judges. They see and feel the hardship of the bargain, and they endeavour to do their best with such powers as they have to save the people from utter ruin and destruction. What do they do? Why, anyone reading the newspapers can see what is done in many of these courts. The Judge sees the hardship and fixes the period of the payment of the instalments for a long time. He orders the debtor to pay one shilling a week, in some cases sixpence a week, and discretion of that kind is really more serious for the money-lender than the discretion which the Bill will confer. There is an idea current also which ought to be corrected—that this Bill fixes the rate of interest and practically re-enacts the old usury law. It does nothing of the kind. That proposal was made by Mr. Justice Mathew, and he argued the case most strongly before the Committee that it would be infinitely better to fix the rate at 10 per cent. than to vest any such discretion in the Judges. Probably if we had fixed the rate of interest in the Bill, there would have been considerable objection to it, and the Committee, at all events, declined to adopt that suggestion, and reported in favour of the discretion which is to be found in the Bill. This ought also to be borne in mind. There is another idea current, and I am bound to say money-lenders themselves hold that the money-lender is confined to the rate of interest set out in the Bill. Nothing of the kind. If he charges a rate of interest in excess of that in the schedule, and a case is brought into court, there must, in addition to that, be a harsh and unconscionable case made out, and I think that is a very great safeguard. I have tried to explain the Bill. It is not a complicated measure, and I think it deals very effectively with a great evil. I have no desire, and I am sure no one who sat on the Committee has any desire, to deny the difficulties that surround the question. If the House gives the Bill a Second Reading, there will be abundant room for legitimate Amendments in Committee, 686 and I am perfectly certain that those in charge of the Bill are ready in all matters of detail to keep an open mind, I am sure that anything short of giving the Court absolute and unfettered discretion in such cases would not be a remedy worth the paper the Bill is printed on, and it is because I believe this that I confidently move the Second Reading of the Bill.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. T. W. Russell.)
§ MR. BIRRELL (Fifeshire, W.)
I am sorry that the duty of moving the rejection of the Bill should devolve on me. A few months ago I had much brighter hopes. That distinguished man, Sir Edward Clarke, would have moved the rejection of the Bill; but he has thought fit to resign his seat, and he has thereby impoverished our debates, and without, so far as I can see, either strengthening or weakening the position of Lord Roberts in the field of action. Failing Sir Edward Clarke, I had hopes that the rejection of the Bill would be moved by a distinguished lawyer who sat opposite me, but he also is gone, although I am told that somebody very like him may still be seen in another part of the House. For my purpose he is worse than dead. He would have moved the rejection of the Bill, but now he will be most infallibly bound to vote in favour of it. However, conscious of my many shortcomings and infirmities, I am going to ask the House to bear with me while I risk becoming a pedant or a. bore. I shall ask hon. Members to do what they never like doing, and that is, to keep separate and distinct two things which have nothing whatever to do with one another, and which I think are muddled and mixed up in this measure. These two things are, the rate of interest which people may charge for the use of money, and fraud, deception, oppression, concealment of material facts, or any other term which may be used to describe fraud and deceit. I hope the Members of the House will endeavour to keep these two things separate and distinct in their minds. The price you charge for the use of money is, of course, known as usury. I quite agree that there is an enormous amount 687 of literature existing on the subject of usury, and a great many people of the utmost wisdom have an objection to usury altogether. The greatest lawyer that ever lived—Moses—I cannot tell the Attorney General what his emoluments were—forbade usury altogether among the chosen people; but he also did what the Bill does not do. Moses forbade pawnbroking, because he distinctly told them that if any of the people took a pledge from his neighbour, his blanket or his clothing, as soon as the sun went down he should return it to him, so that he might be covered during the night. For centuries the Christian Church forbade access to the Mass to all usurers, even though they disguised themselves under the name of bankers. Bankers did not "lend money" within the meaning of this Bill, but the Christian Church knew of no such subterfuge. After the Reformation, many of the Protestant Churches adopted the same rule. Learned treatises on the subject may still be found which it is well worth while to read. Strong views were entertained against usury by Mr. John Ruskin, who advocated all the doctrines that were most unpopular to the spirit of the time, and in regard to whom, therefore, I need scarcely say a very strong feeling indeed found utterance in The Times on the proposal that so great a man should be buried in Westminster Abbey. However that may be, experience proves that usury continued and interest was still charged on money, and so the subject came to be investigated by thinkers and philosophers. The idea very soon sprang up that you should adopt a limit of legal interest, and that was the practice for a long time. First, prohibition was tried, then regulation; but in this country thinkers, among whom were Hume and Adam Smith, demonstrated in a most convincing manner that any attempt to interfere by law directly or indirectly with the rate which one man was to charge another for the use of his money was not only absurd but was injurious to the borrower, the person who most stands in need of it. I must confess I had thought that Jeremy Bentham, in his celebrated "Defence of Usury," published in 1816, had given the coup de grâce to the notion which is found in this Bill. A Select Committee of this House in 1818 sat upon this question, and, although I have no desire to say a 688 word against reform in Parliament, the Report of that Committee of the old unreformed Parliament contrasts very favourably with the more democratic procedure of the present day. That Committee directly recommended the abolition of the usury laws. That, change took a considerable time in this country; but in 1854 every appearance of them disappeared altogether, and there has been nothing in this country since in any way suggesting what interest should be charged for the use of money. But the abolition of the usury laws in no way affected the doctrines of our Courts as to the effect of fraud or deception upon any transaction in which it might be proved by proper evidence that fraud or deception had appeared. I always like, when. I can, to clothe my own crude ideas in judicial language, because it imparts dignity to debate which it would not otherwise possess. I should like to read the observations made by a distinguished judge, Sir John Stuart, in the case of Barratt v. Hartley, shortly after the repeal of the usury laws—It is an observation of some importance, now that the usury laws are repealed, that one effect of such repeal was to bring into operation, to a. greater extent than formerly another branch of the jurisdiction of the Court which existed long before—I mean that principle of the Court which prevented any oppressive bargain, or any advantage, exacted from a man under grievous necessity and want of money from prevailing against him. Whoever has attended to the subject must have seen that the moment the usury laws were repealed the lender of money became enabled to exact anything he pleased in the name of interest—from, that moment the jurisdiction of the Court was likely to be called into active operation.That is the point I wish to call the attention of the House to. We are asked to amend the law, but what is the law at the present time? I am the more emboldened to ask this question because this wonderful Committee over which my hon. friend presided did not know, and many of its members remained from beginning to end in complete ignorance of, what the law of England is at the present. moment on this subject. For centuries the common law of England has vitiated every transaction in which it was found that fraud had entered or had contributed to the making of the transaction. It is an insult to the common law of this country to suggest that anybody can practise fraud or deceit and come into 689 Court and get the benefit of the bargain. Our rude ancestors, however, held that it was not enough for a man to come into Court snivelling and whining and saying that he had been cheated; he was required to prove it. That is one of the reasons why I to-day offer the greatest possible objection to the Bill. If you can prove fraud or deception, suppression of material facts, or show in any way that the lender is taking advantage of the borrower, or that he has forced the contract upon him, the lender cannot make good his claim in any Court of the country. Consider what you have already done in this House by statute. So long ago as 1874 this House passed a law whereby a contract for the loan of money to any infant whatever was declared ab initio void, and was incapable of ratification or confirmation on the infant attaining full age. Indeed, in 1892, inspired by that hysteria which seems to be the characteristic of the closing years of the century, we passed another Act declaring that anyone who sends a circular offering to lend money to an infant may be sent to prison as a felon for three months, although the person offering money may have reason to suppose that the infant is of full age. This Bill seeks to make the punishment even more severe. Infants have already received the most complete protection that it is possible to give I quite admit that it is a babyish age, and if people think that the age ought to be extended I would offer no objection to the period of infancy being twenty-five years. As one having considerable experience in drawing up wills, I know that is now the age almost invariably selected by testators with large estates or property as that at which their offspring should attain their majority. I knew a case of a man who fixed fifty-two as the age, and the son when he reached that age gave a party to celebrate the occasion, at which everyone was present except the trustees, of whom, he frankly said, he had seen quite enough. It is within the power of testators, if they think proper, to extend the age beyond twenty-one, but the protection of infants does not stop there The doctrines of our Courts of equity, which are now the doctrines of our Courts of law, have been stretched to their furthest limits for the protection of borrowers. Therefore I am prepared to assert that if you can prove fraud or 690 oppression, if you can prove a harsh or unconscionable bargain amounting to evidence of fraud, the laws of this country are not in the lamentable position which this excited Committee would have us believe they are in. If a person is in a position to show that he has been cheated or got the better of in an unfair manner, he has no difficulty whatever in getting rid of his bargain. If we come to the Bill itself we find a very inflammatory preamble. There was a time when this House objected to a preamble; I never object to the preamble of a Bill; it is often the only interesting part of a measure. That very distinguished historian, Mr. Froude, has written a History of England in twelve volumes, chiefly from the preambles of Acts of Parliament in the reign of Henry VIII. I ask the House to look at the preamble of this Bill, in order to judge of the spirit in which the Committee upstairs approached the consideration of this subject. The words are—Whereas certain persons trading as, and known by the name of, money-lenders—well, anyone who lends money is a. money-lender—carry on their business of lending money by deceptive methods, and inflict by harsh and unconscionable bargains great injury upon those who borrow money from them; and it is expedient that such money-lenders and their methods of carrying on such business of money-lending should be subject to control," etc.I do not hesitate to say that you could have a Bill with respect to borrowers in the preamble of which every word I have just read might be said of them.Whereas certain persons trading as, and known by the name of, money borrowers carry on their business of borrowing money by deceptive methods, and inflict by harsh and unconscionable bargains great injury upon those who lend money to them.That is not the way in which a question of this sort should be approached. This Committee had a very great deal of very good evidence and sound sense put before them in the course of their proceedings, but they would not listen to it. There was his Honour, Judge Collier, a man who had been County Court judge in Liverpool for twenty-four years. His evidence was that the people of Liverpool knew perfectly well what they were 691 about when they borrowed money from these people. He says—They borrow money at the beginning of the week; they pay it with the interest, which, is hardly ever less than a penny in the shilling a week, on the Saturday, and then on the Monday they borrow it again.In reference to the discretion this Bill proposes to vest in County Court Judges, he says—I think it would lead to enormous litigation, because there would not be a case in the County Court in which the people would not try to get the order set aside on the ground that the charge was unconscionable.This evidence of Judge Collier as to the character of the people of Liverpool seemed to be rather too much for some members of the Committee, and they put it down to the extraordinary intelligence of Liverpool. A member puts it to him in this way—The population of Liverpool is an artisan population, rubbing their wits together, and you would describe them as decidedly a sharp population, would you not?