§ Mr. HARNEYI beg to move, in page 10, line 21, to leave out the words "five per cent. per annum," and to insert instead thereof the words "the rate provided for in the original contract."
The object of the Clause is to prevent a very great injustice being done to moneylenders. The Clause as it stands says that in bankruptcy not only for the purpose of dividend but for the purpose of voting at meetings and compositions and schemes of arrangement a moneylender shall, as regard; that portion of his claim which is made up of interest, be treated as if the interest is only 5 per cent. after all the other creditors have been satisfied to the full, and then he may come back for the balance. The effect of that is that in the case of the insolvency of his debtor the moneylender shall be treated as if every remedy then opened, namely, for the purpose of receiving dividend for the purpose of voting on a scheme of arrangement, for the purpose of voting for a composition, for everything he could do to get his money back, as if the interest was 5 per cent, and not the full amount.
Take a concrete case. The moneylender makes a bargain. He says, "I will give you £100 if you will promise to give me £148—48 per cent. is the maximum interest under this Bill. There is a bargain. Curtailed in every conceivable way, the moneylender who makes that bargain has to be a man of good character, he has to get a certificate, he has to pay a certain 817 licence fee, he has to make returns, he has to go through an elaborate system of accountancy, and even the 48 per cent. can be cut down if the Judge thinks it is unreasonable. So here you have a man who must be of good character, who is absolutely limited as to the amount of interest he can charge, and who is restricted in every possible way. Having made a perfectly legal bargain under all these adverse circumstances, he ought to have the remedies of the ordinary creditor. This Clause has not been put into the Bill for the purpose of mitigating the evils of moneylending, and it has nothing to do with circulars or with the moneylender getting the borrower into his net. All that has been done by the time this Clause is in operation. It has nothing at all to do with benefiting the borrower, and that is a point I wish to stress. In the circumstances with which we are now dealing, the borrower is out of the picture.
You are creating a preference between one creditor and other creditors. Why? Because one of them happens to be a moneylender and the others are not moneylenders. I confess that I do not see very much difference between moneylenders who take advantage of persons in impecunious circumstances and other traders who also take advantage of them by putting up the price because they know the chances of getting payment are doubtful. When any young man goes to his tailor and says "Oh well, you know, I will not be able to pay you for perhaps six or eight months," the tailor makes him pay 60 or 70 per cent. more for his suit. Therefore, I think the tailor or dressmaker, or whoever it may be, is in exactly the same position as the moneylender.
This Clause sprang up in this way. In 1890, the Bankruptcy Act had a provision that where persons were putting in claims for dividends, if the claim included a claim for interest, i.e., interest upon a debt, only 5 per cent. of that interest would be allowed until all the other creditors had been paid. It was not aimed at moneylenders at all. It came to be considered by the official receivers as meaning not interest on a debt but interest in a debt. So what they did was this. They cut down the interest that the moneylender, like any other creditor, might charge on account 818 of arrears of payments. It was thus that they brought forward this extraordinary anomaly. Take a dressmaker who expends £100 upon buying dresses. She disposes of the £100 worth of dresses to customers for £150. £50 is her gross profit. If a debtor of that dressmaker goes into bankrupty, the dressmaker is allowed to prove for £150, but she is cut down if she charges interest on the nonpayment of that £150. Now take the case of the moneylender. The moneylender has £100, and he says "I will give you that £100 in sovereigns if you will promise to give me within a certain time £150. The £150 received by the dressmaker is capital plus profit, and the £150 due to the moneylender is capital plus profit, but the profit of the moneylender is called interest, and, therefore, the official receivers can cut that interest down. That is a great injustice, and it has operated on a great many occasions against moneylenders. We do not want to alter that. We cannot alter it in this Bill. This Bill goes a great deal further than that. So far from remedying injustice to the moneylender it is going to do a further injustice to them, because not merely will the moneylender differ from the dressmaker, bootmaker, grocer or wine merchant, but he 'will have his profit cut down to 5 per cent. Thus, for all practical purposes, he will be put into a position as though his original bargain was 5 per cent. instead of 48 per cent. as is provided for in the Bill. I say that this is unjust, unfair and unequal treatment.
