§ Order for Second Reading read.
§ 11.5 a.m.
§ Mr. W. T. Williams (Warrington)
I beg to move, That the Bill be now read a Second time.
The Bill has at least one merit. There can be few Private Members' Bills that have come before the House with so great an amount of general acceptance, at least outside the House, I have had a considerable number of letters totalling I think, many hundreds. For the first time in my life I have found myself within The Times leader, and on reading many other newspapers—ranging from Right-wing to Left-wing—I have discovered that for once the Press is universally on my side. Indeed, I observed that in the distinguished newspaper, the Daily Mirror, on Wednesday there was an invitation to the 627 right hon. and hon. Members of the House to ensure that the Bill goes through.
I understand that at least until yesterday the Hire Purchase Trade Association and the Finance Houses Association were of the opinion on the whole that this was a good Bill, although there were some things wrong with it. I understand that that position has now changed rather and that they have somewhat severer criticisms of the Bill than hitherto. I hope that before the end of this day they will be persuaded that some of their most awful nightmares may be lulled and that the Bill, though they undoubtedly think they could have drafted it better and produced it more satisfactorily, will at least give them the opportunity of presenting for consideration in Committee some of the matters about which they are anxious. I hope that they may feel that on the whole, the Bill is still a good Bill.
The most interested party unfortunately has been the most silent. I have been utterly unable to discover where the Government stand on this. That, of course, is not surprising in these days, because I think it is true to say that there is ample evidence that the Government do not really know their own minds about anything. Indeed, 1717 they are confused so much that when Ministers go to meet the Queen they cannot even arrange to do that properly.
I would have been grateful to have been able to discover the views of the Government. For I am certain that, whatever view the Government take about long-term legislation on this important matter of hire purchase which affects the lives of more people than almost any other aspect of public finance and public affairs, there cannot be any doubt that in the legislation as it now stands there is such confusion and so many abuses of the hire-purchase system that it is little short of a scandal. In the end, when the Molony Committee reports, it may be felt that it is not so much a change within the framework of the hire-purchase system which is required as a complete change of the whole framework and the devising of some other means by which people may be helped to buy consumer goods.
As we learned from the President of the Board of Trade in answer to a recent Question, the Molony Committee is not expected to report earlier than the second quarter of next year. One's experience is sufficient to be able to say that if that is the earliest, the probability is that it will not report for some time after that. If the Molony Committee does not report until some time in the second quarter of next year, it will be impossible for the Government to give the matter any consideration until after the long Recess next year. That takes us to the end of 1962 and the beginning of 1963 before the Government can give their minds to the business of drafting elaborate comprehensive legislation of the kind which they may want. It is difficult to believe that, with the best will in the world, any legislation on the Molony Report can be expected until 1963 or 1964, and, if an election comes in in the meantime, that is obviously very long-term consideration.
In the meantime, for three or four years before comprehensive legislation is undertaken, if it is ever undertaken, many hundred of thousands of people will find themselves in the same situation vis-à-vis their hire-purchase commitments as many millions now are. I tried to discover from the Board of Trade, which was not disposed to do the research 1718 to inform me, what was the number of people in the large conurbations in the North-West and in Wales who were subject to warrant for non-payment of debt to hire-purchase companies. The Minister could not, or would not, provide me with that information, but I was able to discover that for the country as a whole the figure ran into many, many thousands. Not only are many thousands of people paying their hire-purchase commitments under warrant, but no fewer than 2,500 in the North-West alone are serving or have served terms of imprisonment for failure to pay hire-purchase debts.
§ Mr. Stephen McAdden (Southend, East)
The hon. Member has obviously done some researches into this matter. He has just spoken of many thousands, but earlier he talked about hundreds of thousands. He does not suggest that hundreds of thousands are now in prison. Can he tell us how many thousands?
§ Mr. Williams
I am sorry, but I cannot. I tried to memorise the figure and I avoided using the figure because I wanted to avoid giving a wrong impression. I did not say hundreds of thousands. I said many, many thousands. The figure is tens of thousands and not hundreds of thousands. I gave the figure that there were 2,500 in prison in the North-West for failure to pay hire-purchase debts.
That is not the real scandal. The real scandal, bearing in mind that the legislation I am proposing is desirable if it is only interim, is the enforcement of hire-purchase agreements in the courts. I do not want to be misunderstood, and I speak not literally but metaphorically when I say that the courts hold the hire-purchase laws in contempt. If for some reason a hire-purchase company takes a defaulting hirer to the county court, the position is such that, as the hire-purchase companies themselves said in a recent publication, they feel the company does not get justice in the county court. The situation is so difficult that county court judges are making orders of a shilling a week, or a shilling a month, in respect of debts of many hundreds of pounds. In a recent case the county court judge awarded an order of a shilling a week in respect of a debt which at that rate would take 146 years to pay.
1719 When that situation has arisen, it is clear that hire purchase and its general operation has become a jungle. What the Bill seeks to do in simple terms and by simple methods is to tackle the problem at the point at which it is making most impact on the lives of ordinary people. The Bill proposes to do three major and one minor thing, and I will deal with the minor first. That is the provision in Clause 4 which says that there shall be certain documents which are used in hire-purchase transactions printed in type no less than ten-point. That is roughly the same size as the type in which the Bill is printed.
That refers to only two documents. Last night I had a letter from an hon. Member who asked me whether it referred to the whole of the hire-purchase agreement. That was suggested to be the case in one of the memoranda issued by the hire-purchase companies and the finance houses. That is not so. The only documents which it is proposed should be in ten-point Times print are the documents shown in the schedule of the Hire-Purchase Act, 1938, and the Schedule of my Bill. Those two documents are the notification of the agreement, the memorandum of the agreement giving a short summary of the signed agreement and which under the 1938 Act has to be sent within seven days, and the very small document shown at the end of the Schedule of my Bill.
A good deal of the criticism that has been levelled against this proposal is irrelevant. It seems a little unfortunate, and gives evidence of the somewhat scant attention which has been given to the contents of the Bill, that a document should come from one of the interested parties showing that it is not aware of the fact that I was not referring to the hire-purchase agreement but only to the short documents in which the person who is entering into a hire-purchase agreement shall be given a clear indication of precisely what it is he is letting himself in for in relation to payments, and the nature of the instalments. That being so, the criticism which has been levelled by the finance houses against this aspect of the Bill is entirely misconceived and in those circumstances irrelevant.
My object in introducing this aspect of the matter is simple. It is that in 1720 however large print one prints a document, which at the moment consists of four and sometimes as much as six pages, it is obvious that people will not read all the print, and indeed, although in the courts one is deemed to have read documents which one signs, judges time and again say that these documents are too complicated and too long, that they cannot be understood by simple people. This is one of the ways in which judges lean over backwards to help people who have come before them on hire-purchase defaults.
What I am saying, and I would have thought that it would be acceptable to all reputable dealers and hire-purchase companies, is that before a hire-purchase agreement is entered into, a document in good size print shall be supplied to the prospective hirer or purchaser, containing only the basic elements, the things that the hirer is bound to do, and the terms on which he is bound to pay, all in quite short compass, and that he shall be given 48 hours in which to mull over that document.
I cannot for the life of me see how that can be anything other than desirable. I am sure that all hon. Members must have had experience of people who have written to them, or been to see them in their constituency "clinics," and told them how they have been press-ganged into signing hire-purchase agreements without understanding them, and without having had time to consider whether they could afford to meet the commitments to which they had been subjected as a result of having the goods. One often hears this said, "Immediately I signed the document" or "When my husband came home"—in the case of a wife who has been visited during the day by a door-to-door salesman—"we had a family discussion about it. Although at that stage we had no documents before us, we discussed the fact that we had committed ourselves to purchasing something we did not want, and which we could not afford, and when we tried to get out of it we were faced with the situation that the hire-purchase company with whom we had the agreement wrote back and said, 'Sorry. That is nothing to do with us. You signed the agreement, and you are bound by it'."
1721 Many hundreds of thousands of people—I am sure that I cannot be wrong about that figure—could tell harrowing tales of having committed themselves to the purchase of books, kitchen equipment, electrical equipment, and things of that kind which they cannot afford and which have resulted in them being involved in serious problems.
A few weeks ago I appeared on a television programme in which a woman had served nine months imprisonment because she had been caught up in this kind of situation. She had been press-ganged by a high-pressure salesman into committing herself to a hire-purchase agreement which she could not afford. Then, because she was afraid because she had not told her husband about the agreement, she entered into a new hire-purchase agreement and sold the article she obtained under this agreement to pay the hire-purchase commitments on her first one.
§ Mr. W. R. Rees-Davies (Isle of Thanet)
The hon. Gentleman is giving these illustrations. I am sure that nobody wants to stop him, but it might help if we knew the name of the woman, the county court, the name of the judge, and the extent of the debt so that we can have an illustration which has some validity. After all, if one has no details of any kind, it is easy for people to talk about scandalous details. If no details are given, one cannot test the validity of the argument.
§ Mr. Williams
I am sure that during the course of the debate the hon. Gentleman will be more than surfeited with examples of many kinds. I am attempting to use general illustrations, and I am sure that all hon. Members have experience of situations of this kind. If the hon. Gentleman wants to make a contribution to the debate, I am sure that there is a proper way to do it.
There can be no real doubt in the minds of reasonable and unprejudiced hearers that this kind of thing goes on; that people are so committed that they find themselves forced by high-pressure salesmanship into commitments which they cannot afford, in respect of articles which they do not really want.
I am not committed to the words in Clause 2. If any hon. Member or the Government feel that there is a more 1722 efficient way than that laid down in the Bill of achieving what I want, I would not object to it. I do not pretend to be the fount of all wisdom, and I do not believe that when I die wisdom will perish from the earth. Perhaps with the joint wisdom of the House and the skill of the draftsman—and I think it is agreed on both sides that it is a desirable reform—indeed, I was helped in many ways by a pamphlet issued by the Conservative Political Centre—we can find words to protect people from high-pressure salesmanship of a kind which is utterly unscrupulous, which involves people beyond their capacity to pay, and in respect of articles which they do not want.
I think that the way to do it is to ensure that before any hire purchase is entered into a notice of the terms of the proposed agreement in this short form shall be given to people so that they can study them. My object in putting it this way is that, very often, by the time people see any document they have signed the agreement. I am suggesting that before they sign the agreement they should have a document before them which tells them in plain terms what it is they are committing themselves to, and allows them time to discuss the matter with their families and consider it without pressure.
It has been said that this will be unfair to scrupulous dealers, by giving an opportunity to unscrupulous dealers to get behind the law. Indeed, it was because of that suggestion that I included in my Bill a paragraph which says that if the hirer fails to obey the instructions of this paragraph, requiring him to give 48 hours notice before the things come about, that that should be a criminal offence. In my submission that takes a great deal of the sting out of the suggestion that this will be impossible to enforce. It will be no more impossible to enforce than the present situation in which dealers who act for hire-purchase companies make undertakings and give assurances of a kind which the hire-purchase company rebuts.
§ Sir Eric Errington (Aldershot)
I do not understand what the hon. Gentleman means by referring to dealers who are the agents of a hire-purchase firm. I think that that is rather inaccurate.
§ Mr. Williams
I tried to be as accurate as I could. I did not say "who are the agents". I said, "who act as, or purport to act as, agents".
I have no wish to score a point. All I am saying is that the dealer who arranges a hire-purchase transaction between a hirer and a hire-purchase company may often, for instance, not take the deposit. He will say, " AH right, I will pay the deposit", or, "I will put the deposit down as having been paid ", thereby evading the law.
This is common practice. It is a statutory requirement that before a hire-purchase agreement is entered into a deposit must be paid in one form or another, but dealers often evade this provision of the law, and my Clause is neither more difficult to enforce than the present provision nor open to the same abuse, because of the provisions contained in the penalty Clause. Anybody can lay information in respect of an unscrupulous dealer who evades this aspect of the Bill, and that dealer may be liable, on first conviction, to a fine not exceeding £50 and, in the case of a second conviction, to a fine not exceeding £100, or to imprisonment, or to both. There are real teeth in the Bill, in that it enables more effective control to be applied than exists at present in relation to hire-purchase agreements.
§ Mr. John Howard (Southampton, Test)
Will the hon. Member make it clear that the owners—the finance houses—have no method of checking whether these obligations have been observed? They would have to institute the most elaborate checks to find out.
§ Mr. Williams
I am grateful for these interventions. They show that the House is trying to follow the terms of the Bill. I am coming to that point; I shall not ride away from it.
But leaving finance houses out for the moment, it is a fact that dealers can evade their liabilities in respect of many of the statutory commitments, and the hire-purchase company has no more control over those matters than it would have over this one. But if the dealer, on an information laid by an individual, is not only liable to have the transaction declared null and void—at which stage the finance house is mainly affected—but is also laying himself open to a heavy 1724 fine, or imprisonment, or both, it is self-evident that the Bill contains more teeth to prevent abuse than does the present Hire-Purchase Act. That is all that I am saying in this Bill.
Of all the hundreds of letters that I have received since I put forward the proposal for a 48-hour breathing space, in which prospective hire-purchasers could find out what they were being committed to, not a single one has said that it is not a desirable provision, if it can be made effective in one way or another. Some people prefer a different way from that which I am putting forward, but they all say that some way must be found of dealing with this situation, because it is absolutely essential to do so. That is so true that if the Bill were to be passed for no other reason, this in itself would be something to commend it to the House.
The second of the major reforms that I am putting forward raises the limit of statutory protection from £300 to £1,000. In the case of articles costing less than £300, if the purchaser has paid one-third of the price the commodity cannot be snatched back by the finance house. If he has paid up to one-half of his hire-purchase commitments he is not required to pay any more if he returns the article, subject to any damages that might be claimed in respect of the abuse of the article while it has been in his possession. In general, it would be fair to say that once the purchaser has paid half the price he has fulfilled his commitments, and the hire-purchase company, having repossessed the goods, cannot sue him for any more money.
In my submission the criticisms that have been made of that provision are not relevant, except perhaps in respect of motor cars. As I understand it, nobody who regards this as a somewhat expensive Measure for finance houses is particularly concerned about the increase except as if applies to motor cars. Indeed, in the recommendations proposed by finance houses to the Molony Committee the suggestion was made that the sum might be increased, except in respect of motor cars.
§ Sir E. Errington
Will the hon. Member also bear in mind that besides motor cars there is the question of industrial plant? Will he deal with that?
§ Mr. Williams
Certainly—I will include industrial plant with motor cars, although the Bill is not particularly concerned about industrial plant. I have made a general increase, up to £1,000. Again, I take the view that if examples can be produced of abuse in certain instances those abuses can be dealt with in Committee. But even in respect of motor cars it is very important to remember the difference in the situation now as compared with what it was in 1938, when the first Act was introduced. In 1938 it was possible to buy a Ford 8 motor car for £100. The equivalent motor car of the Ford company at the moment is the Popular, which I believe is sold at £538. Therefore, the situation in 1938, when the £100 limit was proposed, and did cover motor cars, is not altogether unrelated, in respect of the decrease in the value of money, to the increase that is proposed in the Bill. The decrease in the value of money between 1954 and 1961 has been considerably greater than the difference in value between 1938 and 1954, when the limit was increased to £300.
§ The Parliamentary Secretary to the Board of Trade (Mr. Niall Macpherson)
Is it not the case that in the original Act of 1938 the limit in respect of a motor car was £50 and not £100?
§ Mr. Williams
In that case I apologise. At any rate, I am glad at last to have got some expression of opinion from the Government. Nevertheless, although the position relating to motor cars obviously requires consideration, and perhaps some amendment while the Bill makes its progress through the House, the complaint that these proposals would be grossly unfair to the hire-purchase companies is somewhat unrelated to reality. Whether or not we raise the proportion from one-third to one-half, and whether or not we increase the amount of depreciation from one-half, as it exists in respect of articles costing less than £300, to some higher proportion, the situation remains that hire-purchase companies, if successful in repossessing a vehicle, are entitled to claim up to a half, even as the Bill now stands, and under the general law they are also entitled to claim any damages they have suffered as a result of the abuse of the vehicle whilst in the possession of the hire-purchase holder.