—Oh, I should think so, certainly.As a native of Liverpool I have no objection to Liverpool being regarded as radiating with wisdom, so that people twenty miles away are able to get the better of a money-lender, but I hardly think that is the true explanation. My own opinion is that if I were a moneylender I would far rather carry on my business in a large city than in a country district. I do not think the quiet intelligence of the country people is so apt to be deceived as the quick-witted artisan population of Liverpool. But that is an example of how the Committee seemed bent not only not to hear evidence showing the legitimacy of a great deal of money-lending, but to put almost a kind of pressure upon every witness who came before them to speak of the horrors of the practice. I must confess that they got one witness, at least, who fooled them to the top of their bent. There was a distinguished man, Sir Henry Hawkins, now Lord Brampton, who told them a story. I could really hardly believe, if I had not road it in a Blue-book, that a Judge of his great distinction, who has been a member of the Bench for I do not know how many years, who has presided over I do not know how many assizes, who has condemned I do not know how 692 many human beings to death, should have thought so little of a Parliamentary Committee as to tell them this story—I will give you one instance that occurred to my own knowledge. I was placed in a very painful position to know what to do with the man, and ultimately I did deal him out as light a sentence as I could conscientiously do under the circumstances. He was a man who was in a very respectable position; he had married a wife, a very nice woman, who was very much attached to him and he to her; his income was very small, that is to say, £200 a year—some very small income at all events; he tried to do the best he could to make a good home for her; the result was that the first year he a little exceeded his income—not much (£40 or £50); he had recourse to a money-lender (these transactions came before me) at a large rate of interest. Naturally, as anybody who knew his circumstances and position would expect (he never thought of it), at the end of the year he was worse off than at the beginning, because he owed more interest than the loan amounted to. Under those circumstances he thought he would avail himself of the chances of the turf, and he backed a horse or horses at very large odds—I think it was 100 to 1, or something of that sort. Well, anybody who thought of the matter would think it was really a 100 to 1 chance whether he ever made anything out of it; but he looked upon it as a dead certainty. When the race was run he not only lost his few pounds that he had put on the horses, but was worse off still; there was his debt to the money-lender still due; he had hoped to pay it off with his turf winnings. The result was that he was put to his wits' end. I have no doubt he was in tending to be honest, that is to say in the result, but unfortunately he had the means of forging names which gave him the opportunity of realising a sum of money sufficient to satisfy his then immediate wants. He explained to me (and I believed him, and I believe everybody else did, for he had a most estimable character) that his intention was not to steal the money absolutely, but to save and repay the debt, but he was overtaken before he had the opportunity of doing it. Well, that is forgery. It places the Judge in a very painful position to know what punishment to award to a man of that sort; but under the circumstances I met the difficulty as best I could, and gave him that amount of punishment which I thought was lenient under the circumstances, as it ought to be; but that is the mischief. That, to my mind, is a strong instance of the misery which is brought about by these extortionate money-lenders.The Chairman said—In the case you have mentioned this young man first went to the money-lender?The learned Judge: He innocently, and with a view of making his little home comfortable for his wife, a little exceeded his income.He went to the money-lender; then he took to betting. Would you say that it was the case that men take to betting and resort 693 to the money-lender's office to pay the bets?— I think very often.That was Sir George Lewis's evidence?— That is my opinion.So [says the Chairman] it encourages gambling and leads to crime? — It does.All I can say is that I am surprised that no member of the Committee was bold enough to tell the learned Judge, with the utmost deference, that the Strand Magazine was a better vehicle for telling a story of that sort than a Blue-book published at the expense of the country. We will come now to the Bill itself. I will say at once that I have two objections to this measure; it strikes a blow at those pillars of every rational system of modern jurisprudence—first, the stability of contracts, and secondly, the necessity for preserving accurately what you mean by strict legal proof. Consider the effect of this Bill. Clause 1 says—Where proceedings are taken in any court by a money-lender for the recovery of any money lent after the passing of this Act, or the enforcement of any agreement or security made or taken after the passing of this Act, in respect of money lent either before or after the passing of this Act, and the court has reason to believe that the interest charged in respect of the sum actually lent exceeds the rate of interest mentioned in the schedule to this Act, or that the amounts charged for expenses, inquiries, fines, bonus, premium, renewals, or any other charges, are excessive, and that, in either case, the transaction is harsh and unconscionable, the court may re-open the transaction, and take an account between the money-lender and the person sued, and may, notwithstanding any statement or settlement of account or any agreement purporting to close previous dealings and create a new obligation, re-open any account already taken between them, and relieve the person sued from payment of any sum in excess of the sum adjudged by the court to be fairly due in respect of such principal, interest and charges as the court, having regard to the risk and all the circumstances, may adjudge to be reasonable; and if any such excess has been paid, or allowed in account, by the debtor, may order the creditor to repay it; and may set aside, either wholly or in part, or revise, or alter, any security given or agreement made in respect of money lent by the money-lender, and if the money-lender has parted with the security may order him to indemnify the borrower or other person sued.I have no desire to speak otherwise than most respectfully of all the Judges in the land, but it is quite impossible not to consider this question of judicial discretion and to consider what effect we ought to give to the very powerful observations of Mr. Justice Mathew before this Committee 694 itself. There are seventy-nine gentlemen—twenty-three High Court Judges and fifty-six County Court Judges —who will have this discretion of upsetting any contract whatsoever if the interest is more than 15 per cent. per-annum, and if in their opinion there is reason to believe that the bargain is harsh and unconscionable. I know that, as a great French critic said it is very difficult to speak of chastity chastely, so it is difficult to speak of discretion discreetly, and it is not less difficult if the discretion of which you speak is that peculiar kind called "judicial." Everybody knows that so long as a judge is confined to his proper duty—namely, the ascertainment of the law as it is at the moment, or the proper weight and effect to be given to the evidence which has been submitted to him and to the ordinary test of cross-examination, so powerful are the traditions of a lifetime, so strong are the habits of legal training, that, enormous as is the difference between one Judge and another in capacity, learning, astuteness, and acumen, yet nevertheless the difference between the decisions of various judges will be comparatively small. But the moment you say to a Judge, "It is for you, independently of evidence, independently of strict proof, but exercising your own fancies and idiosyncrasies, to say practically what is a proper rate of interest for a man in Bradford or Leeds to charge another man for the loan of £4," the moment you say that, you throw open the door to every kind and variety of personal opinion in the Judges themselves. I am absolutely certain that were this Bill to become law, and were three moneylenders to be pursuing what you are pleased to call their remedies in three Courts of the Queen's Bench Division, whether they got 5 per cent., 15 per cent., or the percentage provided in their agreement would depend entirely upon the personal idiosyncrasy of the particular Judge who might happen to come into that particular Court at half-past ten or eleven o'clock in the morning. Many Judges have been heard to say in the County Courts that they will never give more than 5 per cent. interest to a moneylender; they think it is wrong to do so; they are animated by that spirit of hatred of the whole class of money-lenders which, breathes through the spirited preamble which I ventured to read to the House. Other Judges are inclined to hold men 695 strictly to their contracts, and they say that a man ought to pay what his contract says he should pay, unless he can prove fraud or deception, or something of that kind. This question of judicial discretion is one of the utmost importance. I quite, agree with what was said by Lord Penzance on a celebrated occasion; I will not quote the whole of his remarks, but he wound up by saying, "Speaking generally, when discretion begins, the proper administration of the law, as such, comes to an end." I venture to say that that is a sound and incontrovertible proposition. We do not want seventy-nine gentlemen to be constituted censors of what is a fair bargain between two parties. We want our Judges to be confined to considering whether it is proved to their satisfaction that a transaction is harsh and unconscionable. I do not particularly object to the phrase "harsh and unconscionable"; but in the Courts of Equity from time immemorial proof has been required, and that does not depend upon the whim or fancy of any individual Judge. During the last few months I have done my best to ascertain whether there is not likely to be inflicted upon the poor of this country a very great hardship if this Bill is passed, and I have come to the conclusion that that is so. In the north of England, and I dare say in other parts where there are poor men—it may be a hawker, who wishes to get a stock for his wallet or his bag to go to a fair or a race-meeting where he is likely to get a good return for his money—there are countless transactions where a man wants a loan of £4 or £5. Who is going to let him have it? Will the members of this Committee lend every poor man who wants it £5? Not at all; it would not fall within the scope of their avocations. But the business is carried on in a perfectly legitimate fashion. The poor man who wants a loan goes to the lender, carrying with him his credentials. They are not gilt-edged securities. Hon. Members when they want to borrow £50,000 or £60,000 or a smaller sum for their election expenses go to their bankers with gilt-edged securities or the nearest approach they have thereto, but such a man as I am referring to takes his rent-book to show that at least he is not in arrear with his rent, while inquiries show that he is not a defaulter in the County Court, and if he bears an 696 ordinarily good character he obtains his small loan without security and without sureties. And what else does he obtain? He obtains what is to him the inestimable privilege of repaying the money in driblets. That is of the very essence of poverty. Notwithstanding all the statements of this excited Committee, I believe it is a very great service to a great number of poor men all over the country to be able to obtain, if their characters are anything like reasonable, these small loans. One half of the world does not know how the other half lives, and it will be an act of cruelty to a great number of poor people in this country if you place such an obstacle as this in the way of their obtaining such loans. Look at the scale in this Bill. The scale allowed for £50 for a month is 12s. 6d. Is it unreasonable if a man charges 15s. for the loan of £50 for a mouth? I do not think many men in this House would do it. In fact, this business cannot be carried on without very considerable office expenditure, so as to be able to ascertain particulars of the character of the would-be borrower, and you must in a great many instances make bad debts. People usually look upon this matter as if each transaction was absolutely isolated, and that the lender got 50 per cent., or whatever it is, clear. How unreasonable! You have to consider the average of the transactions throughout the year. I do not believe it will be found in any well-conducted loan society or company of this kind, if a proper inquiry is made, that the average rate of interest is more than 10 per cent. or 12 per cent. on the whole capital involved. I therefore say that by inserting in this Bill the provision that a County Court Judge or a Judge of the High Court should be at liberty to set aside every solemn contract, however long it may have been in operation or whatever cash payments have been made under it, whenever the interest is more than 15 per cent. per annum, you are practically saying that in the opinion of this House 15 per cent. is enough to charge for every transaction of this sort. I have no hesitation in saying that any Judge who has an aversion to moneylenders, who is animated by something of the spirit of the hon. Member who moved the Second Heading of this Bill, will consider himself at liberty, whenever the interest is more than this 15 per cent., 697 to decide that he has reason to believe that the transaction is harsh and unconscionable, and to act in any way his discretion may suggest to him. I say that 15 per cent. on a small loan, repaid in driblets extending over many months, is an absurdly small sum. Look at pawnbrokers. A pawnbroker gets your watch or something which is more than ample security, and the law allows him to charge 25 per cent. But yon say that in the case of a poor man who obtains a loan without any security, the interest is to be calculated at so much per annum instead of per week (because the repayments are so much per week), and I contend that 15 per cent. is an absurdly small and unreasonable charge to be made for the loan. I must apologise to the House for detaining it at such length, but I really do want this to be considered as a serious question. I believe that by passing this Bill you will inflict a very grave hardship on the very people whose condition you want to make better. Their lot is hard enough now, heaven knows. The poor man has to pay heavily for everything. He has to pay heavily for his house and for his food, and now you are going to make him pay more heavily for his money when he has to borrow, because, by putting difficulties in the way of such transactions, you will very likely throw him into the hands of the rogues and impostors. As Jeremy Bentham said years ago, "If a man cannot borrow he will sell," and there is nothing in your precious law to prevent a man realising at a miserable sacrifice the small belongings of his house. He may sell for next to nothing things which cost him a great deal, but he must not borrow. There is supposed to be something peculiarly sanctified about a contract of borrowing, but there is nothing of the kind. A contract of selling should be invested with exactly the same sanctity if there is any—but it is not. You will not let a man borrow, you condemn him to sell, and that is a very grave and serious disaster. I ask the House most carefully to consider whether it is worth while, just because there are a few rogues and impostors in the country, with whom I honestly believe the present law is quite strong enough to deal, to inflict, through this Bill, a grave injury upon the very poor. Isaac Gordon has gone to his account, but before he went a court of this country discharged a man from his 698 obligation because he did not know he was dealing with Isaac Gordon. I confess I thought it was strong law, but it was the law of Lord Justice Vaughan Williams, Lord Justice Rigby, and Lord Justice Smith, and, as Isaac Gordon is not in a position to carry the case to the House of Lords, I expect the law of England it will always remain. Do not think so meanly of the law of your country as to suppose that this Bill is necessary. It is nothing of the kind, and I beg to move that the Bill be read a second time this day six months.