I think the House ought to vote in favour of this Amendment on purely logical and just grounds. It does not touch the evils of moneylending, and therefore why should a moneylender who has made his bargain subject to all these restrictions and is able to say, "This is a perfectly legal bargain," be deprived of all benefit except 5 per cent. I do not see any justification whatever for that. It was said in Committee that the only grounds upon which this proposal was put forward was that moneylenders might charge exorbitant interest, that they might pile up their claim by putting on interest. It was also asserted that in the case of bankruptcy they might use the method of piling up their claim for the purpose of defeating the other 819 creditors and preventing a composition or arrangements, and compelling [...] publicity of bankruptcy proceedings, and in that way force a man to pay something. Any lawyer in this House knows perfectly well that not one, but thousands of cases arise every year where ordinary creditors say: "That fellow will pay sooner than go into the Bankruptcy Court." It is not only moneylenders who say this, but other creditors. As a matter of fact, this Clause does not prevent that in the slightest degree. The way to prevent this is to make a provision that the moneylender shall not be allowed to push a debtor into bankruptcy. This Clause says that his voting powers shall be limited. He will not have the privilege, for instance, of saying, "Well, I think that man should really have paid 11s. in the £" although other creditors might think that 9s. in the £ was sufficient. This man's voting power is cut down. Why should he not have full voting powers like other creditors?
It may be said it is unreasonable to ask that the law as it stands under the Bankruptcy Act of 1890, and afterwards confirmed by the Act of 1904, should remain unaltered. But the law operates unjustly and unequally at the present time by reason of the renderings that have been given to certain words in the Act of 1890, when there was no Moneylenders Act. I should like to see an Amendment brought in to set the law right and to remedy the injustice which has been done all these years to moneylenders. Certainly, to aggravate the position, as this Bill does, is wholly without any justification. In 1890, or even ten years later, I could have understood people saying: "We must stop these bloodsuckers—that is what the majority of people would call them, but I would not—these vampires, from rushing people into bankruptcy, and putting forward exorbitant interest for the purpose of being able to outvote the other creditors." I could understand that being said in those days, because there was no restriction then as to the character of the moneylender and no limitation as to interest. In those days they might be men of infamous character, and their interest might be 300, 400 or 500 per cent. We have now before us a Bill which says 820 [...] must be men of good character [...] that they cannot charge exorbitant interest. They cannot, for all practical purposes, go above 48 per cent., and they cannot even go up to that if the Court thinks that they have acted unreasonably. They must be licensed. At this time, when you hedge round a particular class of tradesman, the moneylender, with safeguards which are not applied to any other tradesman, to say that if a man becomes insolvent the moneylender, of all creditors, must be deprived of the rights which the law provides for other people, is most unfair.
§ Commodore KINGPut shortly, I gather that the complaint of the hon. and learned Member is that moneylenders have been treated for the purpose of voting or composition on the same basis as they stand at present in regard to voting for the purpose of dividend. He complained of the harshness under the Bankruptcy Act of their being treated on the basis of an allowance of only 5 per cent. interest.
§ Mr. HARNEYI said that under the Bankruptcy Act they are limited to 5 per cent., but only for the purpose of dividend. That is bad enough, but under this Bill they are also limited to 5 per cent. also for the purpose of composition schemes of arrangement and voting generally, as well as dividend.
§ Commodore KINGThat is what I understood. The hon. and learned Member said that we could not alter the Bankruptcy Act, but that we ought not to carry the principle of Bankruptcy Act to its logical conclusion in connection with this Bill and treat the moneylender for the purpose of voting in respect of compositions and arrangements as they are treated under the Bankruptcy Act for the purpose of dividend. The moneylender would still have the opportunity of obtaining any further interest that might be due to him that the estate in bankruptcy might permit, after the other creditors have been paid.
§ Mr. HARNEYHow often does that happen?
§ Commodore KINGHe has that right. The provision in this Bill is merely to protect the interest and position of other creditors. The moneylender is limited to 5 per cent. for the purpose of composition. It would be very wrong if the moneylender were to be allowed to rank for the whole of his interest, perhaps an exorbitant interest of 40 per cent., 50 per cent., or 60 per cent.—
§ Mr. HARNEYForty-eight per cent.
§ Commodore KINGForty-eight per cent. is only a guide; it is not a limit. It would be very unfair to the other creditors if, whatever the rate of interest they charged, they were allowed to vote and to have a voice to the whole of the amount, as against other creditors who are limited to 5 per cent.
§ Mr. HARNEYThe other creditors get their full interest in the form of profits, which in one case are called interest profits.
§ Commodore KINGI am speaking of the provision under the Bankruptcy Act which allows only 5 per cent. to be added to the capital sum by way of interest. The promoters of the Bill and the Government consider that it is only fair to the other creditors that moneylenders should be limited to 5 per cent. for the purpose of voting or composition as they are also limited to 5 per cent. for the purpose of dividend.
§ Amendment negatived.