1726 So, as in the case in respect of many of the criticisms of the Bill, this is a much over-rated criticism. All the people who have written to me, and those who have considered the question both in my Party and in the Conservative Party, have come to the considered view that, in general, the figure of £1,000 is now well within the proper responsibility of legislation.
§ Mr. A. E. Cooper (Ilford, South)
In the earlier part of his speech, the hon. Member commented that courts were imposing derisory penalties in many of these cases. Is not this new proposal, to raise the limit from £300 to £1,000, going to accentuate that difficulty and involve finance companies in even greater losses than they suffer at the moment?
§ Mr. Williams
It is obviously time that I came to the last and, perhaps, the most controversial point which I wish to make, although most of my time has been taken up in answering interruptions so really I do not think that I am being unfair to the House. Both the hon. Member for Southampton, Test (Mr. J. Howard) and the hon. Member opposite are really on the same point. I think that I have explained sufficiently what I have in mind on my second point and I will now come to my third and, as I say, perhaps the most controversial point in the Bill. It is that the relationship of the hirer, the dealer and the finance company shall be radically changed.
What I have proposed in Clause 3 of the Bill is that when a dealer gives a warranty or an undertaking in respect of an article hired out, the owner—that is, the hire-purchase company, for the article is nominally sold to the hire-purchase company—shall stand in the same relationship to the hirer as if, in fact the agreement were directly between the two, the hirer and the finance company. The hirer shall have the same rights against the owner as if the deal were straight between the two of them, as if the owner were selling to him. In certain circumstances, he would have the right to reject the goods and rescind the guarantee and, in the other case, a claim to damages for breach of warranty.
§ Mr. Charles Doughty (Surrey, East)
Is there not a slight inaccuracy in what 1727 the hon. Gentleman has said? Should the representation be fraudulent, as it frequently is, and someone is seriously injured as a result of that fraud by, say, a machine exploding or a wheel coming off the car, the hire-purchase company is going to find itself liable to enormous damages because of the fraud of some dishonest seller. Is that what the hon. Gentleman wishes to put into the Bill?
§ Mr. Williams
This is situation which applies under every statute law. If a seller sells something which has a serious consequence, such as the hon. and learned Gentleman has spoken about, and damages are proved against him, the hire-purchase company is in no different position from anybody else who makes money by selling something.
I accept the implications of the Bill, and I will say why. I have gone further in respect of fraudulent misrepresentation in the Bill because I have put into it that whatever the rights may be by common law, by statute, now, the thing shall be an offence against the Bill and shall carry penalties. What I was going to say was that in these circumstances the finance company is in the same relationship to the hirer as if the finance company were the actual seller. Alternatively, if the dealer is not a man of straw, the hirer can go against the dealer having the same rights as he would have against the seller.
This point has been met by two arguments, mutually contradictory. The first is the argument put to me by Mr. Gibson Jarvie when I appeared on television with him, that this is precisely the responsibility that all the best finance houses already accept. He said to me, "You are, in fact, asking for nothing," and I think that this was also said at a lunch which hon. Members on this side of the House and I attended with the finance houses. Mr. Jarvie said, "You are only asking in the Bill for the sort of conditions that already the best finance houses are prepared to adopt." I think it was one of my hon. Friends who pointed out that there were many other finance houses who were not as responsible as those in the Association.
The other argument is the absolutely opposite one. It was, "You are putting 1728 such a burden on the finance houses that in order to counter it they would have to increase their interest charges and make hire purchase more difficult. After saying that one cannot both have one's cake and eat it and have one's money and deny one is getting it, I will deal with what seems to me to be the substance of the argument. It is, of course, true that I am by the Bill putting a much increased burden of responsibility on the finance houses. But why should this not be so? I observe in the most recent of their publications the hysterical cry by the finance houses that this is grossly unjust and unfair and that as a result of the Bill, and, indeed, as a result of the position of hire-purchase finance in the country at the moment, the people who need protecting are the impoverished finance houses and not the wealthy individual who buys on hire purchase. But what is the reality about this?
I took the opportunity of making a note of the most recent returns of the four major finance houses in the country. The profits of North Central Finance for 1960–61, pre-tax, amounted to £1.4 million and it declared a dividend of 20 per cent. According to the Investors Chronicle, Astley Industrial Trust—a situation pretty well typical of the whole of the trading results of the finance houses—made a profit in 1960–61 amounting to £370,000 and declared a dividend of 13 per cent. United Dominions—the last report that I was able to obtain was for 1959–60— made a profit of £2 million and declared a dividend of 26 per cent. Anglo Auto declared a dividend of 30 per cent. and gave a one for ten scrip issue.
§ Mr. William Clark (Nottingham, South)
I am much obliged to the hon Gentleman for giving way. His figures are very interesting, but, really, there is no point in talking about the profits of a company unless one also talks about its capital. Therefore, I do not think that the hon. Gentleman is doing his case sufficient justice by only giving the profits. He should give the capital as well.
§ Mr. Rees-Davies
Is the hon. Gentleman citing these companies to show what excellent companies they are, or is he trying to suggest that it is in some 1729 way improper for any of these companies, which are great companies and are very sound, to make a profit, or that if one wants to have hire-purchase finance it is better to go to not such good companies?
§ Mr. Williams
I hope that the hon. Gentleman's submissions to the court are more relevant than those which he makes to the House. I am not saying that it is not better to go to good companies. If the hon. Gentleman is unable to make better interventions than that, I shall not give way to him again.
§ Mr. John C. Bidgood (Bury and Radcliffe)
Will the hon. Gentleman be scrupulously fair and give the most recent figures announced for United Scottish?
§ Mr. Williams
I suggest that the hon. Gentleman can answer that question in his own speech. Mine is the first speech of the day and I am sorry that I am going on so long. I plead guilty, but also plead extenuating circumstances.
I am doing my best to be scrupulously fair and to give the figures. Unless my speech is to be inordinately long—and I think that some of my hon. Friends have other figures which will elaborate those which I have given—I cannot go into all the details which the hon. Gentleman is suggesting. But I think it fair and scrupulous to point out, when companies are saying that they are having so rough a time that they need protection, that they are declaring dividends of 20 per cent., 26 per cent., 13 per cent. and even 30 per cent. with a scrip issue. That is the point that I am making.
I apologise for unduly delaying the House, which was not my intention. I say—this is the very crux of all I want to say on this aspect—that were this single Clause to find its way on to the Statute Book, no other Clause in one Act would do more to bar the door to the unscrupulous and worthless dealers who stand on the kerbside all over the country. If hire-purchase companies were made responsible, so that when they allowed dealers to arrange finance deals for them, they had to make quite sure that those people were scrupulous, many of the criticisms made at present would become irrelevant.
1730 What continually happens is that dealers give undertakings which are repudiated by finance companies; and very often people find that they have to continue to pay to unscrupulous finance houses in respect of articles which have proved worthless and which were obtained from dealers who in the end turn out also to be worthless. I know that the courts endeavour to compel finance companies to accept responsibility in respect of worthless articles and to assist hirers.
A large amount of case law has been built up on the subject. But I maintain that if the courts have to do that kind of thing, it is high time that there was legislation on the Statute Book to enable them to do so without having to build up artificial case law of this kind. If by their acts the courts say that this ought to be the law; if they say, "We will twist and bend the law in order to help people," the thing has become a scandal. It is time for this action to be put into statutory form in order that people may know exactly where they stand and not be obliged to force themselves within the four corners of already decided cases. If this Bill becomes law, this part of it, in my submission, far from involving hire-purchase companies in a scandalous increase in their expenses, would make them more careful of the people with whom they deal and would prove an effective safeguard and protection to innocent buyers from being swindled on their own doorsteps.
§ 11.53 a.m.
§ Mr. Philip Goodhart (Beckenham)
I congratulate the hon. Member for Warrington (Mr. W. T. Williams) on his luck in the Ballot and on the admirable and lucid way in which he has presented his somewhat contentious Bill. Had I been first in the Ballot—I really cannot complain too much about my own luck—I think that I should probably have chosen this field in which to try to introduce legislation, because, of all the spheres of consumer protection, this is the one which lends itself best to private Member's legislation. I should like also to pay ritual obeisance to the pioneering work of Miss Ellen Wilkinson.
The high level of prosperity in this country has in recent years focussed a tremendous amount of attention on the whole matter of consumer protection. 1731 This is not surprising because more and more people are buying complex goods about which they can know very little. One result of this phenomenon has been the spectacular success of the periodical Which. It shares the independent consumer testing field with the Shoppers Guide, another periodical also doing excellent work. Although this is not a "natural break" in my speech, I must say that the reason, or one of the reasons, for this free advertisement is that I am a member of the Council of the Consumers' Association which publishes Which.
Yet another of the results of this prosperity and increasing interest in consumer protection is the much greater interest in the role of the Government in consumer protection and in consumer legislation generally. The Molony Committee has been set up, and various groups within the main political parties have been considering this problem independently. I think it could be argued with some force that no consumer legislation should be introduced prior to the receipt of the Molony Committee's Report which will, presumably, be available in a few months' time. But, as I am also interested in introducing legislation in connection with this matter, it will be perfectly clear that I must reject that point. I do so, first, because a great deal of the evidence which has been given to the Molony Committee has already been made public and so a basis for intelligent action already exists.
My second reason for rejecting it is that the Report clearly will cover a tremendously wide field. Given the best will in the world, I do not see how in, say, the next two Parliamentary Sessions the Government will be able to deal with all the points, regarding which legislative action may, perhaps, be called for. Therefore, it seems that there is a responsibility on all hon. Members particularly interested in this subject to explore the fringes and, as it were, to traverse the highways and by-ways and to find an area in which it may be possible to help the Government by carrying out some tidying-up operations.
One must also remember that the Molony Report is not yet in the hands of the Government. Before any consumer legislation introduced by private Members could reach the Statute Book 1732 it will have been in the hands of the Government for a considerable period, and no doubt in the hands of hon. Members as well. We shall, therefore, have the guidance of the Molony Committee before any of these Measures can possibly reach the Statute Book.
I am firmly convinced that hire purchase has brought great benefits to the people of this country, and that the tremendous growth of hire purchase in the last few years has been an admirable thing. But all growth leads to problems, and there can be no doubt at all that tremendous problems have arisen relating to hire purchase.
I recently had the privilege of being chairman of a Committee that produced the pamphlet "Choice" to which the hon. Member for Warrington referred, and, looking at this problem, we said:The (1938) Act offers a wide protection to those whose agreements are covered, but the recent increase in the number of hire purchase agreements brought into court is a disturbing confirmation of the fears expressed by numerous observers that many weak-willed individuals are tempted into overcommitting the family resources.The Prison Commissioners Report for 1959 includes this statement: 'It is unfortunate that … there is a striking rise to note in the numbers of prisoners received from county courts. The figures below show a steep assent from 1957 onwards. These prisoners come, we have reason to believe, largely as a result of failure to pay commercial debts of which the bulk will have been incurred as a result of hire purchase agreements.' An attached table shows that the number of prisoners received from county courts was 1,116 in 1955, 2,148 in 1957 and 4,821 in 1959.At the moment it is exceedingly easy to make a hire purchase agreement that can only be broken after substantial sums have been paid, and a number of less scrupulous door-to-door salesmen have undoubtedly abused this fact. How far can the foolish and unfortunate be protected against themselves without unduly hampering a form of trading that has brought much benefit to the community as a whole?There is the nub of the problem that we are considering today.
In our pamphlet we made a number of recommendations—that the total hire-purchase price against the cash price should be displayed; that a permanent minimum cash deposit should be required and that it might perhaps be extended upwards at times but it should never sink below a certain level; that the breaking point should be substantially reduced from the 50 per cent. 1733 figure which exists at the moment for second-hand goods; that the 48-hour pause which the hon. Member for Warrington seeks to introduce should be brought in; raising the level of agreements covered in the 1938 Act, and the compulsory registration of hire-purchase deals in cars. This latter recommendation would mitigate the problem of repossessing cars which have been bought illegally, but in good faith, which causes considerable hardship in quite a number of cases, at the moment.
Oddly enough, our recommendations are perhaps even more sweeping than those which were put forward by the Labour Party in its pamphlet. They certainly overlap in a number of cases. I do not think that this is altogether surprising, because although there is a fundamental difference of opinion between the two sides of the House on certain points of consumer protection, this is not a field that readily attracts doctrinaire fanatics. When one considers specific problems it is not surprising that there should be a considerable identity of opinion about the best way of tackling them.
When we come to the Bill itself, I have been somewhat surprised by the amount of opposition that has been suggested in Questions to the proposals in Clause 1. It seemed to me that they were very largely unexceptionable, and should have been generally welcomed by the House, if only to restore the 1938 position.
Nor do I think there will be very much argument about Clause 4. I suppose that one could make some comment about another and perhaps rather more famous Clause 4 now being printed in three-point italic, but if the hon. Member for Warrington wishes to choose ten-point Times, then ten-point Times is certainly good enough for me.
Clause 2 is much more contentious. I support the idea of the 48-hour pause before agreements become valid and as we said in "Choice ".… it is desirable that those who enter into hire purchase agreements—on both sides—should be given a moment of calm reflection in which to consider the implications of the transaction.One should remember the position of the companies as well. Sometimes it is highly desirable that the credit-worthiness 1734 of some of the people to whom sales are made should, if possible, be checked in this period of 48 hours to try to avoid trouble in the future.
§ Mr. J. Howard
Before my hon. Friend leaves that point, which is important, and on the face of it is an attractive proposition, may I ask him whether he really believes that the dealer will get in touch with the finance house until he has received confirmation from the buyer or subsequent hirer that he is in fact going to take the goods? I do not think there will be any reference to the credit-worthiness of the hirer until the transaction has actually been completed.
§ Mr. Goodhart
That may be. I should have thought that in the case of more expensive goods such as cars this might be so, but that it might not apply in the case of some inexpensive article.
It is extremely easy to set the objective that one wants to attain. It is much more difficult to decide precisely how one should attain it from a legislative point of view. I have received a number of letters from people who strongly support the idea of the hon. Member for Warrington, which I share as well, who have considerable doubts about the way in which this can be brought about. I hope that we shall be able to consider this matter very carefully in Committee so that we can see whether this Clause really does give proper long-term protection without causing unnecessary commercial chaos.
Clause 3 is even more contentious, dealing with the whole finance house-dealer relationship. This is an immensely important point. I think it is likely to become even more important and to be brought home more forcibly to the mind of the general public, perhaps, because of the activities of the Rolls Electromatic group, which now includes the Colston organisation.
I fear that here my remarks will have a particularly disagreeable ring in the ears of some hon. Members. I have no wish at all to enter into any sort of witch-hunt, but I have been asked to draw attention, in the context of this Clause, to the problem created by the Rolls Electromatic group. I have been asked to do this by the Consumer Advisory Council, supported by the director of the Consumers' Association and the director 1735 of the Retail Trading Standards Association. These three groups are independent responsible bodies with great experience and expertise in these matters, and I think that I should have been acting irresponsibly if I had rejected their request.
The Rolls Electromatic group, through vigorous door-to-door salesmanship, now seems to have captured about one-third of the market for washing machines now sold in this country. It has a production approaching about 1,700 a week, so I understand from various reports. The Colston dishwasher also has now a very large share of dishwashing market. These machines seem to have attracted a quite unprecedentedly large number of complaints from dissatisfied customers. I quote here from a letter sent to me by the secretary of the Consumer Advisory Council:In spring 1961 a survey showed that 40 per cent. of households own washing machines, and of this 40 per cent. only 2 per cent. had Rolls machines. Shoppers Guide readers are, in my opinion, not representative of the population as a whole and are, perhaps, less likely to buy a machine like Rolls sold only at the door and not through ordinary retail channels. But, leaving this opinion aside, the maximum number of Shoppers Guide readers owning a Rolls machine is consequently about 400, and as we have had roughly fifty complaints, you will see that this is a very high proportion—particularly if you bear in mind that we do not accept complaints unless the consumer has already taken it up, fruitlessly, with the supplier.I am reliably informed, also, that one major newspaper which has printed a considerable part of the very extensive Rolls Electromatic advertising campaign received about 250 complaints—obviously, a quite unprecedented occurrence.