§ MR. MACLEAN (Cardiff)
I think the House has no reason to complain that the task of moving the rejection of this Bill fell into the hands of the hon. and learned Member opposite, who has delighted us with the skill and vigour with which he has spoken. The first thing I would say with regard to the Bill is that the House ought not to suppose that it deals merely with the case of a few money-lenders. The great objection to it is that it runs counter to the principles which have governed the commercial legislation of this country during the century. Our commercial legislation has been entirely in favour of freedom and of removing all shackles from industry and commerce. The present Bill goes entirely in the opposite direction. It is important to look at its object. The hon. Gentleman who introduced it was the Chairman of the Committee on whose Report the Bill is founded. He took credit to himself in his speech to-night that he had always followed the advice of Polonius— "Neither a borrower nor a lender be." I cannot help thinking that that shows the weakness of his present position in taking charge of a Bill of this kind. It would be much better if the Government had placed it in the hands of some hon. Member who was familiar with commercial affairs and had been in the habit of dealing with money all his life. The Bill is of a sentimental character, and such as we arc; accustomed to see brought forward on Wednesday afternoons. It is a curious circumstance that the member of the Government who is generally in charge of such measures on Wednesday is the hon. Gentleman himself. I suppose other members of the Government do not care to take them in hand. At all events, they studiously absent themselves from the House on such occasions. 699 This is a fair specimen of the kind of legislation to which we are accustomed on Wednesday afternoons, and perhaps that is the reason why it has been entrusted to the hon. Member. I have seen a great many gentlemen connected with the money-lending business, and I was perfectly astonished to find what a arge body of respectable people they are. Their frequent complaint to me was that they had not had a fair hearing before the Money-lending Committee. One can understand that was so from the admission made by the hon. Member to-night. He said it did not come within the terms of reference to the Committee to hear all the people who wished to be heard in defence of money-lenders. The Committee heard a great deal of evidence about some very notorious money-lenders, and my chief objection to this Bill is that it is a thoroughly vindictive Bill, founded on the misdeeds of one particular individual, it is impossible to choose any worse principle as a guide in initiating legislation than to take some singular case of oppression or wrong and found a general Bill upon it. We had the case of thenotorious Isaac Gordon, which was dwelt upon with some reiteration in the Committee, and so much prejudice was raised throughout the country by the way the Committee dealt with that man that I venture to say that any money-lender at the present time would have less chance of justice at the hands of a British jury than he would have had in the time of the Plantagenets. A British jury does not allow any borrower to be ill-treated by the person from whom he has borrowed money; on the contrary, a jury is likely to treat the lender with the greatest severity. It is said that this Bill is founded on principles well known to the law, and that pawnbrokers, for instance, have their rates of interest limited; but, as my hon. and learned friend opposite has pointed out, there is all the difference in the world between a pawnbroker and a money-lender. A pawnbroker lends on certain definite security, a certain fixed amount. The security is brought to him generally in the form of articles, of which the borrower is sorely in need, and the Legislature naturally deals with tenderness with such matters. But the money-lender lends money on a promissory note, as a rule, and gets no security. He lends on the credit and good faith of the borrower, and he is therefore entitled to charge a 700 much greater rate of interest than a pawnbroker, who lends on a definite security. Great complaint is made as to the high rate of interest charged by the money-lender, but in dealing with transactions of this kind we should not take a. few individual examples only; we should survey a wide field, and see what interest is charged over all the transactions in which money-lenders are engaged. I have seen the books of a money-lending; firm which has a very large business in. the country, amounting to £150,000 or £200,000 a year, all lent in small sums I have seen from these books that the average rate of profit made by the firm does not exceed from 16 per cent. to 18 per cent. per annum. The firm has very large expenses and runs great risks, and it frequently happens that the borrower cheats the firm instead of the firm cheating the borrower. Does it do any harm. to the country that money should be lent in this way? On the contrary, it is of the greatest benefit indeed to vast multitudes of the people who are greatly in need from time to time of money to carry on their business. A very large proportion of the money lent by moneylenders is lent to tradesmen in a small way of business and to professional men. It very often happens that a man of that class gets into difficulties in which his. credit is at stake, and he would be willing to pay not 10 per cent. nor 20 per cent. but 100 per cent. for money to tide him over his difficulties, and to save his good name, and to allow him to carry on business again in a fair way. That happens. very frequently. No doubt many hon. Members who have never wanted a guinea in their lives do not understand the position of these poor people, but every man who is engaged in business, and who has had ups and downs in his life, and has had to fight his way in the world, must know that over and over again there is no rate of interest which he would not pay for money to keep his head above water. This is done every day not only by money-lenders but by institutions in the City of London which lend money at a usurious rate of interest. I have in my recollection a case which happened a few years ago in which persons introducing a valuable invention were pressed to such an extent that they had to pledge all the credit of their directors, and were then at their wits' ends to get money. They borrowed money at a usurious rate of interest 701 which removed their difficulties, and at the present time the concern is one of the most prosperous in the City of London; the directors are very wealthy men, and the shareholders are now reaping the benefit of the money borrowed at that time. If that money had not been forthcoming the invention itself would have been lost to the world and the directors would have been plunged into the Bankruptcy Court. That is an example of the good that is done by lending money in this way. I daresay there are some hon. Members in this House who, though they have never borrowed money for their own business, know what it is to borrow money for little speculations on the Stock Exchange. I ask them if they have not often paid a much higher rate of interest than is mentioned in the schedule in order to carry their speculations over from one settlement to another? It is perfectly useless to attempt by Act of Parliament to limit the interest that should be paid on loans of this kind. It is said that the rate of interest is not fixed by this Bill, but under the first clause it is possible for any Judge in any Court in the land to reopen any money-lending transaction and fix any rate of interest he likes. He is not even bound by the rate of interest mentioned in the schedule. If he thinks the bargain is not just, he may reopen it, and absolute discretion is left to him to fix any rate of interest he thinks sufficient payment for the money that has been borrowed. The hon. and learned Gentleman opposite has pointed out the incalculable mischief which will be produced if such an absolute discretion is left to every Judge in every Court in the land. I am sure many Judges on the Bench are men of the highest character and men to whom I should gladly leave the decision of any matter of this kind, but many of them would shrink from the responsibility which the hon. Gentleman without any hesitation wants to give them. So far, objection has been taken to the first clause in the Bill. There are many other clauses about registration, etc., which are good, and money-lenders as a body do not object to them. But this Bill proceeds on the principle laid down for making an admirable cucumber salad. You cut the cucumber, delicately mix the oil and vinegar, and then when complete you throw it out of the window. In this Bill you are taking most admirable pre- 702 cautions to ensure that the money-lending business should be carried on respectably, and then in the first clause you say that the business is not to be carried on at all. No doubt if this Bill passes it will be a serious blow to the freedom with which money is now lent throughout the country—money which is absolutely needed in many instances, and without which it will be very difficult for many small people to carry on business. That is the main objection which we take to this Bill. I second the motion of the hon. and learned Gentleman opposite with the greatest pleasure, because I think the Bill is one which is bound to fail in its intended effect, and one which is mischievous and reactionary in its design.
To leave oat the word 'now,' and at the end of the Question to add the words 'upon this day three months.'"—(Mr. Birrell.)
§ Question proposed, "That the word 'now' stand part of the Question."