I do not wish to try to claim that this large company is callously ignoring the complaint of its customers. I will take the case of one C.A.C. complaint from a certain family named Ross who had five machines between August, 1960 and October, 1961. Every one of these machines has been unsatisfactory. Either these machines are substandard or Mr. Ross shares with me an ability to render all sorts of mechanical contrivances completely unworkable. However, the fact is that five machines have gone into that household in just over a year. This suggests to me that the Rolls organisation was certainly trying to be helpful, even if it failed in this particular case.
1736 I hope that this business solves its present difficulties, but the fact remains that one has here a very large organisation indeed which has a very large part of the market for certain popular goods, which specialises in door-to-door hire-purchase work, but which seems to be provoking a substantial volume of complaint.
§ Mr. Reader Harris (Heston and Isleworth)
I am very closely associated with this company, as my hon. Friend well knows. He says that he does not wish to be involved in a witch-hunt. Is he aware—I am sure he must be—that one of the organisations which has asked him to make these inquiries, the Retail Trading Standards Association, is, of course, a representative of the retailers and is therefore, completely—
§ Mr. R. Harris
Certainly. No one can say that the Retail Trading Standards Association is not representative of the retail trading interest.
§ Mr. R. Harris
This organisation is completely against any direct-selling organisation and is, in fact, conducting a witch-hunt. It is serving my hon. Friend with information in order that he may pursue a witch-hunt.
§ Mr. Goodhart
Naturally, I informed my hon. Friend that I intended to make certain references to this particular company. I cannot accept that the Retail Trading Standards Association, despite its title, is by any means exclusively in the control of retail shop owners.
§ Mr. Goodhart
I should be glad if, when my hon. Friend catches your eye. Mr. Speaker—as I hope he will—he would do that. If he does give the full list, as I am certain he will, it will take him a very long time to do so, so I hope that he will not wish to do it at precisely this moment. Largely, of course, I have been approached by the Consumer Advisory Council, and it is through that organisation that the main 1737 body of complaints has reached me. The Consumer Advisory Council cannot be said to have a direct interest in any way.
The point I was seeking to make is that one has here a very large organisation taking a very large part of the market which is provoking considerable complaint.
I believe it to be extremely important that we should at this stage take a very hard look at the whole dealer-finance house relationship. Here again, I do not claim that the provisions of Clause 3 are, as drafted, exactly right, but, in my view, these are matters in regard to which there will be increasing problems during the next few months and years and it is vital that we should consider them carefully now.
I commend the Bill to my Conservative colleagues. I think that it will have to be looked at closely in Committee, but I hope that, if it is opposed—and I should not be surprised if it were opposed—it will receive the substantial majority which I believe it deserves.
§ 12.19 p.m.
§ Mr. A. E. Oram (East Ham, South)
We are discussing a subject of which, I am sure, all hon. Members have some direct experience. Lawyers like my hon. Friend the Member for Warrington (Mr. W. T. Williams), through their experience in the county courts, can speak about it. Hon. Gentlemen such as the hon. Member for Beckenham (Mr. Good-hart), who has obviously given a great deal of study to the matter through his association with Which and with the Conservative pamphlet recently published, can speak of it from another angle.
But, whether we are specialists, lawyers, or, like myself, mere laymen in these matters, I am sure that all of us have had direct experience of human cases week by week, month by month, of people who have come to us in great financial difficulty because they did not understand their commitments under hire-purchase agreements. Legislation on this matter is, without doubt, long overdue, and I compliment my hon. Friend on taking the initiative, since he was fortunate in the Ballot, in introducing this important although, within 1738 the general sphere that it tackles, limited Bill.
The importance of it derives from the fact that hire-purchase business has increased enormously since the House last legislated on it. Over the last four years, new credit, partly covering hire-purchase, partly covering credit sales, has increased from £350 million to £600 million. If one thinks only in terms of that covering personal consumption, the increase has been from £210 million to £335 million.
A large part of this increase undoubtedly has been due to the extension of the motor car business. A great deal of the extended credit has been to cover the purchase of new or used cars. The increase in that category over the last four years has been as much as £100 million. There is no doubt that a great proportion of the transactions in cars is outside the protection of the Statutes at present in force. That is why I think that all of us who support the Bill attach particular importance to that part of it which raises protection from the limit of £300 to a limit of £1,000.
It is important that legislation should be passed to cover new car and secondhand car transactions. I have seen the motor car trade described recently as a trade which attracts the "spiv", the crook and the defaulter. My hon. Friend gave some examples of that, and I have no doubt that other hon. Members will do likewise, which amply substantiate that description. I hope that the Bill will find its way on to the Statute Book, because, if it does, it will certainly make it more difficult for the "spiv" to operate as he has been operating.
My hon. Friend should be complimented, not only on dealing with this subject but on not being tempted to cover the whole of hire-purchase legislation. He has kept within wise limits. I was reading again recently a report of a survey made four or five years ago by the National Council of Social Service. Listed at the end of that report were no fewer than twenty major categories of problems connected with hire-purchase business, which had come the way of the citizens advice bureaux and other social service organisations, each entailing a great many cases of human hardship. My hon. Friend might well have been tempted to try to cover 1739 all these by legislation, but obviously that is not the sort of thing which can be covered by a Bill introduced by a private Member. He referred to the fact that the Molony Committee is examining this problem and other consumer problems. I hope that before very long the Board of Trade will see fit to introduce legislation to cover the whole sphere.
I hope that that is the Board of Trade's intention, but I echo what my hon. Friend said, namely, that today that will not be put forward as an excuse for not proceeding with my hon. Friend's Bill. We should not be told that we must "wait for Molony." I say that because we are already "waiting for Hodgson." We are already "waiting for Gowers." We are already waiting for legislation which has been promised on complicated and contentious matters like weights and measures and safety in offices and shops. Year after year, the House has been put off and told that it is coming. If, when we have the Molony Report, we have to wait the ten and more years that we have had to wait for weights and measures legislation, which still has not found its way properly into the House, then I think that we should be most ill-advised not to take the steps that we now have the opportunity of taking in connection with my hon. Friend's Bill.
I referred to the fact that my hon. Friend has not tackled many hire-purchase problems which he might have been tempted to tackle. One of these is the amount of interest that is charged by hire-purchase companies and retailers. The hon. Member for Beckenham referred to Which. I was interested to see that in one of the early editions of Which—I think that it was about the second of its monthly publications—there was a survey of hire-purchase transactions and reference was made particularly to the amount of interest that is charged. It brought out some most interesting and important figures about the way in which quite unjustified charges are added to the price. If my hon. Friend's Bill is passed into law, at least the purchaser, the hirer, will be clearly warned beforehand by the notification of terms what is the amount of these extra charges and will have 1740 48 hours in which to wonder whether he is getting as good a bargain as he at first thought.
It is perhaps worth quoting some of the interest charges which were revealed by Which in its survey. It refers particularly to the hire-purchase charges on bicycles which it discovered to be 22½ per cent. It is pointed out that, in strict interest terms, this is no less than 40 per cent. My hon. Friend passed to me just after he had finished his speech a letter which reached him after he had made his speech. It is a letter reprinted from Electrical and Radio Trading of 22nd April, 1961, in which the accusation is made that the amount of interest charged in many of these transactions is no less than usury. The magazine Which has given a great deal of good advice to consumers over the period that it has been in existence, and I think that this bit of advice is well worth quoting:Our suggestion is that for low rates on bicycles, you should try co-operative stores or departmental stores. Hire purchase charges of 22½ per cent. or 27½ per cent., which mean that you are in effect borrowing money at 40 per cent. to 47½ per cent., seem excessive.They are excessive by comparison with the rates of 5, 6½ and 7 per cent. which were shown to be the case in connection with transactions entered into with electricity boards, co-operative stores and departmental stores.
This is one of the subjects among many others which one day will have to be tackled in more comprehensive legislation. I fear, however, that many of the problems to which attention was called by the National Council of Social Service never will be satisfactorily solved by legislation, because many of the human problems to which I have referred which we meet in our daily work arise because people do not realise the commitments upon which they enter and do not properly weigh up whether they can afford to go in for the proposed item of purchase. This is a sphere in which, not only legislation, but education, is very much needed.
I should welcome the Board of Trade not only introducing a comprehensive Bill to deal with hire purchase, but being prepared to do a good deal of publicity, warning hirers and potential customers of the pitfalls. That would be an admirable service which ought to be 1741 done by the Government. At the moment, a certain amount is done by organisations which are interested in these matters. Reference has been made to the Finance Houses Association, which has issued an excellent leaflet telling people what to do if they wish to use hire purchase wisely.
The three golden rules of the Finance Houses Association are worthy of note. The first is to buy only one item at a time on hire purchase; the second is to take one's normal salary or wage as a guide to what payments can be made and not to assume that bonus or overtime will be part of one's normal future income; and the third, to make as big a down payment as one can afford. The Association recommends a down payment of at least 25 per cent. of the cash price of a new car and of at least 33⅓ per cent. on a car more than three years old. This is the sort of publicity which is particularly valuable.
Another useful form of publicity of which, I hope, hon. Members are aware is contained in a useful guide called "Consumer and the Law", issued by the Co-operative Union. It contains a very good chapter giving an outline of hire-purchase law and pitfalls. I emphasise again that, however good these attempts by private organisations may be, it is a function of the Government—of the President of the Board of Trade—to do much more to warn customers of the snags in connection with this business.
I wish to give just two examples from personal experience in support of the proposals of my hon. Friend's Bill. A third example came to me as the House was assembling this morning. I shall not quote it, because I have not had a chance to look at the details, but I went to the Central Lobby and met a very worried man who had obviously had presented to him charges which, he claimed, he knew nothing about. The example of that worried man can be repeated in thousands all over the country.
A man who came to see me some months ago had had what I consider to be the rawest of raw deals in connection with the purchase of a van, which he wanted for his one-man business. He was charged something like £500 for the van. Acting, as it transpires, on the 1742 advice of the Finance Houses Association, he put down a substantial deposit of £280. He want on paying regularly his instalments of over £10 a month for 20 months, so that he had parted altogether with something like £500. Then, the van was snatched back from him.
I had best read his description of what happened on the night in question. He states:When I arrived home on 11th June, I found a letter from Mossbrooks "—that is, the finance company in question—dated 10th June, informing me that I should pay two instalments (May's and June's) into their account by 13th June. My normal paying-in date was the 11th day of each month. On 12th June, I paid into their account one instalment, thus leaving me one day in arrears. I knew that on 15th June I should be receiving a sum of money that would enable me to cover the June instalment and as it meant that I would be in arrears by only a few days, I did not think it would be necessary to get in touch with Mossbrooks on this matter.On the night of 15th June my van was taken from my house, without my consent or knowledge. In the van at the time was £25 in cash and certain goods. In a state of acute distress, I rushed to the police station, only to be told that the finance company had repossessed the van. I immediately telephoned Mossbrooks and told the clerk that I could not see why they had taken the van back as I was only four days in arrears and that they could take the arrears plus any necessary expenses out of the £25.When I was discussing these matters with my hon. Friend the Member for Warrington and others a few days ago, one official who is very much concerned in the business of financing the hire purchase of cars—but not in the case to which I have referred—said that he did not like the term "snatched back" and would prefer a euphemism like " repossessed ". I suggest, however, that the case which I have just illustrated can only be described by a more brutal term and it certainly was a snatch-back case. Had my hon. Friend's Bill been on the Statute Book and had protection been extended to a limit of £1,000 rather than £300, that van could only have been repossessed after a court order. It seems to me completely necessary to make the extension to the limit of £1,000.
The second case, which does not concern a constituent of mine, is of a tape recorder and strikes me as being particularly scandalous. It was the usual story 1743 of the person having got into arrears and having been taken to court. The finance company—in this case the Moorgate Mercantile Company—repossessed the tape recorder and obtained judgment for £17 7s. The unusual and particularly cruel feature of the case is that in repossessing the tape recorder the finance company got the signature of the unsuspecting housewife on a new document which she thought was some form of acknowledgment of the repossession but turned out to be a further hire-purchase agreement with a new company—the Dawnier Hire Purchase Company, Limited—which immediately proceeded to take action in another court of law for a similar amount of money.
§ Mr. McAdden
I am anxious to follow the hon. Gentleman's argument. If I understand him correctly, he supports the Bill because it seeks to raise from £300 to £1,000 the figure to which protection is given under the Hire Purchase Acts. Surely, no tape recorder could have cost £300, and there is therefore no additional protection in the proposals of the Bill?
§ Mr. Oram
No, I am on another point, and I am sorry if I did not make it clear. The first case, that of a van, was one which, in my judgment justifies raising the limit to £1,000. The second case illustrates the need for Clause 2 of the Bill. If the forty-eight hours procedure had been in operation, as it would have been if this Bill had been passed, the unsuspecting housewife would have had at least forty-eight hours in which to look at the second document which she signed. I am not making any excuses for her. Obviously, she was rather foolish in signing such a document, but she would not have fallen into the second trap if she had had these forty-eight hours of grace in which to repudiate that signature. I am sorry if I did not make that perfectly clear.
I have quoted these two cases, one from my constituency and one from outside, as illustrations of the human difficulties into which people can so easily get as a result of defects in the law as it at present stands. There are many such defects, but I believe that my hon. Friend has put his finger on three of the most important, two of which I believe are common to the Conservative Party pamphlet on this subject and to 1744 the Labour Party's pamphlet, and all three of which I should think would commend themselves to the majority of hon. Members of this House. I am quite sure that this Bill is well worthy of their support, and I hope that it will get it at the end of the debate.
§ 12.42 p.m.
§ Mr. William Clark (Nottingham, South)
I think I had better make it clear at the outset that I have no personal interest in hire purchase in any shape or form. It is unfortunate that I am not in a position to lend money for hire purchase, though, presumably, fortunate in not having to borrow money for whatever I need to buy.
This is a very interesting Bill, and I would add my congratulations to the hon. Member for Warrington (Mr. W. T. Williams) on the reasonable way in which he put it forward. No doubt hire purchase is here to stay. Without boring the House with a lot of figures, I would point out that the latest hire-purchase debt is something over £950 million. Before the war, in 1938, it was a very tiny figure, and, quite obviously, with the gross national income, that is, personal incomes and excluding company incomes, at about £17,000-odd million, it shows that the general population in the country has mortgaged its salaries and wages income for two-and-a-half weeks ahead. This shows a surprising difference from the figure of the American mortgage debt, but I will come to that later.
It is quite clear that hire purchase has become the overdraft of the small man, and, in this sense, it is essential that some protection should be given, though I do not think that the protection should be only on one side. Personally, although I have given this Bill a considerable amount of thought, I have had some difficulty in trying to make up my mind whether this is the right way to control the whole of the hire purchase structure in this modern age. When we consider that two bites have already been taken at it, one in 1938 and the amendment increasing the limit from £100 to £300 in 1954, I am afraid that I have come to the conclusion that this Bill is far too scrappy and not sufficiently comprehensive. I should prefer to see legislation going on the Statute Book dealing 1745 with the matter in a far more comprehensive way, rather than having continual bites at the same cherry.
The present law under the Act passed in 1938 set a limit of £100, which was altered to £300 in 1954. What I cannot understand in the present Bill is why that limit is to be raised to £1,000. Nobody who has spoken in the debate so far has yet convinced me why we want a limit of £1,000. It could have been £700, or it could have been £1,500, but why take £1,000? If we accept the figure of £1,000, it will bring in a whole range of things, 90 per cent., I would have thought, of all the motor car deals done in this country on hire purchase. If the stipulations of the 1938 Act remain, and if one-third of the instalments have been paid, repossession cannot take place without a county court order, and several hon. Members have already indicated how cluttered up the county courts already are. If one-third of the price has not been paid and the company repossesses because of non-payment, even so the finance company can recover only 50 per cent. of the hire-purchase price.
Looking at this matter closely, it would appear to me that in car cases in which repossession takes place 50 per cent. of the instalments will mean that the hire-purchase company will sustain a loss, because hon. Members well know that motor cars depreciate very rapidly indeed. It is all very well to say that the hire-purchase company has its normal rights to damages if there had been abuse of the asset, but cars can and do depreciate on mileage. A car depreciates as soon as it is bought. I have been astonished to find how cars do depreciate. I am sure that in these circumstances the finance houses would find that they would be sustaining losses. If that is true, and if I am right, by increasing the limit to £1,000 and bringing these categories in, quite obviously the hire-purchase companies will be likely to increase the terms under which they lend money, and this will act to the detriment of the small man who wants to buy things through hire-purchase companies.
If the hire-purchase Acts are to be amended, I should like to see this repossession 1746 limit and the built-in depreciation clause looked at again, in order to see if it would be feasible to suggest that in a case where a man has paid one-third of the instalments, he should not be liable to a right of repossession by the company against him. On the other hand, should the limit be two-thirds, or even 50 per cent. of the total? These things are germane to the whole gambit of hire purchase, particularly on motor cars.
I would rather see no limit whatever on hire-purchase transactions, and, quite obviously, the right of repossession by the hire-purchase company should be very closely looked into. I agree with what has been said about some hire-purchase companies, particularly about the doorstep sales which have been mentioned, where a contract is signed at the door. As far as I understand it, the hon. Gentleman who introduced the Bill said that the only reason why he wants the forty-eight-hour cushion is in order to stop this doorstep salesmanship. I suggest that this is a very onerous condition to put in a hire-purchase contract merely because of the proportion, and it is only a small proportion, of hire-purchase business which is done on the doorstep. I should have thought that it would be far easier, in cases where a hire-purchase contract is not signed either in the shop or in the office of the hire-purchase company—in these cases of doorstep sales—the signature on the contract should not be effective until the finance house concerned signifies its assent by registered post to the housewife. I think the House would agree, from the examples given today, that it is misleading to suggest that all housewives may be caught by slick salesmen and are gullible. I do not subscribe to that view. Quite obviously, there are some housewives, as there are some husbands, who are extremely gullible and who can be caught by a doorstep salesman.
§ Mr. Darling
I am trying to follow the hon. Gentleman's argument about the need for these sales to take place in shops. Would it not be possible, and in some ways desirable from the trader's point of view, to have the two days' delay, in order that the trader can check up on the statements made to him by the customer?
§ Mr. Clark
That sounds very attractive, but let us assume there is a doorstep salesman in Nottingham and that the finance house happens to be in London. [HON. MEMBERS: "Shops."] In shops? I cannot see why if a person voluntarily goes into a shop and wants to buy some goods he should be told by this Government or any other Government or by any legislation that he is not allowed to make up his own mind about his purchases. Presumably he will have thought about going into the shop before he goes and thought about what he wants to buy, and he is not coerced into the shop.
There may be something of a grievance if a housewife, doing whatever it is she is doing in her home, hears a knock at her door and opens it to find a presentable man or woman on the doorstep who sells her something not so good or on unfair terms, but I cannot see that we should interfere with the whole of this huge business of hire purchase simply because in this country as in other countries there are some people more gullible than others, why we should penalise the majority for the stupid minority who will not think about their obligations.
I come to the relationship between the dealer, the customer, and the hirer. I think there is a tremendous amount in what the hon. Member said about the dealer somehow becoming a party to the hire-purchase agreement, but where I disagree with him is this, that the hire-purchase company can have any sort of responsibility for the goods which are sold. Let me give an example. If I go to my bank and borrow £200 or £300 or £400 on a personal loan and agree with my banker that I shall pay it back in one or two years by instalments, and then I go to the corner and buy myself a motor car and the wheels fall off it, is it to be said I should sue my banker?
What is the difference in the position of the banker and that of the hire-purchase company? The hire-purchase company is in precisely the same position as the banker is. All that the hire-purchase company is doing is to lend finance to help the purchase of the goods. Obviously the responsibility should be between the customer and the dealer, and I think it grossly unfair to endeavour to bring in the finance house 1748 and suggest that it should take some action to see that the goods are up to whatever standard they should be. I repeat that I have no interest in these finance houses.
Even if this were insisted upon, think of the additional work on the hire-purchase companies. Obviously that additional work would have to be paid for and the cost would be put on to the hirer eventually. I think all hon. Members will agree with me about that.
We have heard today of a great number of heart-rending cases. The hon. Member for East Ham, South (Mr. Oram) gave two or three cases which were quite heart-rending of how people had—to put it plainly—been caught, but we cannot base legislation on a few cases we hear about. For every one bad case—in any sort of argument—there are a hundred good cases which are not mentioned. I do not think that we should condemn hire purchase generally, as has been done, just because there are some bad cases.
However, as I said earlier, I do think that some comprehensive legislation about hire purchase should be introduced. Person-ally I would not tamper, as the hon. Member for Warrington is trying to do, with the agreements on hire purchase. The Finance Houses Association, which, I believe, does about 70 per cent. to 80 per cent. of the total hire-purchase business in this country, has, I think, some twenty or thirty members. Each one of them has a different hire-purchase agreement. What I cannot understand is why, in logic, if company A has what it thinks is a perfect hire-purchase agreement, company B does not adopt the same one. I would think that the Association and anybody connected with hire-purchase could have a statutory hire-purchase agreement.
I would go a little further than the Bill because I would have a statutory hire-purchase agreement. One signs an agreement such as, for instance, for insurance. How many people read the back of their insurance policies? How many read through all their hire-purchase agreements? Nobody. In any case, they are unintelligible to the ordinary person. I would much prefer that there should be a statutory form of hire-purchase agreement, and that each agreement should have on it, just above 1749 the signature of the hirer, some such sentence as.. "This is the recognised form of hire-purchase agreement" or "This is not the recognised form of hire-purchase agreement." I would make it the rule for some such wording as that definitely to be printed on each agreement so that the person signing it could know whether he is signing a statutory and common form of agreement or not.
I come now to the Schedule to the Bill. I do not think that this should be put into the statutory form of agreement. Of course, I do think that when an agreement is settled earlier than the normal or specified time there should be a recognised rate of rebate on charges added on to the agreement in the first instance.
I think the Bill is insufficient to protect the public and insufficient to protect reputable finance houses. I think it is agreed that hire purchase is playing a major part in our social and economic life. I was very interested when an hon. Member gave some figures of profits of hire-purchase companies. It is interesting to realise that pre-war the losses of finance houses on a turnover basis were one-half of 1 per cent., but today the losses on a turnover percentage are just slightly over 2 per cent. which is nearly five times as much. Obviously in any Bill dealing with hire-purchase we must give protection to both sides, from the financiers' point of view and the hirers' point of view.
Now I should like to go a little further and speak about motor cars in a little more detail without detaining the House too long. I am concerned about the illegal sales which go on because people are sold and buy motor cars which unknown to them are subject to hire-purchase contracts.
Personally I cannot see why the Minister of Transport, or whichever Minister is responsible for the issue of logbooks for motor cars, should not put a stamp on a logbook saying of the motor car, "Subject to hire-purchase contract." In the first instance the finance house would tell the local taxation people of the existence of the hire purchase contract in relation to the vehicle. As soon as the contract is completed there should be another official stamp saying, "H.P. 1750 contract cancelled." That would strike at all these illegal sales.
I really should like my hon. Friend to answer about this, although I do not know whether it comes within his powers at the Board of Trade. It probably does not, but I wonder if he would give some sort of undertaking to take up with his right hon. Friend the proposition of the endorsement of logbooks of motor vehicles subject to hire-purchase contracts.
While speaking about action which the Government could take I would say that there is no reason why H.P. contracts should not be registered with the Board of Trade. Hire-purchase companies, after all, lend money to the public as banks do. They do, after all, ask for money from the public and one sees advertisements all over the place saying that if one invests in this company or that one can obtain a higher rate of interest.
I cannot see why we should not have all finance companies registered with the Board of Trade. I should like to see stringent regulations introduced by the Government so that the finance houses which ask for money from the public should be subject to rigorous and strict regulations to protect the investing public. I will not prolong that argument because I might be ruled out of order, since the Bill does not deal with that subject.
I would only add that obviously there would have to be exemption from registration for the little man who does a little hire-purchase. I mean, for example, the little cycle shop round the corner, the shopkeeper who when he has sufficient spare cash in his own bank will do a little hire-purchase financing on his own. I believe—because I have never had any evidence to the contrary—that generally there is a good relationship between the small shopkeeper and his customer, and I think that that kind of shopkeeper should be entitled to carry on his business, subject to some limit to ensure that the hire-purchase business does not exceed perhaps £1,000 or £2,000 a year.
I believe that nobody in the House is of the opinion that there is anything wrong in hire purchase. I agree with the remark made this morning that hire-purchase has brought many benefits, but 1751 I do not think one should enter into those benefits lightly. The spirit of the Bill is extremely good, and I am sincerely sorry that I cannot support it because it is not sufficiently comprehensive. The "never-never" system is here for ever and ever and we should have some legislation covering every aspect of it. Let us alter the law by all means but let us make the law comprehensive.
The Molony Committee on Consumer Protection is now sitting and I say, with respect, that Her Majesty's Government should be pushed into doing something about hire purchase. When it is so pushed, let the House do it in a comprehensive way. Our income in this country is mortgaged from the hire purchase point of view for about two and a half weeks. I believe that in America it is mortgaged for just short of six weeks. Therefore, if one compares the creditability of the British public with the creditability of the American public, we have still a long way to go.
Provided that the customer realises his obligation, provided that the dealer is absolutely bound to honour his obligations, and provided that the finance houses continue to lend money without becoming involved in the selling business there is still a great future for hire purchase in this country. Do not let us condemn hire purchase altogether because there are a few examples of bad hire-purchase agreements—and there are bad customers as well.
I will not support the Bill. I do not think it should go on the Statute Book as it is. I do not think it is sufficiently wide even to be amended in Committee. I am sorry that the hon. Member for Warrington is not now in the Chamber because I should have liked to have said this to him. Whilst I agree with the spirit of the Bill, I do not agree with its content.
§ 1.5 p.m.
§ Mr. Bruce Millan (Glasgow, Craigton)
The hon. Member for Nottingham, South (Mr. W. Clark) has mentioned a number of interesting points, with many of which I would agree. I was interested in his suggestion that finance houses should be registered with the Board of Trade. It is something well worth looking at, although there would be a great 1752 many practical difficulties in dealing with the smaller houses. There is also a good deal to commend in the hon. Member's suggestion that the existence of a hire-purchase agreement should be noted in some way on the registration book of a vehicle. I had a particularly bad example of a constituent of mine who was badly caught out by an unscrupulous dealer.
I find a great deal with which to disagree in the first part of the hon. Member's speech and I do not think that he introduced a very praiseworthy argument for voting against the Bill. I support it and I congratulate my hon. Friend the Member for Warrington (Mr. W. T. Williams) on having introduced it. It is not a comprehensive piece of legislation. In the very nature of things not many Private Members' Bills are comprehensive. If one is to do anything useful by means of a Private Members' Bill one has of necessity to confine one's activities to a small number of particular things that require attention.
My hon. Friend has chosen a number of matters which require attention, and although I have certain disagreements with him and think that in certain respects he might have done things in a slightly different way, I think that the Bill as it stands is certainly very useful. If it could be amended in Committee to meet some of the points raised today I believe that in the end we should have a Measure which would be extremely useful not only from the point of view of customers and consumers but also from the point of view of the finance houses themselves.
We have heard some of the complaints which the finance houses have against the Bill. In particular, the crux of the Bill from their point of view is Clause 1, which raises the limit from £300 to £1,000. We have been warned of the dire consequences of this and we have also been given the finance houses' sorry tale of reductions of profits over the last two or three years.
The finance houses have certainly burned their fingers over the last two years and most of the blame for that rests upon themselves. There is a certain amount of blame to be attached to the Government, but in October, 1958, which was a year before the last 1753 General Election, when hire-purchase restrictions were completely removed, it was extremely unbusinesslike and foolish of the finance houses to act in the way they did. They were caught in a hire-purchase boom not of their own making. They put far too much reliance on the Government's word when past experience ought to have taught them better, and now they are reaping the consequences.
Because of the enthusiasm with which the finance houses tried to cash in on the boom—and it was a highly profitable one while it lasted—many unfortunate things happened. If the consequences now are fairly serious for the finance houses it is even more important to point out that the consequences, both at the time of the boom and subsequently, were far more serious for the consumers. If it is a question of choosing between protecting finance houses and protecting the customers, I have no doubt at all that the customers ought to be protected. Finance houses are big wealthy bodies. Many of them are associated with banks and they ought to run their affairs in a businesslike way. If they get caught out because their natural caution has been superseded by enthusiasm for quick profits that is too bad for them.
Even if we look at the profit figures, it is not so much true that the finance houses are making losses as that they are suffering reductions in profits. For instance, in 1960–61 the United Dominions Trust, although the profits, before tax, had gone down, was still earning a profit of more than £2 million. If one compares the profits of the finance companies, comparing 1960–61 not with the previous year or two years previously but with the pre-October, 1958, period, the difference is not substantial at all. I should not imagine it to be substantial in the case of the company I have quoted or in the cases of some of the other very big companies.
As the hon. Member for Nottingham, South stated in an intervention, in considering finance companies it is not accurate to look at the capital involved. That is a misleading way of looking at the situation. The finance companies both borrow and lend money. There is no capital employed in the sense of physical assets that one can use about a 1754 manufacturing concern. To say that one must look at the capital employed in that sense is extremely misleading.
§ Mr. W. Clark
If I said "capital employed" I meant "the issued capital and any reserve." The hon. Gentleman knows that as well as I do. It is only on that figure that one can accurately compute what dividend one is paying.
§ Mr. Millan
Dividends are, m fact, paid on the issued capital and on nothing else. As my hon. Friend the Member for Warrington pointed out, the dividends of finance companies in those difficult days were extremely high, and, therefore, the argument is not convincing. Even in these difficult days, most of the finance companies, the big ones, are still fairly prosperous concerns. The original point that I made about capital employed is a valid one.
It is wrong for the finance companies or anyone else to look upon their post-1958 experience as being the natural thing. It does not necessarily follow that, because they had difficulties about bad debts and so on over the last two years, that will continue into the future. Prior to 1958 their bad debts experience as a whole was very good. Most people, provided that they are not persuaded to take up hire-purchase commitments well beyond their means, try to meet their obligations. If there has been a considerable increase in bad debts experience over the last two or three years, it is because the finance companies were foolish enough to allow their enthusiasm in the temporary boom to outrun their natural business caution.
§ Sir E. Errington
Would the hon. Gentleman be agreeable to people who entered into hire-purchase agreements being required to disclose any other hire-purchase commitments that they had?
§ Mr. Millan
There is a certain amount to be said for that. With regard to the notification period and the 48-hours' interval required between notification and the signing of the hire-purchase agreement under Clause 2, even if one does not ask the hirer to disclose his other commitments, that provision ought to give the reputable dealer an opportunity to check the credit-worthiness of the customer, which is the essential factor. 1755 Obviously, it is very difficult to find out what the precise commitments of an individual customer are, but it is the creditworthiness that one ought to check. If one finds that a customer has never previously been in trouble over hire purchases or anything else, I think the natural assumption is that he will be all right. Nevertheless, there is a certain amount to be said for what the hon. Gentleman has suggested.
There is also a certain amount to be said for the argument used by the hon. Member for Nottingham, South, among others, that if one extends the protection of the Hire-Purchase Act from goods totalling £300 to goods totalling £1,000, one ought to look into the matter of county court orders where one-third of the amount has been paid and at the 50 per cent. depreciation provision.
I should not object to what the finance companies describe as a "fair deal clause" being inserted in hire-purchase agreements and superseding the 50 per cent. depreciation provision, but it would have to be a genuine fair-deal clause. One must also remember that the protection of the hirer must also be taken into account. In the case of cars, if one inserts a fair-deal clause which provides that the hirer shall be responsible for the difference between his total commitment and the sale price of the car, there is no incentive to the finance company to get a reasonable price for the car. I understand that most cars are sold at car auctions, and the people buying them know that they are being sold by finance companies and know that in many cases the finance companies will not lose when they have a fair deal clause. If such a clause became recognised and superseded the legislation in the Bill, I think that the hirer would also have a certain amount of protection. If the hirer could sell the vehicle for a higher price than is likely to be obtained by the company, he should have certain rights in that respect. It is a complicated point, and worth looking into.
§ Mr. W. Clark
Provided that the difficulty was overcome, surely there would be no necessity to have a limit in the Bill.