§ *MR. WARR (Liverpool, East Toxteth)
The hon. Gentleman has given us as an illustration a case where an invention was saved by borrowing money at a very high rate of interest. I care not if in such a case the rate was 50 per cent. or 75 per cent. This Bill would not in any way interfere with a transaction of that kind. Take the case of a ship in a foreign port. The owner has no money. He tries to get it from the ordinary sources, but does not succeed. He goes to a money-lender and borrows money at 20 per cent. or 30 per cent. He then brings the ship home and handles the freight and pays his disbursements. There would be no relief for him from that bargain under this Bill, because it only applies to cases in which a court of law finds that the rate of interest was excessive and also that the bargain was harsh and unconscionable. In the two cases I have mentioned there would be no evidence of anything harsh or unconscionable. The whole transaction would be perfectly understood and would be entirely above board. The two contracting parties would have been equally free agents. On the other hand, supposing the loan is made to a Bank of England clerk, or to a clergyman, or to a Government official, and that, relying on the ruin that publicity would 703 bring, the money-lender if the instalment is not paid to the day and to the very hour makes the application for renewal of the loan the occasion first of getting an admission of his account for principal, interest, and charges, and then taking a new promissory note for what is due upon the account so stated, including fines and charges and interest at an inconsiderable rate, with a huge rate of interest for the further advances. I think it is not improbable, under such circumstances, the lender having relied on the ruin which would be involved by publicity, that the unfortunate borrower might look for some relief under this Bill. It is not so much to the initial transaction as to the subsequent transactions that the Bill would apply. Can anyone say that under such circumstances the bargain is between two free agents? The lender is free, the borrower has a pistol at his head. Unless he agrees to the terms, whatever they are, he must be a ruined man. This Bill will enable poor people to get justice done. No one who sat in the Committee, as I had the honour of doing, and heard the evidence can have the least doubt that some legislation of this kind is needed. It is very significant that the first reference to this Committee — which was established on the initiation of my hon. friend the Member for Chester, to whom we owe so much in the matter—was confined to an inquiry into the evils of money-lending between the poorer classes and professional moneylenders. It will be felt that it is more important that the poor should be relieved from oppression than that the law should aid persons who have less excuse or no excuse for finding themselves in the hands of moneylenders, although it was subsequently extended to a general inquiry. My hon. and learned friend the Member for Fife says that the law as it stands affords a sufficient remedy. If so, I should like to know why it is that the Courts are not resorted to in such cases. I do not dispute the fact that relief can be granted under the equitable jurisdiction of the Courts against harsh and unconscionable bargains, but I think it will be admitted, and that the hon. and learned Member for West Fife will admit, that the cases are rare in which relief has been extended except to heirs, expectants, and reversioners. The money-lenders of the class who bring this business into dis- 704 repute—I am quite willing to believe that there are money-lenders who conduct their business honestly — know far too well how to make any relief on the part of the borrower as the law now stands an absolute impossibility. I venture to doubt whether, apart from cases in which heirs and reversioners have been concerned, there have been a dozen cases reported in the authorised reports in which relief has been given during the last thirty years. No doubt most of these cases come before County Courts; but according to Judge Owen, who gave valuable evidence before the Committee, the County Courts have no power to set aside or cancel any agreements except agreements of sale. I venture to think that no one reading the valuable evidence of Mr. Justice Mathew and Sir George Lewis can maintain that it is in the power of the Courts to give the relief that ought to be given in cases of this kind. The money-lender makes it absolutely impossible for the debtor to make out a case for relief as the law now stands. Nothing is more significant than the dread the money-lenders themselves feel of legislation on the lines of this Bill. That is the best proof of the need of legislation. It may be suggested that we have the security of the criminal law. The hon. and learned Member for West Fife did not refer to that remedy, but in criminal prosecutions there is very great difficulty, because practically a course of dealing with intent to defraud must be proved, and it is obvious that witnesses would be adverse to coming forward to state their personal experience. What we require is power to enable the courts to reopen money-lending transactions if they are unjust, and to reopen them notwithstanding any settlement of account, and to force the money-lender to repay any amount unfairly taken by him. That is the effect of this Bill. I believe this Bill will not affect any honest dealing. If there were no definition of a money-lender in the Bill, and if it were to apply to every transaction, I do not believe that the honest trader would have anything to fear from its operation. The Committee thought that Mr. Justice Mathew was right when he said that there should be no definition of a money-lender in the Bill, as there is not the slightest danger of its interfering with any legitimate business. I never heard that any objection 705 had been raised by any banker to the Committee's proposals. Bankers know very well that there would not be the slightest danger of interference with any legitimate business under proposals such as are embodied in the clause giving discretion to the Courts. The hon. and learned Member for West Fife seems to think that it is monstrous to confer discretion upon Judges to review agreements which have been made. In the first place, the power of the Courts will rarely be invoked unless the interest exceeds the rate of interest in the Bill. Why should there be any doubt as to the capacity of the Judges to exercise their discretion? I myself can remember the time when bonds were constantly given upon the security of ships in foreign ports. They are very rare now because the cable has made it quite easy to pass money at almost a moment's notice. The rate of interest on bonds of that kind was oftentimes very high, and the Courts always claimed the right to reopen the agreement and to cut down the rate of interest if in their discretion it was too high. I myself was acquainted with a case between a shipowner and a lender, which was referred by agreement to a Judge of the High Court, and the Judge awarded interest at the rate of 20 per cent. That may seem excessive, but, taking into account all the circumstances, the Judge considered it was fair. I see no reason to fear that any more difficulty will arise out of the discretion of the Judge as to what is reasonable, than presents itself when juries are asked every day in the week to take into account all the circumstances of the case, and say what was a reasonable amount to award. It would be better upon strict principle to leave the amount to be fixed by the juries, but money-lenders might reasonably think that they would not get even-handed justice from them. Therefore to leave it in the discretion of the Judge is in the interest of the money-lenders. I have no doubt that this Bill will do something to prevent dishonest money-lending. I do not think it will be found to stand in the way of any honest transaction. If it to any extent prevents dishonest money-lending, if, as was predicted by money-lenders, it makes their business as some of them have carried it on useless and unprofitable, then this Bill will not have been passed in vain.
§ MR. VICARY GIBBS (Hertfordshire, St. Albans)
Really when I read this Bill I feel quite confused about the days of the week, and cannot say whether this is a Thursday, or a Wednesday, when Private Members' Bills are introduced. Private Members, with the best possible intention in the world, on that day intro-duce Bills likely to produce the worst possible results. I cannot help thinking that the Government do not intend to persist with this Bill, and that it is only "out for an airing," and that it is not in-tended to "gallop or go" after the punishing disclosures of the hon. and learned Member for West Fife. The hon. Member for one of the Divisions of Liverpool pointed out to us some cases which the Bill would affect; but I want be know what cases it will affect, which it ought to affect, which are not already affected by the law as it now stands? The hon. Member gave us one instance. He spoke of a Bank of England clerk. I suppose Bank of England clerks are not allowed to borrow money, under the penalty of dismissal, and he referred to one case of such a clerk borrowing money, and somehow or other he seems to think that this Bill would have protected that clerk. I do not see it. He says that the plan of the money-lender is to get exorbitant rates of interest from the clerk under the threats of exposure, but certainly that money-lender could, under the present law, be convicted of obtaining money by threats—whether in the form of interest or cash-down payments. But be that as it may, you will not be able to relieve the clerk from exposure under this Bill. It is said that only the dishonest moneylender will be affected by the Bill. I cannot see that at all. I had a letter from a money-lender, whom I believe to be a perfectly honest man, in my constituency, who tells me that he does a very large business in lending money to working men from week to week, and that his rate of interest is from 20 to 25 per cent. He asks me to inspect his books, which shows that he only makes a decent livelihood and no more. Nothing can be more retrograde than to speak of one rate of interest as just under all conditions. It all depends on the security. When a man comes to mo and deposits certain securities I may advance him money at 7 per cent., but is 20 per cent. too much to charge on a note of hand? 707 In the City such business as lending on note of hand would not be done; it would be looked upon as far too dangerous. The hon. Member spoke of the rate of interest of 20 or 25 per cent. as nett. It is nothing of the kind. It is saddled with all the expenses of inquiry and with bad debts. Do not let anyone run away with the idea that the moneylenders are all rogues and the borrowers all honest men. My experience leads me to the opposite conclusion. No protection or assistance is given to money-lenders when they are cheated, as has been shown already. There is no necessity for protecting the borrower; even a black-mailing Bill would not protect him from that. But let us take another point. A man's business must be that of money-lending if he is to come within the compass of the Bill; but what about the tailors? How are those young men, who run into debt with their tailors, to be protected from extortion; and, if not, why not? Does anyone suppose that money-lenders would not start tailoring or other similar businesses with the view of keeping their money-lending transactions outside this Bill? Of course not. As to the power of revising contracts, the objection is not that any particular judge is not likely to do his duty, but that each would be free to develop his idiosyncrasies, and you might have cases of gross injustice. One case might be dealt with from one point of view one month, and another from another point of view next week. Already divergencies in criminal cases are sufficiently large according to the different idiosyncrasies of the different judges. One Judge will send a man to fourteen days imprisonment for half killing his wife, and another Judge would send a wretch to a year's imprisonment for a petty larceny. One Judge, starting with the presumption that 5 per cent. is a proper rate of interest, whatever the circumstances of the loan may be, would at once decide that 25 per cent. is in itself evidence that that rate of interest is "harsh and unconscionable." We have already seen cases in which a Judge said that 5 per cent. is a sufficient rate of interest in any circumstances, and that that is the maximum rate of interest which ought to be charged. Now that is a question of opinion, and it is too risky to give such power to any individual, whether he is a Judge or a Member on the front bench. Then, the 708 Judges are not to be guided by any law at all, and they are not even obliged to take evidence. They can, according to. this Bill, upset contracts which have been entered into by two grown-up men, each of them possibly trying to cheat the other—if that is not equal terms I do. not know what is. They know every circumstance of the case that is material to be known—not to both of them, but to the borrower. If anything is kept back from him that ought to be disclosed the Court, under the present law, will set. aside the contract on the ground of fraud. When these two men meet they make a. bargain agreeable to both of them. Why does the borrower take the money? Because, in his deliberate judgment, he considers it more to his interest than to go without it. You let him make the bargain, but are you going to help him to cheat the money-lender? Can anything be more unjust? I cannot conceive it. Most of these money-lenders are honest traders, and the effect will be that these men will have to calculate the risk of having their rates reduced, and they will inevitably "take it out of" other men who will not come into court. You cannot fight against natural laws; and if you read Adam, Smith, Ricardo, Bentham, you will find that if you pass this Bill into law, you are knocking against these natural laws, and that you had better have loft the subject alone.