§ Mr. Millan
I do not think that is so. The fair-deal clause is far more relevant 1756 to a motor car and an industrial plant agreement than to furniture. There is no need to disturb existing legislation in respect of goods already covered at the moment, but we should look at the matter in regard to the class of goods which will be covered by the Bill if it becomes an Act. There is no reason why there should not be in the Bill or any other legislation exceptions for motor cars, industrial plant or any other class of goods having special characteristics. For example, I understand that there are exceptions in respect of livestock.
I see no good reason at all why Clause 2, dealing with notification, should not become part of our hire-purchase legislation. It is desirable from every point of view, and not just that of the door-to-door salesman, although I appreciate that that is where the maximum danger to the hirer arises. It would be valuable even in the case of people buying furniture, electrical appliances, and so on, in shops. It should, however, be said that the customer does not normally go into a furniture shop and buy a bedroom suite and take it away on the back of his, probably, hire-purchased car. In many cases delivery does not take place until two or three days after the order. There are many electrical appliances which, after they have been ordered and after the hire-purchase agreement has been signed, the dealer has to obtain from the manufacturer or wholesaler. There again, there is a natural delay. I do not think there are many classes of goods about which there is such urgency that the hirer must have them immediately he decides in the shop to buy them.
The provision is admirable. If there are practical difficulties about any class of goods, they can be dealt with during the Committee stage. I am sure that, in principle, this is absolutely right and one of the most desirable protections for the hirer that we could possibly have. It is know that anyone who is determined to be caught out and swindled will be swindled. Nothing in hire-purchase legislation or any other legislation will prevent that from happening. But the vast majority of people, even those who have been caught, could be prevented from being caught if there were provisions of this kind in hire purchase.
1757 The same applies in different circumstances to Clause 3, which deals with the agent—principle relationship which would be involved if that Clause were passed. It is nonsense and irresponsible for any reputable finance company to say that it is not concerned with the reputability of the dealers with whom it is dealing, but that is what such an attitude amounts to. If a dealer is reputable he will not make misrepresentations to sell his goods, and there is an absolute obligation on reputable finance companies to see that they finance only reputable dealers. If there is such an obligation the only way to get it discharged is to have a provision such as that contained in Clause 3.
§ Mr. Millan
That is a quibble. I am aware that, in strictly legal terms, they do not finance dealers, but nevertheless they enable them to conclude hire-purchase arrangements. If they did not provide the finance, dealers would not be able to operate. Therefore, it is the responsibility of the finance houses to see that the dealers with whom they are working are reputable. The principle of Clause 3 is absolutely right and reputable finance houses should not be afraid of it.
A number of points require to be looked at further, but though the Bill is not perfect, basically it is trying to do the right thing and I have the greatest pleasure in supporting it, qualified only by the fact that unfortunately it does not apply to Scotland. Perhaps that is something that can be taken care of in Committee. There are so many good things in the Bill that there is no reason why Scottish people should not get the advantages of it as well as people in England and Wales.
§ 1.22 p.m.
§ Sir Eric Errington (Aldershot)
I should like first of all to declare my interest as a director of a finance house which is a member of the Finance Houses Association. The difficulty that arises in this Bill is largely as the result of the considerable developments that have taken place in hire purchase since 1938. The sort of developments I have in mind are the wide diversity of merchandise 1758 and the various methods by which these are financed through hire-purchase arrangements.
The aspect which comes most easily to mind is the development of the plant hiring part of hire-purchase financing. There has also been an immense development in gross figures. I believe that the figure of £953 million of the hire-purchase debt has already been quoted. It is interesting to note that, of that sum, £362 million is provided by depositors with finance houses, so that the capital arrangements that have been the subject of discussion include a considerable number of people who have deposited their money for these operations.
Reference has also been made—and in examining the position I do not think it possible to avoid careful consideration of it—to the increase in losses by default. The most current estimate that I have been able to obtain is that the figure is five times as great as pre-1958. From these general statements, there arise two distinctions which have not been brought out in the Bill, and it is because of the fact that there is no provision for distinctions between various types of hire-purchase arrangements that I desire to oppose the Bill.
The first distinction that has not been made is the one between motor cars and industrial plant, on the one hand, and ordinary household goods, on the other. The household goods position is entirely different from the motor car position. Household goods are not brought round at all to the home in the way in which it has been suggested—by high-pressure salesmen. There is no evidence, so far as I am aware, that there has been an abuse by the ordinary trade in connection with household goods and the ordinary business of supplying household utensils.
The position with motor cars is different. In them, one has an asset that is subject to considerable and rapid depreciation. It is a mobile object and, generally speaking, the person who is prepared to pay a substantial sum—if this Bill goes through it will be up to £1,000—is quite well aware of what he is doing. That distinction must be borne in mind, in spite of the fact that no provision is made in the Bill for the differences which I have only sketchily outlined.
1759 The second distinction which is not drawn is between the door-to-door salesman and the ordinary transaction that takes place in a shop or office. One must have great sympathy with the hon. Member for Warrington (Mr. W. T. Williams) in his desire to stop the "snatch" salesman—and "snatch" seems to be the right word to use. If protection were to be given against the "snatch" salesman, then it would be most valuable, and that could be done in the Bill if it were limited to cases that arise outside the shops and offices where normal transactions are carried out.
§ Mr. Darling
Is the hon. Gentleman giving an assurance that there is no high-pressure salesmanship inside shops?
§ Sir E. Errington
I cannot give the hon. Gentleman any assurance on these matters, but I will say that there is comparatively little. At any rate, high-pressure salesmanship, if it exists in shops, does so in an atmosphere which tends to produce a more reasonable attitude for the customer. A lady who is Hoovering her carpet in her house and who is wearing a mob-cap is much more susceptible to a salesman and will sign almost anything to get rid of him. That is a real danger and one with which we shall have to deal, but the question which has to be considered is how and whether that can be achieved, as this Bill does not do so.
Clause 1 deals with the increase to £1,000. That will include many people who are not in need of protection. If someone decides to buy a motor car for cash and has the money to put down, there is no protection. If he is prepared to pay by deposit and subsequent instalments, one has to be careful about carrying too far what in legal terms is sometimes called "care and protection". There is no reason to give protection as high as £1,000, for those who deal at that figure do not need it.
§ Mr. Robert Edwards (Bilston)
How does one protect the purchaser of the motor car who has only about £100 to pay on a £600 car, but who has it removed from outside his house in the night?
§ Sir E. Errington
I shall be coming to that later. The point I am now making 1760 is that this provision will apply to things other than motor cars. I have already mentioned the sale of industrial plant which is a business transaction which, I should have thought, took place between people who knew exactly what they wanted and how they were to finance it, and so on.
Another reason against raising the limit to £1,000 is that it will lead to extra expense and loss. With the example of a £700 car bought on the basis of twelve months' instalments and a minimum deposit of £25, if a finance house desired to repossess the car before court proceedings can occur, it would have to be repossessed before the second instalment had been paid. The motor car is a depreciating asset.
The result of all those things will be congestion of a considerable order in the courts, and over that period there will be substantial losses. I speak as one who at one period of his life sat quite frequently as a deputy county court judge. I know that delays are inevitable, although there has been some improvement. Increasing the limit to £1,000 would increase the delays. When a county court judge considers a case, he is in the difficulty that if the person who has the car says that he does not have the money to pay the instalments, the judge has to make an order postponing it during a period, provided that so much is paid. The hire-purchase company can do nothing about the vehicle and can only watch its value steadily depreciate.
The hon. Member for Warrington was very courteous and helpful, but he suggested that hire-purchase transactions resulted in some cases in people going to prison. That is not really so. A county court judge will not send a person to prison if he is unable to pay. What a county court has to do is to see that people do pay if they can. It is then that orders are made.
Increasing the limit to £1,000 raises it above the present county court limit of £400. That is a matter which needs careful consideration, because in many cases these matters will have to go to the High Court. The whole object of hire-purchase legislation in the past has been that matters should be dealt with efficiently and economically in the county courts. If there are many of 1761 these cases for repossession or protection against it—and I am afraid that there will be—they will have to go to the High Court which will be very expensive not only for the customer, but also for the hire-purchase company.
Several matters mentioned by the hon. Member for Glasgow, Craigton (Mr. Millan) require considerable investigation. I would not be unhappy with the Bill just because it was likely to be temporary, as the hon. Member for Warrington suggested. What I am unhappy about and what we have to examine is whether it will achieve its object. Let us take the example of the 48-hours' "notification of terms." I have drawn a distinction between motor cars and other goods. I am told that if one orders a suite of furniture, while there may be only one suite of furniture in the shop, half a dozen can be obtained on order. However, when someone buys a motor car, he buys the one he sees saying, "I like that one with the nice blue top and the red upholstery".
About 50 per cent. of the business of selling motor cars is conducted at the weekend, on Fridays and Saturdays. Because of that, it will be extremely difficult for the provision about notification of terms to be observed in the sale of motor cars. If someone has the necessary deposit with him and goes to a reputable dealer, that period of waiting will normally be observed, but that may not apply to the case of the less reputable dealer. I can imagine cases where the customer who wants to go to his aunt in Pwllheli, or wherever she is, will say, "I want that car, and I want to leave today". The transaction will probably be delayed if it is between an honest dealer and an honest customer, but what worries me is that under the Bill it will be simple for a fraud to be committed by less scrupulous customers and dealers.
One's experience in these matters is that dates mean they little to people. They ought to mean a lot, but they do not, and it is so simple to back-date one document by two days, put the correct date on the other, and send them off together. I do not know how the hire-purchase company will be able to deal with that situation if this should become widespread.
1762 The finance houses always try to deal with reputable dealers, but this Bill goes much further than ensuring that they do that. It says that there shall be a liability not only on the person who made the representation, the dealer himself, but also on his agent even if he was exceeding his authority. I do not know how any finance house will be able to check on that particular impropriety.
The hon. Member for East Ham, South (Mr. Oram) quoted a document to show the basis on which the finance houses desire to carry on business. They strive to achieve fairness for the dealer and fairness for their depositors, and generally they achieve those objects. But it can happen that a dealer has a fraudulent agent without knowing it, and the finance houses cannot possibly know.
§ Mr. Millan
Should not we draw a distinction between the big finance houses which are members of the Finance Houses Association and the other small ones which in many instances deal with disreputable dealers?
§ Sir E. Errington
I am speaking with some knowledge of the Finance Houses Association. We feel that it is reasonable to expect us, as finance houses, to have the ultimate responsibility in the matter. A Clause might be considered which would put the primary liability on the dealer for any fraud or anything of that kind, and only in the event of that dealer turning out to be fraudulent might there be a secondary liability on the finance house. No Clause of that kind is in the Bill.
I am told, too, that a problem arises in connection with the proposed 48-hour delay. I make this point only because it is one of the problems which arise in this complicated field. Apparently it may happen that Purchase Tax becomes payable where an allocation has been made to a customer, even though the customer subsequently retracts from the bargain. Therefore, any Committee which looked at this Bill, if it went further, would have to satisfy itself that there would be no necessity to alter the law relating to Purchase Tax, following on what I have described as the notification of terms.
I have mentioned the primary responsibility which rests on the dealer. I 1763 do not like the form in which the dealer's representation—that is Clause 3—is framed, particularly when it extends to all goods up to £1,000. It is very doubtful whether the position is not sufficiently covered by Section 8 of the 1938 Act. There the implied conditions are, first, that the goods shall be of merchantable quality—and one cannot get away from that or get out of it—and secondly, that the goods are reasonably fit for the hirer's purpose. That is an onerous requirement and it could be contracted out of only by the finance house establishing that the hirer accepted a cancellation of those terms after disputed evidence under Section 8 (2) of the 1938 Act. If those two implied conditions are looked at, I think it will be agreed that they are reasonably satisfactory to cover the situation.
I am frightened of the form of this wide-open Clause 3 (1, b), because I think that it will carry an absolute liability which, as far as I know, has not previously been imposed on anybody for other people's torts.
In conclusion, may I categorise some of the things which require consideration. I have said that the Bill, even if it is temporary does not cover many of the points which have been made, and would not work in practice, but I do not want to be unconstructive. I am not using the Molony Committee as anything in the nature of an excuse for not going on with the Bill, but I think that the complications are such that grave consideration must be given to the amendment of the 1938 and 1954 Acts.
I am speaking entirely for myself when I say that I am far from certain that the way to deal with the whole hire-purchase question is to abandon the narrow confines of the Bills of Sale Act and permit chattel mortgages, because I believe that if we had chattel mortgages many of these problems would be solved in a way which cannot be done now without a formal adaptation of the Bills of Sale Act. It could be done as they do in America, where, by means of a chattel mortgage, a grand piano can be mortgaged in the same way as one can mortgage a house or other property. This issue ought to be faced, in view of the size of the problem which I outlined 1764 earlier. I think that we should have to evolve also a number of exceptions to any increase, if there is to be an increase up to £1,000.
As the limit would be over £400 under this Bill we must consider whether the High Court is really the place where these cases ought to be heard, and whether the county court is really going to be so full that it cannot function properly. We must consider the effect of the abolition of the one-third rule in regard to an owner's right to possession, and the abolition of the arbitrary 50 per cent. depreciation rule. We must also work out a provision defining the rights of the parties in the event of early termination of contracts. From our own experience we know that the question of a settlement figure for early termination of the contract causes a great deal of dispute and trouble. I have already spoken about making it possible to sue the dealer, who cannot be sued direct by the hirer unless there is a collateral warranty, and that is unsatisfactory. Even if the dealer is responsible he has to be sued through the hire-purchase company, which has never seen the goods and does not know anything about them, or about the circumstances in which they were hired.
It would be possible to evolve two or more hire-purchase agreements in statutory form. That would be immensely helpful. Everybody would know the position. There would be little opportunity of argument, and the agreements could be so worded as to be fair as between the parties concerned.
There ought to be a liability upon the hirer to declare his other hire-purchase commitments. Many of these problems arise because a person has five, six, seven or eight hire-purchase agreements. That situation would never occur if, at the time when one of those hire-purchase agreements was entered into, the extent of the hirer's other hire-purchase commitments was known.
Then there are the difficulties in relation to county court jurisdiction. If it were desired to keep the hire-purchase legislation in line with the county court position the raising of the limit would have to be not to £1,000 but to £400. Since the war, county court jurisdiction has been extended to articles costing up 1765 to £400, and if any increase in the hire-purchase figure were to be allowed I submit that the limit should be fixed at £400, because that would ensure that those concerned in these matters would be able to proceed in the most inexpensive way, by using the county court procedure.
In sum total there are so many problems, which are so important, that this Bill cannot be expected to deal with them. It is essential to preserve a degree of fairness as between the hirer, the finance house and the reputable dealer, jest as it is essential to control the disreputable dealer. The problems involved are of such a character that although the Bill is motivated by a real sense of putting things to rights, it does not achieve that object, and I shall therefore regretfully have to vote against it.
§ 1.55 p.m.
§ Mr. John Stonehouse (Wednesbury)
Enough has been said by hon. Members on both sides of the House to show the great need for a comprehensive survey of the hire-purchase law. I echo the point made by my hon. Friend the Member for Warrington (Mr. W. T. Williams), that we cannot wait another two or three years for the Molony Report, and for somebody to take some steps arising out of that Report. The late Lord Keynes once said, "If you want to stop something being done, appoint a committee or a commission and wait for its report." We cannot wait in a situation in which there is an obvious need for protection to be provided for the consumer and the finance house, as is proposed in the Bill.
I should have thought that the speech of the hon. Member for Aldershot (Sir E. Errington) was another argument for the Bill rather than against it. As I understand it, he said that he had prepared a Clause, which he was considering proposing as an Amendment. That is the constructive approach. He should not vote against the Bill. He should allow it to go to Committee, where all these points can be thrashed out. Even although he cannot accept all the provisions he must realise that a problem exists here which ought to be dealt with and which should not be deferred for two or three years.
1766 Does anybody seriously suggest that this comprehensive reform, which hon. Members on both sides agree should be carried out, can be implemented in less than two or three years? Surely in the next few months we should try to get the Bill through the House, so that we can get a much-needed reform on to the Statute Book as soon as possible. Although we all agree that a wider reform is needed, we should apply some of the Bill's provisions immediately.
The hon. Member for Aldershot also said that he had seen no evidence of abuse in the sales of household goods.
§ Sir E. Errington
I was referring to the sales of household goods in shops and offices. There are abuses—although we do not know the extent of them—at people's homes. I was drawing a distinction between sales conducted on a person's doorstep and sales which take place in shops and offices.
§ Mr. Stonehouse
To some extent I accept the hon. Member's point. There is more abuse by doorstep salesmen than there is in shops. When a person goes into a shop he is in a frame of mind to make a considered purchase, and is less susceptible to persuasion by a slick salesman than is the unprepared person in the home. But I do not fully agree with him, because there are many examples of slick salesmanship in shops, and the customer needs just as much protection from them as from the slick salesman on the doorstep.
I want to refer to the debate which took place about three years ago in connection with switch-selling techniques used on the doorstep to trap the unsuspecting consumer and, in particular, the housewife. Although we had a Board of Trade inquiry arising out of complaints made in the House—which confirmed beyond a shadow of doubt that switch-selling was a considerable abuse—and we also had a campaign in the Press and on television which eventually persuaded the Newspaper Proprietors' Association to persuade newspapers not to include this type of advertising in their columns, the practice still continues, although it is not so serious as it was three or four years ago. The provisions contained in Clause 2 would provide a very great safeguard against this switch-selling technique.
1767 The House is well aware of what occurs. A consumer fills up a form and sends it to a firm asking for information about a secondhand commodity that has been advertised at a very cheap price. Instead of having those details sent back to him or her, the salesman arrives on the doorstep to demonstrate the secondhand commodity. The demonstration is designed not to sell the commodity but to demonstrate to the prospective customer that that commodity is not good at all and to switch the customer from wanting the secondhand commodity to wanting the new commodity which the salesman already has very conveniently in his van outside. He brings in the new commodity which is, perhaps, five, six or even ten times as expensive as the secondhand commodity, and by his slick salesmanship he persuades the housewife to sign the hire-purchase form there and then. He leaves the new equipment in the home and takes away from the housewife either the whole deposit or part of it, thereby leaving her committed to the contract.
This sort of thing happens not in a dozen cases but in tens of thousands of cases in the towns and villages of this country. We have all heard of cases where customers have tried to get out of these contracts and have been threatened with legal action because, in a moment of thoughtlessness, they have put their signature to a form of contract without fully realising the implications of it. Fortunately, this practice has declined to a large extent because most of the national newspapers are now refusing to accept these advertisements. However, the practice continues because the firms who use these techniques are resorting to house-to-house circularisation, so advertising in other ways, which enables them to by-pass the regulations of the Newspaper Proprietors' Association.
Very recently I had brought to my attention an example of a housewife signing an agreement without really wanting the commodity and then being tied to the agreement because her signature was on it. If the cooling-off period proposed in the Bill were accepted it would protect the customer from this type of thoughtlessness. Even 1768 if the other provisions of the Bill are not acceptable to the whole House, I think that this one Clause is important enough to ensure that the Bill should receive a Second Reading today so that at least this very important provision can become law. The cooling-off period is a very valuable protection for the poor consumers. They will have time to think over the full implications of the contract and to decide whether they can really afford the weekly or monthly instalments involved.
A person can, in a rash moment, put his signature to a contract without fully realising what commitment he is taking on. Although I agree with the hon. Member for Aldershot that there is more abuse on the doorstep than in the shops, this matter still applies in the shops as well, where slick salesmen can persuade customers to sign an agreement to pay weekly or monthly amounts far beyond their resources.
The hon. Member for Aldershot also referred to the problem of people buying a car and wanting to use it on the day of purchase. They want to make the purchase there and then and to use the car straight away. I am sorry that the hon. Gentleman is not now in his place, but I would suggest to him that a person purchasing a car costing some hundreds of pounds should really give the matter serious consideration instead of rushing off to a dealer on some bombed site or other and putting down a deposit of, say, £50 or £60 of hard-earned savings and driving away the car there and then.
The matter of visiting an aunt in Anglesey that weekend is really not a strong enough reason for putting down as a deposit one's savings and committing oneself to hire-purchase payments over a period of two or three years. People who do this sort of thing should really be brought to their senses and made to realise what they are doing. Supposing that the example to which the hon. Member referred in fact took place. Supposing that a purchaser, fully conscious of his responsibility, went to a dealer to buy a car and supposing that the dealer in question was a reputable dealer anxious to fulfil a deal with that person, whom he might know, that weekend. What possible objection would there be to the dealer hiring the car to the prospective purchaser for the 1769 weekend, thus giving him a wonderful opportunity to try out the car, and for the buyer to bring it back on the following Monday or Tuesday? The purchaser might then say, "I have tried out the car over the weekend. It is a good buy, therefore I confirm the details of the agreement at which we looked last Friday or Saturday."
§ Mr. McAdden
I am sure the hon. Gentleman will believe me when I say that I am not attempting to defend in any way the slick salesmanship tactics of those who deceive housewives at the door. But if they are so slick, clever and unscrupulous, does the hon. Gentleman really think that by writing into the Bill a Clause which, personally, I think is unexceptionable, to the effect that there should be a 48-hour pause, he will defeat the slick salesman? Is it not perfectly simple to persuade the housewife to ante-date the agreement two days and to say to her, "This is for your own protection and if you want the commodity quickly we will fix it for you"? Does the hon. Gentleman really think that that would be a protection to the housewife?
§ Mr. Stonehouse
Of course, the slick salesman will do anything to get his commission. Salesmen have even been known to pay the deposit themselves. There have been cases of which I know where the salesman has said, "Look here, I will help you out. You have ten shillings; give me that and I will put down the rest out of my own money." He realises that the commission which he gets on producing the contract to his employer will cover the amount which he is putting down for the deposit.
I agree with what the hon. Member for Southend, East (Mr. McAdden) says, but, of course, we should hope that full publicity would be given to the Clause and that housewives and consumers generally would know how they were protected under the Bill. If the penalty Clause is made apparent to the representatives and the salesmen they will think twice before they engage in such slick techniques. If they knew that for the first offence the penalty would be so much and for the second offence a term of imprisonment it would be quite discouragement to them to engage in such slick techniques.
§ Mr. Rees-Davies
Concerning the hon. Gentleman's illustration of the person who took a car for the weekend and brought it back on the Monday or Tuesday, does he not realise that a very large number of people might, equally unscrupulously, use that opportunity to have a free ride over the weekend without the slightest intention of buying the vehicle?
§ Mr. Stonehouse
I was talking about the reputable dealer and the reputable prospective purchaser known to the dealer. In that case the dealer could say, "You hire the car for the weekend. It will cost you £2 a day. Bring it back on Monday, and, if you like, we can then go ahead with the deal."
§ Mr. Stonehouse
I am afraid that I cannot give way to the hon. Gentleman. We must give time for a full debate, and I think that too many interventions take up too much time.
The Finance Houses Association has just made a statement through its secretary, Mr. Woolveridge. He makes a rather extraordinary remark quoted in the Daily Telegraph this morning. He says:Companies needed the means to protect themselves against 'an increasingly careless community'.I submit that the finance houses are well able to protect themselves and that, if anything, it is the consumer who needs protection against the unscrupulous agents of the finance houses and the unscrupulous dealers who act on their behalf. In many cases, the dealers are appointed as agents for the finance houses. Many car dealers use the forms of the finance houses and therefore in that sense they are acting as agents of the finance houses.
§ Mr. Stonehouse
In 99 cases out of a 100 where cars are sold the finance houses do not have their own representatives personally involved. It is the dealers who do the job. They take the form for the car out of one drawer in their office and from another drawer they take out the form from the finance house. Very often the car purchaser, because he signs the form without reading it, has no idea that the financial 1771 transaction is being done with somebody else. He assumes that it is all being done by the dealer who he thinks is putting up the money so that the car may be purchased.
It could be said that the finance houses need protection. Many of them have been very rash in the last few years, during the boom in second-hand cars, by allowing people to have credit too easily. They appointed as their agents hundreds of bomb-site dealers in secondhand cars who had absolutely no reputation whatever. In their mad rush for business a few years ago finance houses were prepared to allow any Tom, Dick or Harry to act on their behalf. Many finance houses have been made bankrupt because they poured out too much money in this direction. Many of the dealers involved were engaged in fraudulent activities—selling cars which did not exist, forging agreements and so on, and using money in a fraudulent way.
The cooling-off period of forty-eight hours which is suggested in the Bill might prove a protection for the finance houses, and I suggest that rather than rushing thoughtlessly to obstruct this Bill the finance houses should allow it to have a Second Reading. Then these points might be threshed out during the Committee stage and probably the finance houses would discover that they had more to gain from the Bill than they suspected.
I am glad that the hon. Member for Nottingham, South is present in the Chamber. He referred to an interesting statistic of the losses now involved in hire-purchase contracts. He put the figure at 2 per cent. or more at the present time, compared with half of 1 per cent. before the war. I suggest to the hon. Member that perhaps one of the reasons why the finance house interest charges are now so high is their losses have become so great.
I must declare my interest as a director of a retail co-operative society. One of the reasons why co-operative society interest rates are so much lower than the private finance institutions is their losses on hire-purchase contracts are invariably, even today, less than half of 1 per cent. In many cases they are 1772 only one-tenth of 1 per cent. because a contract is made with a co-operative member. It is done without any of the pressure or the slick selling that is the case with many private shops. The transaction is done in an orderly way, with the result that far more consideration is given to the contract than is the case in respect of many sales made in private shops.
I suggest that were there this cooling-off period of forty-eight hours a substantial saving might accrue to the finance houses and their losses of 2 per cent. might well be reduced to the pre-war figure of half of 1 per cent. This would mean that interest charges could be reduced. There would not be the same reason for them to be as great as they are now, in some cases amounting to 20 per cent. or so. It is ridiculous that charges should be so high but that is in part due to the losses involved in so many contracts.
I am trying to follow the argument of the hon. Gentleman and I am anxious to obtain information. From his experience, not only as a member of the Labour Party but also of the Co-operative Party, can he tell us what are the rates per annum and for two years for the co-operative financing of hire purchases?
§ Mr. Stonehouse
The figure varies between societies. There is no set amount. It would vary between 5 per cent. and 8 per cent. There are few cases where it would go above, for instance, 10 per cent. I do not suppose that there is any case at all where the charge would approximate to the charge made by some private finance institutions.
§ Mr. Bidgood
Will the hon. Member go further and give details of those companies which he says charge 20 per cent. per annum?
§ Mr. Stonehouse
It would take up too much time to go into all the details. My hon. Friend the Member for East Ham, South (Mr. Oram) referred to one or two, but if the hon. Member would like me to quote some examples perhaps I may quote four figures. These are average figures. The Electricity Board 5 per cent.; co-operative 6½ per cent.; departmental stores 7 per cent. and other shops 10½ per cent.
§ Mr. Stonehouse
There are some which are quoted for cycles which went well above 20 per cent. and certainly that is deplorable.
§ Mr. Bidgood
On a point of order, Mr. Deputy-Speaker. If the hon. Member is making allegations that there are companies charging 20 per cent., he ought to substantiate them.
§ Mr. Stonehouse
The point I have been trying to demonstrate is that the losses involved in hire-purchase contracts with finance houses might well be limited if there were a cooling off period and an opportunity was given to check on the credit worthiness of prospective customers. So the provision in this Bill might well be an advantage to the seller and to the finance house just as much as I believe it would be to the consumer.
There are many examples of slick selling from which the consumer needs protection. Time for consideration would enable him to give full thought to the intended purchase. Certain publishing houses engage in the practice of selling books, particularly children's books and encyclopædias by sending agents from house to house to sell these books on hire purchase. The books are sold at greatly inflated prices.
I believe that an encyclopædia imported from the United States of America is sold at three times its real value. One-third of the retail price represents the credit charges, commission and other expenses that certainly would not be incurred were these books bought from a reputable book shop. If a customer had a period of forty-eight hours or so to consider such a purchase, I think that he would realise that it would be possible to get the same, or a very similar, book from a bookshop far more cheaply than by involving himself in the monthly payment of £8, £10 or £15 for encyclopædias which almost invariably are put on a shelf and never looked at. This Clause, therefore, would be of great help to purchasers not only of motor 1774 cars but of household equipment, encyclopædias and all the rest of those goods which are increasingly sold on the doorstep.
The finance houses must have a real sense of responsibility in their dealings with the public. They cannot expect to have all the rich profits which have accrued, particularly in the last year or two, and none of the responsibility. They enter into contracts and they must ensure that people acting as their agents—dealers, traders and so on, who use their facilities—are reputable individuals. They should also consider whether the prospective customers are the sort of people with whom they wish to do business. They must enter this business with a sense of responsibility, and that is why I welcome the terms of this Bill.
§ 2.20 p.m.
§ The Parliamentary Secretary to the Board of Trade (Mr. Niall Macpherson)
I hope the House will not think it inappropriate if I intervene at this stage in a debate which has so far been very well-informed and very even-tempered.
First I should like to join with other hon. Members in congratulating the hon. Member for Warrington (Mr. W. T. Williams) on, if I may say so, the charming, persuasive and delightfully modest manner in which he introduced the Bill. I thought he was not particularly conciliatory to the Government. Indeed, he was polite, I thought, to almost every one except the Government. I recognise that the Government have no claim whatsoever upon his gratitude, but I should like to express on behalf of the Government our gratitude for the care and thought which the hon. Gentleman has given to this matter and the opportunity that he has afforded for a debate on a matter which, as he himself said, is of great importance to an immense number of people in this country. I am sure that this will not be the last time that he will be mentioned in a leader in The Times, and honourably mentioned at that.
Even if everybody agreed that changes are necessary, the question remains what those changes should be. I think I can meet the convenience of the House by asking a number of questions. I do this not to provoke replies by interruption 1775 but rather to provoke thought and discussion. First, as one or two observations have been made which throw some doubt on the matter, may I remind the House of the protection that the law at present affords in hire-purchase transactions for goods of £300 in value and less. I shall summarise them, and if I misstate them I am sure that one of my hon. Friends will correct me.
The hire purchaser has the right to cancel the contract at any time by returning the goods and paying the balance of the deposit and instalments due up to the date of the cancellation, or half the purchase price, whichever is the greater. Secondly, once one-third of the total purchase price has been paid the goods cannot be repossessed except by court order. Thirdly, the court may suspend an order for repossession for as long as the hirer pays at such reduced rate as the court thinks fit to impose—that is to say, as the court thinks he can afford. Fourthly, there are certain conditions as to merchantable quality and reasonable fitness of the goods to which reference has been made in the course of the debate.
There are three main proposals in the Bill, and I should like to deal with each of them in turn. May I say first that the general objective which the hon. Member has set himself is one which commends itself to many of us. I am sure we have all had cases of what seemed to be hardship arising out of the application of the present legislation, and many of us have encountered them in our constituency or professional work. The Government are aware of this, and they have great sympathy with the hon. Member in his desire to make the way of the customer in hire-purchase transactions more sure and more simple to understand than it is today. But we have to consider not only the end but the means.
Here I would start by posing the questions: Are these the right ways in which to afford the additional protection? Will they really achieve the objectives that the hon. Member has in mind? Will the additional protection be worth the additional cost involved for the hire-purchaser, taken over all? Finally, is this the right time to make the changes?
1776 Perhaps I can conveniently deal first with the issue of cost. The hon. Gentleman himself said that he was putting additional responsibility on the finance houses. Is he not also putting additional costs on the companies? My hon. Friends have argued that he is. Will not these in all probability be passed on to the hire-purchaser? I feel that the effects of the proposal will be to increase the cost of hire-purchase as a service.
§ Mr. Stonehouse
Would the hon. Gentleman not also concede that it could save him considerable loss as well?
§ Mr. Macpherson
I did say "taken over all". I agree that in individual cases it might save loss, but I am considering this question over all. I suggest that the House would do well to examine very carefully proposals that have the effect of putting up the cost of hire purchase. If hire purchase were not generally satisfactory to customers now, we would not have at the present time a hire purchase debt of no less than £942 million.
I agree with my hon. Friend the Member for Nottingham, South (Mr. W. Clark) that all these proposals are going to increase hire-purchase cost. Each one of us, if we indulge in hire purchase, thinks that his own transaction is unique. But the finance company and the dealer know that year in and year out they have to make a profit in order to stay in business. The profits of leading hire-purchase houses have been quoted. They have made profits which may seem large in relation to the original capital, which was probably raised at a time when the value of money was very different from what it is today. But on the other hand, many of them have not made profits and have gone out of business.