§ MR. BAYLEY (Derbyshire, Chesterfield)
I can say that three or four years ago the speech of the hon. and learned. Member for West Fife would have expressed correctly the opinion of the whole of the Committee which sat on this inquiry. But what did we find when we began to take evidence? We found that the money-lending business was a sore eating into the very life of the working classes of the country, leading to poverty, to increase of the rates, and to habits of drunkenness and betting. We also found' that the rich people in this country who had extravagant relations and who were prepared to find a fair and reasonable amount of interest when these relations got into the hands of the money-lenders, could make advantageous terms with the money-lenders, who were willing to take 5 per cent. interest, no matter how unconscionable the original contract had been. Certain solicitors had that power with the 709 money-lending fraternity. But the poor man or woman had no protection from paying from 60 to 300 or 400 per cent. for their advances. What was the trap set for these poor people? In the local newspapers in every town in the country, and in some in London, there was sandwiched between advertisements about some excellent building society, with an excellent board of directors whom everybody knew, another advertisement that some Union Bank had £250,000 to lend on note of hand. Of course that was not the Union Bank which we know is one of the finest banks in the country. The poor people were caught by that plausible advertisement, and once in the hands of these money-lenders they were bled to death, and their furniture and home sold up. After sitting for two years and hearing all that evidence, the Committee were unanimous in recommending what is the principle of this Bill. Of course the Bill can be improved. The object of the Bill is, in the first place, to Jet a man know exactly with whom he is dealing — that he is not dealing with a Union Bank, or a Provincial Union Bank, but at the bottom with a Mr. Isaac Gordon. We must have these money-lending gentlemen registered. We are agreed on that. Now there comes a very serious question. My hon. friend is against giving the Judges the right or privilege to say what is an unconscionable bargain or a fair bargain between man and man, taking into consideration all the circumstances of the case. We do that already. In a case of bigamy the judges have the power to say whether a man should go to prison for one day or for ten years. Has that power ever been abused? On the same principle, we wish to give the Judges power to say what is a proper and fair rate of interest. We had cases before us of family after family being ruined completely by getting into the hands of these money-lenders. An extraordinary case went to the Court; of Appeal the other day, and the judgment was in favour of the man who borrowed the money from Mr. Gordon because he had been trading under somebody else's name. But what could a poor man have done in such a case? In fact, we would not have had that decision in the Court of Appeal but for the evidence which had been produced before the Committee. I hope that the Government, because some of their friends are 710 wavering on this question, and some of our friends on this side of the House have not the knowledge that we have who sat two years on that Committee, will not be dismayed or down-hearted, but that they will put their back into this great social reform and determine to carry it through this session. If they do that, they will save a great many families, whom it is their duty and that of the House of Commons to protect, from the snares of the money-lenders.
§ *SIR WILLIAM ANSON (Oxford University)
Although I cannot regard this Bill with the unqualified condemnation lavished upon it by the hon. and learned Member for West Fife, I find very great difficulty in supporting it as it stands. The Bill is very curiously framed. Practically the serious part of it deals with two things—the transactions of the money-lender and the regulation of the trade. Of the latter part I have very little to complain. If we can locate the money-lender, register him, and regulate him so much the better. But the Bill creates a new kind of offence—a misdemeanour punishable by two years imprisonment or a fine not exceeding £500. One of the provisions is rather startling. The offence is that—Any money-lender, or manager, or agent, or clerk of a money-lender who, by any false or misleading statement, attempts to induce any person to borrow money, or agree to terms on which money is to be borrowed," etc.Now, there is no suggestion that the person who has been induced to borrow the money has been injured by the transaction. The offence is merely a deceptive statement, and it suggests to me a new and satisfactory way of paying old debts. If a man borrows money and is unwilling to pay when the lender demands it, he may say, "There is a misleading statement in the correspondence between us prior to the loan. I do not propose to repay the money, but I propose to indict you for misdemeanour." That clause requires very careful reconsideration. Then the whole efficacy of the Bill turns upon the definition of a moneylender. But what is a money-lender? We are told that a money-lender is a person who lends money, which is fairly obvious, and further that he is not a pawnbroker, a friendly society, a body corporate, an insurance company, or a banker. I 711 should be surprised if such astute persons as money-lenders have proved themselves to be do not evade this somewhat precarious definition. The Bill begins with a preamble of an unusual character. It is like the preamble to the Statute of Uses, which Lord Bacon called a persuading and inducing preamble. I cannot help thinking that it would have been much better if, instead of going to old statutes for his preamble, the draughtsman had gone to the old cookery books, and had started with the phrase, "First catch your money - lender." The first thing we have to consider is whether there is a grievance, and, if so, how it is to be remedied. I must confess that the great bulk of the evidence taken before the Committee does not suggest to me a grievance requiring a drastic remedy. There are incidents brought up which affect people's minds and which give notoriety to the work of the Committee, but which do not call for interference. If I recollect rightly there was the case of a young man who escaped from a home for inebriates and fell into the clutches of a money-lender, and died whilst engaged in evading the demands of that money-lender. But the Chancery Division would have been amply capable of dealing with difficulties of that sort. Then there was the mysterious adventure of a lady who communicated a forged note to a money lender. This would be dealt with by the ordinary process of criminal law. But then, apart from the stories told to the Committee, which might be interesting for the purposes of passing this Bill, there does appear to be a mass of evidence which suggests that there are cases of oppression of the poor through the agency of money-lenders which require to be dealt with in some way or other. But if a grievance exists there is the question of how far this Bill proposes to deal with it. In the Committee there were three remedies suggested: first, the limitation of the rate of interest, making it illegal to recover more than 10 per cent.; the power of reopening a transaction where the Court had reason to believe that an unfair advantage had been taken by one of the parties; and the registration of securities given to money-lenders. A promissory note given to a money-lender was to be made distinct from one given in an ordinary business transaction. Registration of securities appeared in the Bill 712 of last year, but doubtless for good reason has disappeared from this. This Bill applies in a half-hearted way two out of the three suggested remedies—an extension of the power of reopening a transaction and a mild suggestion of a usury law. I agree with Mr. Justice Mathew that the great value of any assistance which we could give to the poor men who are oppressed in transactions of this kind consists in its rapidity and in its cheapness. But if the House looks at the remedy offered in the Bill it is neither simple nor clear. In the first place, a man must prove that he was dealing with a money-lender, that the percentage charged for the loan was a certain percentage in the schedule, and he must induce the Judge to form a general impression that the transaction was unconscionable, and after this the Judge would re-open the transaction. That does not seem to me to be a very prompt or valuable assistance to a poor man in the clutches of a moneylender. I think it would be as well to consider how this matter is dealt with elsewhere. By the Indian Contract Act as amended last year Judges in India are given power to re-open transactions in all cases where a contract was made with a person whose fitness to enter into it might be questioned by reason of age, illness, or mental or bodily distress. That is a very wide power to give, no doubt. The German Civil Code provides that where one man takes advantage of another who is in necessitous circumstances, who is ignorant, or had shown insufficient experience or care, so that the parties were on unequal terms, the transaction is to be null and void; and by the Penal Code for such exploitation such a person is liable to severe penalties. These remedies are at any rate clear and comprehensive, but the remedy offered by this Bill is a mild extension of an equitable doctrine, hampered with an insufficient definition of money-lender, and haunted by the uneasy ghost of the usury laws. If this measure is to be pursued, if the House acknowledges that there is a grievance, that grievance ought to be dealt with in a masterful way. Either we ought to offer a substantial remedy or do what is. possibly the best thing to do in the circumstances—namely, leave the grievance alone.
§ MR. STEADMAN (Tower Hamlets, Stepney)
It was not my intention to intervene in this debate, and I should not have done so but for the concluding remark of the hon. Member for West Fife. At the conclusion of his speech he said that this Bill would confer a great hardship on the working classes of this country. It will do nothing of the sort. The working classes are not in the habit of looking up the advertisements in the newspapers to see where they can secure a loan, and the money -lender of the type this Bill attacks is not of that class who would make a working man a loan. First of all, very good security is required, which working men are not likely to have, besides which, working men have their own way of dealing with the matter. In London there are hundreds of loan clubs managed by working men themselves. A man for a £1 share pays 6d. a week to the society, and if he wants a loan he has only to get one of his mates to stand security for him, and he can borrow his £2 or £3 and pay it back at so much a week. Many men belong to these clubs for the purpose of borrowing a few pounds in the summer to take their families to the seaside. In my constituency has also been formed a co-operative bank, and the object of the formation of this bank is to enable the very man that the hon. Member for West Fife has been speaking of to borrow £3 or £4 when he was hard pressed without going to these extortionate money-lenders. The right hon. Member for Fife, has not, perhaps, had any experience of loan clubs, but I may say that the money of these loan clubs is shared between the members at Christmas, when it comes in very handy. [Laughter.] Hon. Members laugh, but I speak from a practical and not a theoretical point of view, and if any hon. Member here was the son of a father who had been out of work for a few weeks before Christmas, and had nothing in his pocket, he would be very glad to receive in this way a few shillings to put upon his table. Pawnbrokers have been referred to, and to the working man they are sometimes a very useful class; for the working man, though poor, is proud, and rather than go to his friends will pawn what little jewellery he possesses, say, a watch or a chain, and when that pledge is redeemed the pawnbroker is bound to return it in as good a condition as he received it. I am glad on this occasion I am able to support the 714 Government. It has been stated that the Bill will enable the borrower to cheat the money-lender, but I deny that that will be the case. The Bill does not in any way affect the honest man. Perhaps the Member for West Fife will not object to lending a hand to protect the working classes from unscrupulous landlords, as he takes so much interest in them as appears by his speech. I hope the Government will stick to their Bill, which will inflict no hardship upon working men.