If Parliament imposes fresh liability on finance houses and dealers, either their profits will be reduced—and I understand that already there is a lot of talk among dealers and finance houses of losses in respect of hire-purchase transactions—or alternatively charges must go up. Competition, of course, could ensure that, granted the new liabilities, the customer continues to get the best deal available. But, in consequence of this Bill, there will be new liabilities and they will have to 1777 be paid for. Most of the new costs will inevitably fall on the honest men on both sides of the deal. There is no doubt about that. This, I hope, stresses the importance of obtaining the right solutions to such defects as may exist.
I would remind the House that the Report of the Committee on Consumer Protection is expected by the second quarter of 1962. I cannot guarantee—I say this to my hon. Friend the Member for Beckenham (Mr. Goodhart)—that the Report will have been published by the end of this Session—one does not know whether it will be available and in the hands of Members, and one does not know when the Session will end—or even before any of the Private Members Bills could conceivably reach the Statute Book.
§ Mr. Macpherson
I think it is fair to assume that a delay of that kind is unlikely to arise on a matter which is bound to excite a great deal more regular Parliamentary attention than the Hodgson Report has excited.
That Committee has said that is considering whether or not it is practicable or desirable that there should be further control of the terms of hire-purchase and credit sales contracts, and its guidance on these complex and difficult issues cannot but be of value.
The House will remember the Committee's valuable interim report on the safety of consumer goods as an instance of the advantages to be gained from this detailed and close study. We also know, thanks to the efforts of the House, how quickly the Bill got on to the Statute Book.
If there were no doubt whatsoever about the solutions proposed, if there were the same degree of agreement as there was in the case of the late Miss Ellen Wilkinson's Bill, there would be a case for proceeding now with the solutions. But the debate today has already made it clear that that is not so. In commenting in more detail on the proposals, I hope I shall be able to bring home the difficulties of deciding upon these particular solutions and illustrate 1778 the advantages that awaiting the Committee's Report may afford.
I take, first, the raising of the £300 limit to £1,000. We will all agree, I think, that the most significant effect of this would be the inclusion of a range of motor car contracts at present exempt, especially those relating to new cars. The House will probably be interested to have the figures of hire-purchase contracts for new and used cars in 1960. The total was 909,319. For new cars it was 163,532. For used cars it was 745,787. In such an immense number, it would hardly be surprising if even hundreds ultimately came to grief and led to trouble.
Assuming it is right to bring in the motor car, is it right to bring it in on the same terms as household goods, encyclopedias and so on? After all, the motor car is a different sort of entity from a television set or washing machine. No doubt, all three can be abused, but the motor car's main characteristic is mobility—or should be. It can be left out of doors without attention. It can be banged about. It can be driven to death and be practically worthless by the time half the purchase price has been paid.
Are we sure that it is right that the hire purchase of motor cars should have the benefit of the protection of the Act? As my hon. Friend the Member for Aldershot (Sir E. Errington) suggested, it is well to remember the words of the late Miss Ellen Wilkinson in the Second Reading debate on her Bill almost exactly twenty-four years ago. She said:We have limited it to £100 total"—the Amendment to £50 was introduced on Report, I think—because that is the limit of county court jurisdiction. Under strong pressure, we agreed to £50 if only one article is comprised. That leaves out the cheap motor trade"—and then she added the wordsI am afraid."—[OFFICIAL REPORT, 10th December, 1937; Vol. 330, c. 734.]The point was that the Act was related to the normal limit of jurisdiction in the county courts, which at present is £400.
If it is right to bring in the motor car, is the figure proposed the right one? It certainly leaves a number of car models outside the range of protection. Indeed, we might well ask, as did my hon. Friend the Member for Nottingham, 1779 South, should a figure be specified at all? If there should be a limit, should any range of goods, such as industrial goods which also are covered, be exempted? It should be remembered that this protection is not limited to consumer goods. For instance, if one increased the level of protection to £1,000, this would bring in catering plant, for which, I am told, there is virtually no second-hand value, or very little. These are the sort of questions to which we may expect answers from the Molony Committee in the comparatively near future, and I have to ask again—I shall do so repeatedly—is it wise to legislate so soon before the report is expected?
The second proposal is for a 48-hour escape period during which the consumer is given time to change his mind. I was not quite clear whether the hon. Member for Warrington's main concern in this case is door-to-door selling and the danger of high-pressure salesmanship in the home. The suggestion certainly seems attractive. The hon. Member for Warrington said that he was putting it forward only as a principle which could be applied in any way the House wished. But will not the House wish to consider the way the principle should be applied in the light of the recommendations of the Molony Committee? Is it even courteous to the Committee to ask for its views and then ourselves give an answer without waiting for the Committee's reply?
§ Mr. W. T. Williams
This puts me in some difficulty. The Minister is constantly referring to the Molony Committee which will not report until, at the earliest, the middle of next year. Heaven only knows when, after that, the Government will do anything about it. The hon. Gentleman then said that if, in the meantime, before the Committee's report is received, we should like to do something to prevent the gravest abuses, that would be discourteous to the Committee. I can only reply by saying that, from such contacts as I have been able to have with members of the Molony Committee—at least, this is the view of those to whom I have spoken—I understand that they would not be in any way embarrassed.
§ Mr. Macpherson
I can only answer that by pointing out that the Molony 1780 Committee has not yet reached its conclusions. Individually, some members of the Committee might not be embarrassed, but it would surely be quite wrong for us in matters where there is a considerable difference of opinion not to await its report. The House should, I think, remember that this is not like the case of the Wilkinson Act in 1938, when there was substantial agreement before the Bill was introduced. Our debate today has already shown that there is considerable difference of opinion on these matters. That is why I think that it would be reasonable and courteous to await the report of the Molony Committee.
Undoubtedly, the suggestion for a 48-hour period of repentance or thought, so to speak, sounds attractive. It would, I think, to some extent protect the harassed housewife in her own house. Nevertheless, I think the point was well taken by one of my hon. Friends who said that it would do so at the expense of a serious weakening of her sense of responsibility.
§ Mr. William Ross (Kilmarnock)
I come from the land of Napiers. How can the hon. Gentleman say that?
§ Mr. Macpherson
I am at the moment talking about hire purchase as such. It would mean that the salesmen in most cases would have to come back, perhaps more than once, to complete the sale. This, again, would add to the cost of transactions to customers as a whole.
Is it necessary for the protection of the person who goes in search of such goods? The hon. Member for Wednesbury (Mr. Stonehouse) spoke as if a lot of people went out and bought cars on impulse, as they might buy a bar of chocolate, because they had money in their pockets. That is not so at all. People who go, with money in their pockets, looking at motor cars generally have thought the matter out fairly thoroughly, they know the sort of car they want, and they know the sort of price they want to pay. I am not at all certain that the same considerations would apply to the person who goes deliberately out in search of goods.
§ Mr. Stonehouse
I am sure the hon. Gentleman wants to be fair. I was dealing with a point specifically raised 1781 —which, I think, the hon. Gentleman did not hear—in the speech of the hon. Member for Aldershot (Sir E. Errington), who wept crocodile tears about someone going out to buy a car and wanting it that very weekend for a trip. I agree that most people going to buy a car will probably be fully aware of their responsibilities, but that there are a few who need protection. This Bill would help to protect them.
§ Mr. Macpherson
I accept that the hon. Gentleman was answering my hon. Friend, but the point still remains that this is really a different set of circumstances altogether from the circumstances in which someone goes to a person's house, very often gets into it, and is jolly difficult to get rid of unless, perhaps, a signature has been put somewhere or other.
The next question is this. Is it not all too easy for a doorstep salesman to persuade a housewife who is greatly tempted to possess the goods that minute—again, this was stressed by my hon. Friend the Member for Aldershot—to falsify the date of notification of the contract? I do not think we should underestimate that difficulty. This may not he the only solution. The right solution, if one is called for, may be more along the lines of a joint signature of the husband and wife being necessary to make an agreement effective. That would, in most cases, result in a pause for reflection and make both partners more aware—this is awfully important in a responsible society—of the commitments into which they are entering. Again, these are matters that the Committee on Consumer Protection is bound to examine closely. It seems both prudent and, as I have said, courteous to await the arguments of that Committee.
Whatever the merits of the escape period in relation to door-to-door sales, is it in any way appropriate for the sale of motor cars, especially when the transaction involves the disposal of a used vehicle in part exchange? As one of my hon. Friends said, it may well result—in fact it must result in practice—in a dealer being unable to offer a particular car to anyone else for a period of time. During that time, a very valuable opportunity for sale may be lost. These are 1782 all things which have to be taken into account.
The last main matter is in Clause 3, which deals with the liability of the owner and the dealer for misrepresentation. In effect, it makes the dealer the agent of the finance house so as to give the consumer the right of recourse against the finance house if the vehicle does not comply with the representations made. I say "vehicle" because it is mainly the hire purchasing of motor cars, as I think all the discussion today has emphasised, which has led to this difficulty. I agree that there is something wrong here. As things stand, the hirer may have neither a right of redress against the dealer because the contract is not with him, nor against the finance house, which may, out of caution, have expressly protected itself against representations since it has no means of knowing what the dealer may say. It therefore seems right that redress should not be denied to the hirer.
However, the proposals in the Bill are that the finance house and the dealer should both be liable. Is that the correct solution? I agree that the finance house will have recourse afterwards, if that is what the hon. Gentleman suggests, but the recourse is given both against the finance house and the dealer. I would only point out that that puts the hirer in a stronger position than the buyer for cash whose contract is with the dealer. It makes it easier for him to have redress, at any rate. Is it necessary to go further than to make the dealer liable, or can the view be taken, in the rather specialised field of hire purchase, that the finance companies should bear some responsibility? Again, I can only remind the House that it would be unwise, I should have thought, to legislate in principle and to take a decision on this matter before the Molony Committee had reported.
As my hon. Friend the Member for Nottingham, South and other hon. Members, I think on both sides of the House, have said, it may well be that a much more fundamental change is needed in the whole system. An article appeared in the Financial Times of 6th December which stated:But no change in the law is going to be satisfactory until it is designed to end the legal fiction which encourages the financing house 1783 to pose as a hirer. For it is by re-modelling the law to establish hire purchase financing for the personal lending that it fundamentally is that reform would most promote the best interests of the public as a whole.It can hardly be denied that a system which, in some respects, places the finance house at one and the same time in the position of buyer, seller and owner whereas, in fact, it is really none of them but in effect the banker, although a very well-protected banker, is somewhat surprising. It is, to say the least, odd that the dealer who sells the car, and very often does a very hard job of selling, legally hardly comes into the picture at all. On the other hand, in the main, the system works, and, generally speaking, it is only when there is deliberate fraud on the part of the dealer or lack of reasonable care on the part of either the finance house or the hire purchaser that things go wrong. There are, of course hard cases, hard cases which are not due to carelessness, but, at whatever point the limit is fixed and however the law is fixed, there will always be some of those.
May I sum up the things that I have said? I think that we have to consider whether the Bill would necessarily benefit the ordinary hire-purchaser of a car. It would almost certainly increase the cost of hire purchase or the amount of the deposit, or both. In so far as that happens, it will, of course, affect car sales as a whole. Would it not also be liable to lead the finance houses to adopt a harsher policy—for example, to be less lenient in the period before one-third of the purchase price had been paid if there were default, instead of giving the hire purchaser some consideration and showing lenience in some cases of what might prove to be purely temporary embarrassment?
Where more than one-third has been paid, what would be likely to happen to the vehicle in the period between the institution of proceedings to recover possession and the time when the case came before the county court? I come back to what I have already argued. The main Clause, if I may be permitted so to describe the first provision of the Bill, does something which has not been done so far. It brings in the great bulk of the purchase of new cars, something which was excluded deliberately from the 1784 1938 Act. I suggest to the House that much closer examination of the principles involved here should be made before we make a change of that kind.
Perhaps I may conclude by repeating—I know that it will be very little consolation to the hon. Member for Warrington in view of the speech that I have had to make—that the Government are grateful to the hon. Gentleman for providing the opportunity to discuss this matter. We have had a number of reports on this subject. The debate has ranged very widely indeed. For example, the hon. Member for East Ham, South (Mr. Oram) dealt with the question of interest rates and the giving of advice to purchasers. But I cannot believe that it is right to commit ourselves to accepting these particular solutions without a more detailed examination of the principles involved and their probable implications. After all, these are matters of principle which ought to be settled and not just a question of adjusting the principles once they have been settled by a vote on Second Reading.
Perhaps I can therefore commend to the House the virtue of patience, a virtue which is perhaps not as exhilarating as action but nevertheless often the right course, particularly since not much time has to pass before we receive a detailed examination of all these matters on which the Molony Committee is lavishing so much time and care.
§ 2.49 p.m.
§ Mr. George Darling (Sheffield, Hillsborough)
I am sure that many hon. Members, not only on this side of the House but on the benches opposite, will think that the Parliamentary Secretary's speech was very disappointing. [HON. MEMBERS: "Hear, hear."] Not only did he say that this is not the time to pass amending legislation of this kind, but he proceeded to criticise the Bill without offering any hope or chance of having it amended in Committee. The hon. Gentleman made no mention of the Bill having a Second Reading and going into Committee, where some of his observations on the Bill could be examined to see whether they were valid. We could then have proper discussion in Committee to proceed further with whatever may be needed to get rid of the abuses that undoubtedly exist in sections of hire-purchase trading.
1785 If there were no abuses and the whole system was perfect, the Molony Committee would not have been asked specifically to examine hire-purchase law and arrangements. The fact that that Committee is examining the problem means that in the Government's view, because it was they who made the reference to the Molony Committee, something is wrong and that the hire-purchase and credit-trading system needs, at least, examination and improvement and, perhaps, putting on a different footing, as the hon. Gentleman himself suggested.
I do not rule out the possibility that ultimately a major Bill will be required I am compelled, I regret to say, by the disappointing intervention of the Parliamentary Secretary, to speak for a little longer than I intended, but I will try to make my speech as brief as possible. I begin by congratulating my hon. Friend the Member for Warrington (Mr. W. T. Williams) on taking advantage of his luck in the Ballot to bring forward this subject. We are all agreed that it is important. I go further than congratulating my hon. Friend. I thank him for introducing the Bill, because it is a desirable and very useful Measure to put before a Standing Committee.
I agree with some of the criticisms of my hon. Friends, as well as with criticisms from the Government side, that parts of the Bill probably require rewording and improvement. That rewording and the improvements that may be needed can be done in Committee. I appeal to the House, even at this stage, to let the Bill go to Committee so that this can be dealt with.
We all know the abuses with which the Bill tries to deal. It has been suggested by hon. Members opposite that the abuses are small in degree as against the whole field of hire-purchase trade, and that is true. Hire-purchase trade is big business. The debt now reaches something like £1,000 million all told. I am prepared to believe that the abuses that we come across from our constituents and from other sources are small in scope compared with the tremendous volume of hire-purchase trade. That, however, is no reason for not doing anything about the abuses. The abuses which arise from our present legislation occur because there are too many loop- 1786 holes for unscrupulous dealers to deceive and rob customers who come to them for hire-purchase trade. The law allows high-pressure salesmen to lead people, often with false and misleading statements about the commitments into which they are entering, into signing extravagant agreements that they cannot afford to meet. The Parliamentary Secretary is saying, in effect, that this should continue. He does not propose that anything should be done about it.
I want to examine the hon. Gentleman's suggested time table. He said that we should wait for the Molony Committee. In view of the careful Governmental statement made by the Parliamentary Secretary that that Committee will report in the second quarter of the year, the earliest time that it is likely to report will probably be late in June. Then follows the month of July for the President of the Board of Trade to consider it. It will be published, possibly, in October or November. Then, there are precedents to follow, the most important being the Report of the Hodgson Committee.
The Parliamentary Secretary cannot get away from the Hodgson Report. It dealt with the same subject of consumer protection. The Parliamentary Secretary was somewhat off the mark in saying that there was no pressure in the House and in the country to get the weights and measures legislation on the Statute Book, as proposed by the Hodgson Committee. There was a great deal of pressure. I should say that the weights and measures business is just as important.
§ Mr. N. Macpherson
I did not say there was no pressure. I said that the pressure which might be expected on consumer protection was greater than that which came from the Hodgson Report.