§ *MR. GEDGE (Walsall)
said the hon. Member for Stepney had told the House that so far from creating a hardship the passing of this Bill would confer a boon upon the working man; and the boon conferred was that it would not affect the working man at all. He wished it would confer the same boon upon other people. Both reason and experience were against any attempt to interfere in free contracts between persons of ripe years, and he believed that any interference such as was contemplated by the Bill before the House was bound in the long run to injure not the money-lender but the man who borrows the money. The Bill proposed to allow a particular interest in particular cases, but in arriving at the interest to be allowed the Judge must consider the circumstances of the transaction and the value of money at the time the transaction was entered into. For instance, when the Bank rate was 10 per cent. then 25 per cent. might be a fair rate of interest to be allowed, but if the Bank rate was 2 per cent. it would be quite a different matter. A rate to be usurious must be either more than the law permits or more than is usual. This may be so, but what is meant by usual? One rate may be fair when the Bank rate is low, the borrower a substantial man, and the security good, but when dealing with a man who could give no security whatever, and has no character to lose, they must put out of consideration all such things as these, and endeavour to fix what the rate should be in the case of a man who could offer no security whatever, and that would be found an extremely difficult task. It was quite certain that the rate paid for the use of anything, even of money, as in everything else, depended mainly upon the law of supply and demand. If the supply of money was ample the rate went down; if it was short the rate went up, By 715 making a stringent law they would make it more difficult for the lender to lend money, and therefore it would be more difficult to borrow it. The Bill was opposed to every principle of political economy, and moreover it was proposed to enact that the poor man might be charged 25 per cent. interest, and the rich man only 15 per cent. The man who was determined to have money would have it at all hazards, as a drunkard would have drink, and having no security he would be compelled to pay a high rate of interest. This was a mere departmental Bill, and its introduction was due to the fact that we have no Prime Minister—Lord Salisbury, as a Foreign Minister, was beyond all praise, but his duties and anxieties as Foreign Secretary precluded him from paying attention to the sentimental nonsense of his colleagues, or he would have put his foot down on such a Bill as this. | Although at one time he had hoped that he would be able to vote for the Second Heading, and that Clause 1 would be struck out in Committee, he felt now that he could not do so, having regard to the imminent approach of the end of the session, and to the little probability that the Bill would find its way through Committee. Those who voted for the Second Reading would be supposed to have accepted the principle of the Bill. It was said that the Bill is in favour of the poor. Poor people borrow small sums and rich people large sums; the poor might be charged 25 per cent. per annum, but if a man borrowed more than £10 he might be charged 15 per cent. The poorer the man the higher the rate of interest to be charged. Why should a law not be made to interfere with bargains made between man and man for the temporary use and return afterwards in good condition, not of money, but of a house? It was of a great deal more importance that a man should be housed respectably and decently. Why is a man allowed to build houses and get the highest rent he can for them? If the principle of this Bill were applied to matters of that kind it would only have the effect of preventing being built. He had read nearly all the evidence which was given before the Committee, and all he could say was that in coming to their decision their hearts must have had more power over the result than the reasoning power of their heads. If they had just studied the political economists and then applied 716 their reasoning to the evidence before them they would not have come to this decision. He would not take up the Bill clause by clause to show the absurdity of the drafting, and to show how ridiculous it was altogether from beginning to end with one or two exceptions. It would only be an injury to those who were accustomed to seek the benefit of loans.
§ THE ATTORNEY-GENERAL (Sir ROBERT FINLAY, Inverness Burghs)
I do not propose to follow the arguments of my hon. friend the Member for Walsall in this discussion. As a matter of fact he has summarised in a very convenient way all the misconceptions that have been formed with regard to this Bill. My hon. friend is under a delusion in supposing that this Bill is intended to fix the rate of interest. One feature that must have struck everyone in regard to this question is that everyone is agreed that there is a great grievance to be remedied in some way. [Cries of "Not at all."] My hon. friend says "Not at all." I am aware of my hon. friend's hardihood in dissent.
§ SIR ROBERT FINLAY
I have listened to the greater part of the debate, and I have not heard any question made of the fact that very great abuses exist in the system of money-lending. If my hon. friend asserts that there are no such abuses he will find very few supporters.
§ SIR ROBERT FINLAY
The second point that has struck me is that two-thirds of this Bill have really not been objected to at all, or, if so, it has only been by way of criticism more suitable for the Committee stage. The only clause which has been attacked on principle is the first clause of the Bill, the most important some people may say, but there are other clauses which are also very important indeed, and which no one has ventured to attack. I think everyone who has inquired into the subject of money-lending must have been struck with the very great mischief that ensues from the practice of persons carrying on a business 717 of this kind under some name which is not their own as a bank, for instance. One is familiar with advertisements such as this:—"Why go to money-lenders when a private gentleman is prepared to lend money at 5 per cent?" That advertisement is inserted by a professional money-lender, and the dupes who go to him and get involved find that the interest is 5 per cent. per month, and not per year. Surely it is highly desirable that some steps should be taken to ensure that a business of this kind, which is liable to very grave abuses, should be carried on under the real name of the person who is behind the scenes. That is provided for by the second and third clauses of this Bill, and I have heard no attack whatever from any quarter either on the principle or the drafting of the clauses which are intended to suggest a remedy for that evil. And yet the House is being asked not to read the Bill a second time. There is another very important section of the Bill which I have not heard attacked, and which I do not think can be attacked. Every-one must be aware of the mischief that attends the sending of circulars to boys and young men under the age of twenty-one inviting them to gamble or borrow money. Everyone is desirous that a practice of that kind should be put down, but the existing Act is to a great extent inoperative owing to the difficulty of proving that the person sending the circular knew that the person receiving it was a minor. Surely, when circulars of that kind are sent out, it is only right and reasonable that unless the person who issues the circulars can prove that he had reason to suppose that the persons who received them were above age, he should be liable to the penalty which the law imposes. That is the provision contained in the fifth clause, a clause to which, so far, I have heard no objection put forward. There are two other portions of the Bill which have been criticised on questions of detail; one of them is the fourth clause, which provides penalties for false statements and false representations made by money-lenders. It surely is right that in a business so capable of being abused as that of money-lending there should be some sharpening of the remedy for misleading circulars and statements, with which all who have followed the subject are familiar. My hon. friend the Member for the University of Oxford made some 718 criticisms on the definition of moneylender. The whole object of the definition is to ensure that the Bill shall apply only to those whom we all know as being money-lenders in the popular sense of the term. The Bill does not apply to those who genuinely carry on the business of bankers. Bankers lend money, but no one ever talks of a banker as a moneylender; he is not what is popularly known as a money-lender. The Bill is not to apply "to any body corporate, incorporated or empowered (before the passing of this Act) by a special Act of Parliament to lend money, in accordance with such special Act." In like manner, friendly societies and pawnbrokers are exempted. The stress of the attack has been directed at the first section of the Bill, which is the one that provides for strengthening the hands of the Court in setting aside harsh and unconscionable bargains. I think I can satisfy the House that the attack on the clause has proceeded on a radical misconception of its meaning. The hon. and learned Member for West Fife has obviously been refreshing his knowledge of the Pentateuch. He quoted to the House, and he designated me by name, the authority of Moses on the subject. I wish my hon. and learned friend had given a little more time to the reading of the Bill than to the reading of the Pentateuch. There was one passage in the speech of the hon. and learned Gentleman to which I listened with a little regret. He made very great fun of a story told to the Committee by Lord Brampton, but I think that everyone who heard the story must have realised that behind it were all the elements of tragedy. It is all very well to make fun of a particular case, but if I possessed the literary talent of my hon. and learned friend, I think I could move the House by drawing a picture of some humble householder who, having fallen into the meshes of some unscrupulous money-lender, is led on from one step to another until total ruin and crime result. The hon. and learned Member for West Fife, referring to the first clause, spoke of the Bill as one to put proof altogether aside. The Bill is not one to do anything of the kind. The words of the clause are that if—the Court has reason to believe that the interest charged in respect of the sum actually lent exceeds the rate of interest mentioned in 719 the schedule of this Act, or that the amounts charged … are excessive, and that in either case the transaction is harsh and unconscionable.That does not mean if the Judge on some speculation of his own came to that conclusion; it means if the Judge upon the evidence before him came to that conclusion.
§ SIR ROBERT FINLAY
The language can be made clear in Committee if my hon. and learned friend thinks it is open to objection, but that is a pure question of drafting. There is no intention whatever on the part of the framers of the Bill to say that a Judge is to arrive at a conclusion on a matter of fact without any evidence.
§ SIR ROBERT FINLAY
There is no verdict because there is no jury. I do not know what the money-lenders would say to the suggestion that there should be a jury. I am strongly of opinion that they would find the little finger of the jury thicker than the loins of the Judge. The hon. and learned Member for West Fife entirely misunderstood the first clause when he asserted that it fixes the rate of interest. It is not solely because the rate of interest is beyond the scheduled amount that the Judge can interfere with the bargain. It must also be proved that the bargain is "harsh and unconscionable." I submit to the House that the Bill, in point of principle, is not open to objection, and, as matters of drafting can best be considered in Committee, I confidently ask the House to assent to the Second Reading.
§ MR. MURNAGHAN (Tyrone, Mid)
The hon. and learned Member for West Fife seemed to shed tears at the moral lapse of those who on this occasion support this measure. I think, on the other hand, that the Government deserve words of praise for trying to step in and save those people whose necessities compel them to seek the use of money from unscrupulous men, who prey upon their 720 necessities and entrap them in meshes from which it is impossible to escape. The custom of money-lenders is to circulate throughout the country statements offering certain inducements. They state-that they are ready to lend money and desire no security, that no questions are asked, and so on. Then when they get the people into their meshes, they place very severe conditions on them. I think 15 per cent. for a small sum of money is reasonable, and I am sure some of the hon. Gentlemen who have protested against this Bill would hesitate long, before they paid that rate. I notice that the opposition to the Bill comes altogether from the professional element. I do not see anyone representing the honest workman opposing the Bill. The opposition crimes from professional men, and they object to it on account of the encroachment on the personal liberty of the subject. I do not think that any person who has had dealings with a money-lender will believe there can be safeguards too strong to protect the public against these men. I have known instances where people have paid 100 per cent. for a loan, and the weaker the individual the greater are the demands made upon him. The State interferes and says a man should not drink too much whiskey, that he should not get drunk, and it is the duty of the State to interfere in this matter and protect people from these dangerous men. I therefore rise for the purpose simply of saying how glad I am the Government have brought in this measure, and of expressing the hope that they will carry it into law.
§ MR. H. S. FOSTER (Suffolk, Lowestoft)
I am sure that anyone who listened to the speech of the learned. Attorney General must have felt that he himself realised the difficult task he had undertaken in defending on behalf of the Government the main provisions of this Bill. The Attorney General very ingeniously argued that because we object to one clause that is no reason whatever for objecting to the Second Reading. He told us there were six or seven clauses, and that so far he had heard very little criticism of any clause except the first. The hon. Gentleman who moved the Second Reading told us that he anticipated very little objection to any part of the Bill other than the first 721 clause, but that, so far as he was concerned, he valued the first clause as more important than any other part of the measure. That being so it does not seem to be quite frank for the Attorney General to say later on that the discussion has justified the House in reading the Bill a second time because there has been so little said about any clause except the first. Clause 1 is for all purposes that which the hon. Gentleman in charge of the Bill has described as the essence of the measure, and it is on that ground and that alone that the discussion has waged to-night around the extraordinary provisions of this clause. When I first road this Bill I confess I found it difficult to believe that a responsible Government would make itself responsible for putting such a clause before the House of Commons. If such a proposal were put before a debating society I believe it would be laughed out of discussion, but as it comes from a responsible Government, we are bound to deal with it with some measure of apparent respect. The whole case for this clause is based on appeals to prejudice. In the absence of logical argument to prove there was a weakness in the present law which this proposal was required to make good, all those who have supported the Bill have appealed to the prejudice of the House. Hard cases have been cited, and the hon. Member in charge of the Bill gave us two, one of which was so extraordinary that I marvelled he was not cross examined upon it. It was a Scotch case, and I was curious to see whether the Attorney General would have an opportunity of explaining the peculiar intricacies of Scotch law as suggested by that case. It was said that some moneylender—I think it was Isaac Gordon— had lent a man two sums of money at two different times—one sum from an office in England and the other from an office in Scotland.
§ MR. H. S. FOSTER
But one of the promissory notes was dated from Glasgow, and the hon. Gentleman told the House the money-lender had an office in Glasgow. I assume, therefore, the money was lent from the Glasgow office; the hon. Gentleman told us nothing to the contrary.
§ MR. T. W. RUSSELL
That is not so. It was expressly stated by the witness himself that although he had an office in Glasgow for this particular purpose, he carried on no business in Glasgow. He had an office in Glasgow for the express purpose of taking bills, but the money was lent from England.
§ MR. H. S. FOSTER
But it was a Scotch loan unquestionably. The lender was domiciled in Scotland for the purpose of the transaction, or the Scotch Courts could have had nothing whatever to do with it. The hon. Member told us that proceedings were taken against the defaulting debtor. I like to call things by their proper names; my hon. friend would probably say the man got into the meshes of the money-lender, but I say he was a defaulting debtor, and while proceedings were going on in the English Courts with respect to the English loan the bill dated from Glasgow also fell due and was also dishonoured. Thereupon, by some extraordinary process of law, which I should like to hear explained, the money-lender was able to commence an action in Scotland, and continue that process to a judgment without any sort of communication being made to the defendant; and without the defendant being even conscious that proceedings had been initiated, a bailiff was found at his door somewhere in Herefordshire. Is that an accurate statement of what really happened? If so, there is a much more serious grievance for this House to deal with than any question raised by this Bill, namely, that Her Majesty's Courts may be grossly abused for the purpose of oppressing Her Majesty's subjects at the suit of anybody who chooses to go to the Scotch Courts without notice to the defendant, and to say that a transaction which did not take place in Scotland did take place in Scotland—that judgment may be obtained against a person who has had no opportunity of defending himself, that that judgment may be transferred from the Scotch Courts to the English Courts, and in order to enforce a Scotch judgment of that kind an English baliff may be put in possession of the man's goods. The statement is so-incredible and extraordinary that until we have further proof I shall venture to believe that the hon. Gentleman's credulity has been imposed upon. Such a case 723 is not sufficient to justify this House in making such an inroad upon the principle of freedom of contract. It may be that there is not the same respect for freedom of contract to-day as there used to be. It may be a very old-fashioned thing for anybody to get up and say that if people of mature age and in possession of their faculties make a bargain, whatever the terms of the bargain may be, the bargain ought, under ordinary circumstances, to be respected. At any rate, I am old-fashioned enough to believe that the principle is a sound one to go upon, and certainly this House ought not to be influenced by such improbable and incredible stories as that to which I have alluded. My hon. friend says that three or four years ago he should have been the last man to support legislation of that kind, but he comes to the House to-day with the usual zeal of the convert—or, I should say, the pervert. He told us that he used to believe in the heresies which he now dismisses. I should rather say that his present view is a very heretical one, and is founded upon having given an undue and abnormal amount of study to the hardships which have been brought before him in a certain number of hard cases. It is a truism that hard cases make bad law, but the hon. Gentleman in this instance is founding his desire for law upon hard cases. The hon. Member for Stepney, in supporting this Bill, cited as a ground for doing so the practice of the workpeople to resort rather to the pawnbrokers than to the money-lenders. Does not the hon. Member know that not only does the pawnbroker obtain ample security for the sum he advances, but he is allowed by law to charge something like 25 per cent., and that as a matter of practice, where the poor are in the habit of redeeming their goods on the Saturday night and pledging them again on Monday morning, the rate of interest he is entitled to charge works out to something nearer 40 per cent. than 20 per cent.? The hon. Gentleman does not consider that to be a hardship, but he cites it as a very desirable instance of the right which ought to be given to poor people to raise small sums of money. I cannot help thinking that a great deal of the prejudice to which appeal is made arises from the confusion in people's minds as to that which a money-lender really does. The money-lender, after all, deals in a commodity the same as any other person. 724 If a man carries on a business for the purpose of lending money, the article in which he has to deal, and upon which he has to make his profit, is money, and he is entitled like any other trader, so long as he resorts to honourable and fair methods, to make the best use he can of the commodity with which he has to deal. Why is it not suggested that every harsh and unconscionable bargain in any other branch of trade should be revised and re-opened? Why should it be said that if a man has money to lend, and lends that money at what a Judge may consider to be an unduly high rate of interest, the debtor is to have the privilege of having that rate revised, while in the case of any other article of commerce, no matter what the bargain maybe, no matter how hard it was or how much the debtor needed the goods that were supplied, or how much the profit was, the debtor is not to have the opportunity of re-opening the transaction? If we passed this Bill— although I do not think there is much chance of it—we should not be able to stop here. Once having established the precedent of re-opening a transaction because in the opinion of one of Her Majesty's Judges the terms were unreasonable—for that is all that "unconscionable" means, according to the dictionary—every kind of bargain will have to be liable to revision on the same ground. Another point the Attorney General endeavoured to make was that there were two precautions: first, that the Judge must be satisfied that the rate of interest was more than 15 per cent., and, secondly, that the transaction was harsh and unconscionable, and he seemed to treat those points as two independent propositions. Is it not conceivable that, if we set down here 15 per cent. as the limit above which a Judge may re- open a transaction, if the charge for interest is 20 per cent., that in the opinion of the Judge may be an un- conscionable bargain—that the more fact of the rate of interest being higher than 15 per cent. may be sufficient to indicate to the Judge that the bargain is a harsh and unconscionable one? It is easy, because it is taking the popular side, to abuse the money-lender and to couple with his name the term "unscrupulous." But this Bill is not limited to the unscrupulous. The preamble of the Bill says that many money-lenders have resorted to deceptive methods, and one would 725 have thought that the Bill would have gone on to deal with the money-lenders who "have resorted to deceptive methods." Not at all. As my hon. and learned friend who moved the rejection of the Bill pointed out, if this first clause is passed the Judge is to have thrown upon him the onus of saying what, under all the circumstances, was a fair bargain, and to say what sum is fairly due in respect of principal and interest. I cannot imagine a more irksome or difficult task. The Judge has got to endeavour to put himself into the circumstances of the person carrying out the transaction; he has to appreciate the risk which the lender had to incur, he has to fix the rate quite apart from the circumstances and the actual terms of the agreement entered into between debtor and creditor. The result must depend upon the Court in which the case may happen to be tried and the idiosyncrasies of the Judge who happens to preside. The risk which the money-lender will run of having his bargains upset will have to be paid for by those who borrow; in other words, instead of lightening the burden of the borrower the money-lender will require to exact a higher rate of interest for the money he lends in order to cover this additional risk. I have made it my business to inquire into one or two of these cases. I had a case presented to me of a money-lending company carrying on business at four or five places, and I found that the average charge they made was 35 per cent., but notwithstanding that they were able to pay to their shareholders a dividend of only 11 per cent. Their working expenses were from 15 to 20 per cent. of their profits, they were obliged to keep up a staff for making inquiries and so on and to keep the books of account, and where money was received by instalments a great deal of expense was incurred in keeping people up to date in their payments. In addition to that, they incurred a loss of something like 10 per cent. of the total amount of their loans through bad debts. The House must remember that the class of people who go to moneylenders are those who cannot go to their hankers to borrow on good security; they have not any good securities, and their credit at the bank is exhausted. The result is that the money-lender is carrying on an exceedingly risky business; everybody knows that a high rate of interest always means a heavy risk. The 726 experience of money-lenders seems to be that although a man may charge 25 or 30 per cent. for short periods he does not make much more than a decent living, and if you are going to introduce provisions into the law whereby you are going in effect to make it impossible to carry on that business and at the same time to make a living you are going to make it impossible to lend money unless a man has a banker's security. The learned Attorney General rather complained that we had not criticised other portions of the Bill. If he is going to interpret silence or absence of criticism as approval of the Bill I have no doubt that from every part of the House criticisms will come with regard to the other clauses. Clause 4 seems to. be a most unfair clause, rendering a. money-lender liable to prosecution on the mere ipse dixit of a borrower who does not wish to repay his debt. If legislation, of this kind is to be introduced against the money-lender, I would ask whether it is not equitable that the money borrower should be liable to exactly the same penalties for making similar misrepresentations. In the case of the lender he-has been induced to part with his money, but in the case of the borrower it is not until after he has obtained the money, and is called upon to repay, that the difficulty arises, and I certainly think similar penalties should apply to the borrower as to the lender. I trust the House will not accept the second reading of this Bill. If the second reading is carried I hope the Government will make some announcement which will disarm much of the hostility to this first clause. If that clause ever was placed in an Act of Parliament it would not only transgress all those principles of political economy in which we have been taught to believe, but it would open up a vista. of future legislation which would be fraught with very great danger to the country. The Times newspaper, which might have some influence with Members of the Government, in a leading article on this subject not long ago said—Lord James expressed the hope that the Bill would become law before the close of the present session. We are not sure that this will be or ought to be the case, unless the clause giving the courts authority to reopen contracts is withdrawn. Under the existing; law there is power to deal with cases of fraud and misrepresentation, and to allow public Judges to interfere in bargains between man 727 and man however hard they may appear to be, where no fraud or misrepresentation can be alleged, is a step back to the Dark Ages.We are all in favour of strengthening the law if required in any case of fraud or misrepresentation with regard to money-lending. If my hon. friend's case is that these money-lenders do resort to fraud, misrepresentations, or deceptive methods, which are not covered by the law as it at present stands, by all means let us strengthen the law. But this Bill goes much further than any proposal of that kind, and for that reason I support the motion for its rejection.
§ MR. LYTTELTON (Warwick and Leamington)
I did not intend to trouble the House, but inasmuch as there appear to be a considerable number of speakers on this side objecting to this Bill I desire to say in a few sentences the reasons I have for upholding it. No candid man can dispute that there are difficulties in and objections to submitting bargains made between adults of full mental capacity to the revision of Judges, many of whom differ widely as regards the principle which should be applied to such cases. Nobody can dispute that different minds would probably take different views of such cases, and it is quite likely that Judges in one place would give decisions widely conflicting with the decisions of Judges in other parts of the country. But that is not a difficulty which exists for the first time. For my part I think the present is a far greater scandal than would exist if this proposed legislation were carried into effect. I take it as beyond controversy in this matter that there are constantly scandalous cases of hardship by which the poor suffer at the hands of money-lenders. That has been established beyond all doubt. What is the result? Cases are brought before the Courts by money-lenders, and can anything be more disastrous to the administration of the law in this country than that the Judges appointed and sworn to administer the law are, by the very hardship of the cases brought before them, almost compelled to evade their duty, and not to administer the law as they 728 swore to do? If the hon. and learned Member opposite ever visited a County Court he would see the stress in which the Judge is placed if he has before him this dilemma: "Am I to administer the law of the land which I am sworn to administer, or am I to give the wretched rascal who comes before me the very life-blood of his victim?" That is what it really comes to. What is the answer? The answer is, "I will take any course I can to avoid ruining this unfortunate man who is brought before me." I respectfully submit to the House that that brings upon the community at large, and especially upon those who admire and respect and believe in the law, a most serious scandal and difficulty, for it places those who have been sworn to administer the law in the position of struggling to evade it. Further, it is most disastrous for a Judge, for there is a great temptation to extend it to subsequent cases. Once a Judge has been shown the way, with the approval of others, not to administer but to evade the law, and to follow his own opinion, the House may easily judge how tempting it is for him to set up his own opinion against the law of the land, and to administer what he calls right and equity in other cases contrary to the law of the country. Stress has been laid upon the onerous task which is laid upon the Judge in deciding not questions of law, but questions which no doubt are of economics. But that is no new thing. For centuries the Judges have had to decide upon the legality of covenants in restraint of trade, which is an economic matter. But nothing disastrous has ever happened to the community by reason of the Judges having to decide upon that most important matter. I may take another illustration. For many year's the law of conspiracy—a far more delicate and a most difficult matter—was in the hands of the Judges; it was within their discretion to say whether a combination of two or more people was likely to effect something contra bonos mores, and in many other matters with regard to trade the law of conspiracy frequently placed the Judges in a position of the greatest possible difficulty and delicacy. They have had for many generations to decide upon questions of custom—a custom which prevails in a trade—whether that custom is reasonable or unreasonable. The Judge is asked in these cases to say whether a bargain is or is not harsh and 729 unconscionable. That the task is difficult no candid man will deny, but it is a task they have set themselves to perform already, as moneylenders appearing before the Courts have found. How much better it is in the interests of all concerned that that proceeding which has already begun should be legalised and made part of the law of the land. For these reasons, though I do not dispute for a moment the soundness of many of the objections which have been made against the Bill, some of which no doubt will prevail in the Committee stage, I shall support the Second Reading, as the state of things which this Bill will bring about is merely that of regulating and ordering that which already obtains.
§ *MR. HAZELL (Leicester)
, as a member of the Committee of whose labours this Bill was the result, congratulated the Government on bringing in the measure, and expressed the hope that it would be carried into law, although he was not in love with all its details, some of which would have to be modified in Committee. To those who heard the witnesses give their evidence many of the arguments advanced against the Bill appeared illogical and unsound. It was assumed by many that these bargains were made between two persons meeting on equal terms and with their eyes open. The eyes of the lenders were very clearly open, but that could not always be said of the borrowers. The Committee heard of cases without number in which astute money lenders, learned in the law of debtor and creditor, dealt with people who were absolutely unlearned in the law, and who had no conception of the nature of the bargain into which they had entered until they found themselves practically ruined. No doubt there were many reasonable moneylenders and many unreasonable borrowers, and an effective Bill of this kind would strengthen the hands and improve the business of men who were bona fide lending small sums of money at rates of interest which might appear high, but which under the circumstances were not extortionate, and it would squeeze out of 730 the business those who used oppression as a means of livelihood. Their circulars were often so misleading that when they were not absolutely untrue, they required a very expert person to understand exactly what they meant. No doubt the people who were victimised were foolish and blameworthy, but there were a great number of people whose knowledge of business affairs was so small that it was not fair to face them with people who were extremely acute in one branch of the law, and perhaps one only. The Committee took the evidence of over forty witnesses, and with the exception of one hon. Member the Report was absolutely unanimous. There could be no doubt whatever that registration of these lenders was very desirable. It was the duty of the Government to carry the Bill through, and he was sure that with proper handling in Committee it would be a very useful and important measure.
§ MAJOR RASCH (Essex, S.E.)
I do hope that the House will pass the second Reading of this Bill. I should like to say half-a-dozen words with reference to one class of persons in particular who are peculiarly the victims of these thieves—I have been through the mill myself—I mean with reference to the position of the British officer, or rather the British subaltern, who is peculiarly their victim. That ineffable Department, the War Office, has provided that certain regiments should be so hopelessly and ridiculously expensive that it is absolutely impossible for the son of a country gentleman to live in them. The War Office seem to prefer to fill the commissioned ranks with South African Jews and American millionaires rather than with Englishmen. The result is that, in certain cases, a son of an English country gentleman gets into one of these expensive cavalry regiments. Either the regiment give a ball or a mess dinner, or his brother officers buy polo ponies at £200 apiece, or the War Office alter the whole of his kit from blue to red, or they put the regiment on pie-bald horses instead of brown horses. The result is that the young officer does not do what he should do, and he finds him- 731 self unable to get on and to pay his mess bill. The boy does not go to his father for help, but he invokes the aid of "the man round the corner'," and pays 50 or 60 per cent. for a loan. This goes on until the money-lender gets him fairly on his hooks. The money lender then writes to the War Office, and the War Office writes to the boy's parents, and the boy has to retire. The result is that the boy is ruined, and he becomes a club loafer, or drives a hansom, or even becomes a lawyer, and his career is absolutely ruined. What I say is that the only way to stamp out this pernicious breed is to pass some such Bill as the Government have now placed before the House, in order that the boy, like the Prodigal Son in the parable, can go to his father in the first instance instead of having that association with the swine. I hope the House will not pay too much attention to the false sentiment so admirably expressed by my hon. friend the Member for West Fife. It is the duty of the House to extend its protection to other people besides the class to which my hon. friend has alluded.
§ MR. MADDISON (Sheffield, Brightside)
I have listened to a large part of this debate, and the most peculiar thing about it has been an attempt to show that the money-lender is a blessing to the working classes. I have not a keen sense of humour, but I do certainly appreciate that joke. The right hon. Gentleman the Member for West Fife in his brilliant speech entirely marred it when he attempted to indulge in that special pleading about the poor people who had to go to the money-lender in their time of dire necessity. I quite agree that there are many respectable money-lenders, but I do not like very much this first clause. I think myself that there is a tendency in our just zeal against excesses to do injury to those who may be respectable members of that particular class. I have been very much interested in the somewhat frequent quotations from Jeremy Bentham, and I am bound to say that when those quotations came from the mouth of the hon. Member for Walsall I began to have a somewhat serious regard for that great philosopher. But, after 732 all, are the hon. Gentlemen who have quoted Jeremy Bentham so freely prepared to follow him in his philosophy"? Very likely the hon. Member for West Fife; would, but the hon. Member for Walsall is a living contradiction of Bentham's philosophy from beginning to end. I have a profound respect for that brilliant group of utilitarians of which Bentham and the elder Mill formed such a prominent part, but are hon. Members who have quoted from them not aware that, like most doctrinaires, they made no exceptions to their rule, and thus you have John Stuart Mill, in his love of liberty, actually opposing any attempt to deal with the sale of poisons, for he believed in freedom to poison yourself or other people. I think in all these matters of freedom our experience has shown that you must in a civilised community regulate it, for it is regulation which, after all, has given us the best results. So far as I am concerned, I believe that if you were to deprive the poor amongst the working classes of all moneylenders good and bad, the net result to the working classes would be distinctly good. It was really amusing to hear the hon. Member for Walsall discoursing upon this point in such a fluent way, that one-could hardly keep pace with him as he gave us those high economics as to how the value of money was regulated by the law of supply and demand. I had my mind upon some poor wretched man who has gone wrong with his accounts, some miserable clerk who has got wrong to the extent of £20 or £30 with his accounts. He goes to one of these money-lenders,. and in his extremity and dire necessity he becomes a hopeless victim in the hands of these unscrupulous men. The result is that this poor man becomes absolutely helpless and hopeless in the hands of the money-lender. That is only one type. There can be no freedom of contract or any real contract between a man who possesses money and another man who does not possess it and must have-it. In that dire necessity the borrower is prepared to enter into a contract which, I venture to say, would not be considered fair, and should not be considered fair, by any civilised community. Although I agree in principle with this Bill, I wish to say that I shall support any Amendment which gives it more effect in the direction I have indicated, for it is an attempt to interfere not with what I would call 733 the regular forces of commerce, but with the brigands of commerce, and just as you would treat a regular army very different from what you would treat a band of brigands, so I think this House is justified in adopting the same policy with respect to money-lenders. It has been said that this Bill really fixes a certain rate of interest. It is needless to say that I am not a lawyer, but in reading this Bill through I must say that I could not get that meaning out of the measure. I admit that the scheduled rates of interest establish an indication to the Judges, but the clause distinctly says that if the scheduled rate of interest has been exceeded the court may reopen the trans-action, and I take it that in the reopening duo regard would be had even where the scheduled rate of interest had been exceeded to the peculiar circumstances of the case. Without wishing to occupy the time of the House any further, I do give to this Bill my support, not because I agree with every detail of it, but lie-cause, first of all, I think a real evil has been made out, and no one has attempted to deny it. The evil exists, and hon. Members who are opposing this Bill are evidently prepared to allow that evil to go on until it reaches almost the open form of fraud. I take that to be the case. I think we can very rightly, without encroaching upon the freedom of trade, take this step. I wish to say before I sit down, in support of my hon. friend the Member for Stepney, that the real truth is that we have already in some parts of the country—and I am glad to hear that we have them in Stepney—banks and other places where this difficulty has been solved completely. The hon. Member for Leicester could tell us of the good work that co-operative banks are doing at the present time, and there is no need for the working classes to depend on these money-lenders either bad or good. But whatever may be said against this Bill, do not let it be said that it would, in any sort of way, injure the best interests of the working classes. Money-lending is a great curse, and it does an enormous amount of injury to the working classes, for it gets them into habits which affect them for a lifetime.
§ Debate to be resumed upon Monday next.