§ Mr. Darling
I do not know how the hon. Gentleman separates the two. Weights and measures are part of the whole field of consumer protection with which we are concerned. Our purpose is to bring all our legislation up to date.
Eleven years after the Hodgson Committee reported, we still do not have a Bill in the House of Commons. Admittedly, we had two Bills last Session, but there is not one this Session. I am afraid that the same thing will happen to the 1787 Molony Report if it makes sweeping recommendations as did the Hodgson Committee Report in the case of weights and measures.
The Parliamentary Secretary gave his whole case away when he asked us to wait for Molony—I nearly said Godot, but he never turned up—in this hire-purchase business, because he supported a Private Member's Bill last Session to alter the law in relation to hire purchase and credit trading and to remedy an abuse in Scotland. We are suggesting that there should be an English and Welsh Bill to amend the law as it affects England and Wales regarding abuses in the hire-purchase system down here. Why does he agree that we need not wait for the Molony Report when dealing with Scottish abuses, but that we must wait for that Report when dealing with abuses in England and Wales?
§ Mr. N. Macpherson
The answer is simple. The Scottish Bill merely brought Scotland up to the level of England in this matter.
§ Mr. Darling
That may be true, but suppose that the Molony Committee, although I do not imagine it will, recommends that the law in Scotland should be different from the law in England. The hon. Gentleman was anticipating the Molony Committee's Report. I do not see any reason why we should not continue to anticipate it.
I quarrel with another of the points made by the Parliamentary Secretary. He suggested that when the Molony Committee reported, the Government would act speedily. They did not act on the Interim Report of the Molony Committee but left it to Private Members' Bills. The first case concerned oil heaters. In the second case, the Government left it to my hon. Friend the Member for Bilston (Mr. R. Edwards) and we proceeded on the basis of two Private Members' Bills. We can do the same thing now. We are trying to amend the law in relation to hire purchase by means of a Private Member's Bill. It is no use the Parliamentary Secretary saying, "Leave it to us, wait for the Molony Committee to report and the Government will act, because we acted on the Interim Report of the Molony Committee." 1788 The Government did not act. In the end, they supported the Measures proposed by private Members.
The two Private Members' Acts to which I have referred were enabling Measures. Not a single thing has been done under the Consumer Protection Act, which was initiated by my hon. Friend the Member for Bilston, in spite of all the recommendations to the Home Office asking for regulations applicable to electrical appliances in the home which proved dangerous and caused many accidents. Therefore, I see no reason why we should consider waiting any further for the Molony Report when there are cases of abuse that should be dealt with before that Committee reports.
I should like to take up one point that was mentioned almost casually by the hon. Gentleman but was developed further by his hon. Friend the Member for Nottingham, South (Mr. W. Clark' and his hon. Friend the Member for Aldershot (Sir Eric Errington). I firmly believe—this is my personal view, and I do not want to commit any of my hon. Friends to it—that we have to get rid of the whole basis of hire-purchase law and hire-purchase dealings in this country, and very much on the lines of the suggestions of the hon. Member for Aldershot. It is quite wrong to allow the dealer who sells the article to the customer himself to become a money-lender or to be associated with money-lending transactions in the way in which he is today.
If the customer wants to buy a car, a refrigerator, or whatever it may be, he should first of all go to the finance company, to the bank, the co-operative society, the loan society or whatever it may be, and say, "I want to buy a car. The kind of car I am after is so-and-so. I think I can pay for it. Will you lend me the money to buy it?" This is the way it should be done, and if it is done this way, that registered loan institution, whatever form it might take, would be able both to guide the customer away from disreputable dealers—because, obviously, it would have a list of them, whatever form their activities took and whatever their form of trading—and also to check the customer's ability to pay, as anybody borrowing money from a building society would be checked.
§ Mr. Dudley Williams (Exeter)
I am following the hon. Gentleman's argument closely. Is he suggesting that a reputable finance company would make use of disreputable traders as agents?
§ Mr. Darling
If the hon. Gentleman had come in a little earlier and had spent a little longer with us, he would have known that on both sides of the House we have covered this point already. This is not in the Bill.
It is on these lines ultimately that we shall have to go for the changes that must be made in our hire-purchase and credit-trading system. In the meantime, suppose that the Molony Committee recommends these wide changes in hire-purchase law, as that Committee may very well do. Even under the rather restricted terms of reference which it has, I do not think it would be restricted from making these wider recommendations. These would then require major legislation, and major legislation, under this Government, at any rate, is a very difficult thing to achieve. We have had a Weights and Measures Bill, a Road Transport Bill, and a Road Traffic Bill all jammed up and then scrapped, and nothing happens. This will require major legislation, and I think a change of Government, before anything can be done. In the meantime, are these abuses to continue? Are the Government to do precisely nothing about them, as the Parliamentary Secretary suggested?
We have been asked in this debate to give evidence in support of the declarations we are making that there are abuses in our present hire-purchase system. I take up one point which has been made by a number of hon. Members, including the Parliamentary Secretary, that if we raise the limit to £1,000, it will catch up quite a number of car dealers in ways in which car dealers do not want to be caught up. The assertion has been made that this will raise the costs of the operation to the customer.
I have here a hire-purchase agreement, which I agree is very difficult to understand, concerning a person who bought, not something for £300, but a second-hand scooter for a cash price of £25. The person buying it made an initial payment of £5, and agreed to pay the rest off at about 30s. a week for an appropriate number of weeks. I am not complaining about the rate of interest, 1790 although it looks pretty high. The point is that this young man's mother, when she heard about this deal, said, "Good heavens, you cannot pay that amount of money. I will take the £20 along to this man, and you need not pay the hire-purchase terms at all. He will have the £25, and you will be clear".
But no, although she went along only a few days after her son had entered into this agreement to buy the scooter, she found that the sum of £8 14s. had been added for the cost of the operation. One of my hon. Friends, on behalf of this lady, wrote to this finance company, and I will not mention names, because I think it very unfair to pick out just one or two cases like this. Here is the material and hon. Members can look at it if they like. The managing director very fairly set out the charges which the company would have to make. Frankly, I do not want to go into the details.
However, I cannot see how the raising of the limit to £1,000 from the present limit of £300 could make any difference at all to these incredibly high charges in which the finance company, quite rightly, is involved. I am not complaining that they are too high, but I think that they are too high on a transaction involving £20. However, the trouble which reputable companies themselves go to to check the bona fides of customers, the value of the machines, and all the rest of it, cannot be paid for in peanuts. One has to pay money for this kind of service.
In reply to hon. Members opposite who suggest that the rates of interest which are charged by reputable companies are not too high, I have another case I could mention, but it is a complicated one and I think I had better not go into its details. I can say, however, that this is another case of a person who undertook to buy something not over a long period of time but on three months' credit and who, when he decided he would pay the whole thing off all at once, found that, under the terms of his agreement, he could not pay the thing off all at once and had to pay the rate of interest he would otherwise have had to pay. He was involved in a rate of interest which worked out for the period of the transaction at over 30 per cent.
1791 This is the kind of thing which happens, and for the life of me I cannot see that raising the limit to £1,000 will make any difference here.
§ Mr. McAdden
Is the hon. Member saying that that man was charged 30 per cent. for a period of three months?
§ Mr. Darling
Yes. That is how it would have worked out. Let me explain. He bought a washing machine at a total cost of £59 7s. He paid the representative £30 7s. and then asked the firm to grant him three months' credit for the rest. The agent or representative returned the next week with the news that the firm could not do this, but offered hire-purchase facilities. The purchaser writes:I signed a twelve-months agreement on the understanding that if I paid up in three months the interest would be 2½ per cent., if in six months, 5 per cent.—and so on. He paid £29 by monthly instalments of £10 and a final one of £9 and added 15s. which he thought was the interest charge. The whole sum was paid by 28th February. Three months later he received a letter demanding £1 10s. 3d. He immediately wrote protesting, and then discovered that this was the interest charge, the charge of the finance company, which he would have had to have paid if he had not paid off the difference quickly. If we add that in, the interest comes to 30 per cent. Hon. Members can do the sum themselves.
§ Sir E. Errington
Surely there is no suggestion here that that 30 per cent. is really the percentage? The things which bring it up are the charges, whenever an agreement is accepted. It is quite unfair to call it a percentage.
§ Mr. Darling
That is the point I am making; I quite agree; but from the customer's point of view he has paid 30 per cent., by counting in the charges, the interest, and all the rest of it.
We think that the argument for raising the figure to £1,000 would lead to much higher charges than are now made—and I do not think that the charges could possibly be any higher.
I want to make only one further observation, and that is on the two days' grace. I think that this is absolutely 1792 essential. I will confess that when my hon. Friend was discussing the terms of his Bill with a few of my hon. Friends and myself, I wanted to make it longer than two days, because I think it is essential that people should be given the chance to reconsider what they are trying to do, and I think that that is important also for the dealers and the finance companies. They should have a chance.
On the question of the children's encyclopaedia, which my hon. Friend the Member for Wednesbury (Mr. Stonehouse) raised, there is another point to be made, and that is the pressure which can be put from the doorstep is often abusive pressure. I can speak with personal experience of this. An agent of this firm apparently got a list of the parents of the local school children and went round to their houses and came eventually to my house while I was working in the garden.
§ Mr. Darling
Please let me finish.
When I said that I did not want the encyclopaedia he started abusing me by saying, "You have no interest in your children's education." I can well understand how that kind of pressure builds up with the housewife on the doorstep, and she will sign anything to get away. If the Parliamentary Secretary will not allow us to have the Bill sent to Committee, where we could get improvements made, like the two days' grace, and some of the abuses which we have discussed this morning wiped out, the Government are being very unfair to us because, as I have tried to say, the hon. Gentleman is anticipating to some extent the recommendations of the Molony Committee.
The hon. Gentleman has criticised the Bill in a way in which, for all I know, the Committee may not criticise it. He has given us no opportunity to get rid of abuses before action is taken on the Molony recommendations. Provision for the two days' grace and other proposals, such as the requirements that the document must be seen and signed before agreement is reached, are desirable and necessary measures to get rid of abuses. The Government are being very unfair in giving us no opportunity to look after our constituents' interests in the 1793 way that we should like to look after them. They are being unfair also to the finance houses and dealers who might, if necessary out of an amended Bill, obtain the protection which we want to give them against unscrupulous customers.
I hope that in the short time that remains the Parliamentary Secretary will reconsider what he has said and will suggest to the House that the Bill should go to Committee and that we should all bend our efforts, without party division, to make the Bill what I think it could become and what all of us would want it to be in order to get rid of abuses in the hire-purchase business.
§ 3.13 p.m.
§ Mr. Harris
I still intend to do so, but not because I think that the Bill in its present form is absolutely correct and workable. Many alterations may be necessary, but I hope that it will get beyond the Second Reading stage. I am disappointed by the statement made by my hon. Friend the Parliamentary Secretary to the Board of Trade. He gave the impression that the Bill should be completely withdrawn and that we should wait for Government legislation, which I would be prepared to bet could not come within three years.
There are a number of features in the Bill to which we should give serious consideration. Some, possibly, are not practicable. I do not know that the provision for oral representations to be written into a contract of sale is practicable. But there are other matters in the Bill which should not be thrown overboard. Various statements made today need to be seen in proper perspective. Some hon. Members have talked about high-pressure salesmanship. We should be careful about what we mean by that expression. There is nothing wrong with it, provided that there is no misrepresentation or deception. The Government keep pressing industry to get on with high-pressure salesmanship abroad, and it is the high-pressure salesmanship of certain companies that has helped to make those companies and British industry generally 1794 prosperous. What we are against is misrepresentation or deception.
Furthermore, the hon. Member for Warrington (Mr. W. T. Williams) talked about the hire-purchase jungle. It ought to be made clear in the House of Commons that the great mass of the British public who enter into hire-purchase commitments are good payers. There is a jungle on the fringe for various reasons. Some of the reasons may be laid at the door of the finance houses, some at the door of the manufacturers, some at the door of the retailers, and in some cases it is the fault of the customers themselves who have allowed themselves to be carried away. But, by and large, the hire-purchase contracts in existence today are running very smoothly, and the great mass of the British public are not bilkers.
I declared my interest very briefly earlier on, but I will do it again. I am the chairman of the company which has been named, and I will name it again—Rolls Razor Ltd.—which indulges in the selling of its goods direct to the customer. This is different from door-to-door selling. Direct selling to the customer comes about as a result of a customer seeing an advertisement in a paper, cutting out a coupon, filling it up, putting it in an envelope, stamping the envelope and sending it off; a few days later receiving a brochure, and later, unless an indication is given to the contrary, seeing a salesman who will call. My company's salesmen may not get to the customer for four weeks, so that such customers have a fairly long time to think about a sale.
This is very different from door-to-door selling, in which case a salesman goes into a street and knocks at every door all the way down and catches the occupants of the houses unawares. If it is during the day, the occupants may, of course, be only housewives.
One of the best suggestions made today—I was going to make it myself, because it is a practice operated by my company; the Parliamentary Secretary referred to it—is that no sale ought ever to be made to a housewife alone. There ought to be absolute insistence upon the husband being present. One must do that. One simply cannot have a door-to-door salesman going into a house and jockeying a wife into buying all sorts of 1795 things. If that is done, there will simply be incidents such as the one mentioned by the hon. Member for Warrington, when a wife loads herself up with hire-purchase commitments and is too frightened to tell her husband about it, and then resorts to shoplifting. The hon. Member mentioned one case, but many cases have been reported in the Press over the last few years.
§ Mr. W. Clark
If my hon. Friend says that the husband should be present when the wife is about to sign a contract, would he also say that the wife should be present when the husband signs one?
§ Mr. Harris
I have not said that two persons should sign the contract. Whoever is the wage earner should sign.
Perhaps I might, in passing, mention an amusing case which occurred in my office last week. A gentleman wrote to us in high dudgeon. His wife had filled in a coupon, and one of our salesmen had gone to see her. She had decided to buy a washing machine. At the last knockings the salesman said "I am sorry, but I cannot sell it to you because your husband is not present". When the husband came in later he was very irate, so irate that he wrote to us saying "I am a justice of the peace. My wife is a business woman, and is compos mentis and well able to enter into a business commitment of this sort. I am prepared to sign the cheque, but she must sign the receipt for the purchase." In those exceptional circumstances we allowed the sale to go through. However, I am sure that, in principle, we are right always to insist that the husband must be present, because it is he who will have to pay the instalments.
I must now spend a little time answering the statement made about my company by my hon. Friend the Member for Beckenham (Mr. Goodhart). What he said was mischievous and unjustified. He was unwise to mention the name of a company. Although he had the courtesy to tell me that he would make 1796 a statement, he never took the trouble to come to me and find out the answers to the points he was going to make. Simply to come here and say that he has been asked to make statements on behalf of the Consumers Advisory Council, the Consumers Association and the Retail Trading Standards Association, because they have had 50 complaints, is not good enough.
If my hon. Friend had come to me first, he would have discovered that we have 150,000 customers. We are an organisation which does not have the advantage of the "cushioning" of retailers between ourselves and the customers, and it is not good enough, in these circumstances, to attack us like this because we have had 50 complaints.
§ Mr. Goodhart
Will my hon. Friend remember only members of Consumers Advisory Council—a comparatively small group—can send complaints to that Council?
§ Mr. Harris
A few months ago a lady member of the Consumers Advisory Council was kind enough to show me a very damning article which she was proposing to publish. It began by saying, "We have had ten complaints" I had to go to the trouble of pointing out to her that ten was an infinitesimal number, and was certainly not enough on which to build up a case. I suggested that she should look into the facts first. This company two years ago was about to go bankrupt—perhaps I should say liquidation, because legally a company can only go into liquidation—but a crash operation was put into effect and the company was saved. If some of the goods at the start were not of the high quality which they are today, then that is part of the teething troubles to which any organisation would be subjected in such circumstances.
My hon. Friend said that there had been an unprecedented number of claims, but there is no precedent for an organisation like this, selling by direct methods. The methods of selling in this country are changing. The old method of selling through a small retail shop in each town is disappearing. The supermarket is coming, and the small shopkeeper is being pushed out. Whether that is for good or ill, I do not know. Direct sellers are here to stay, and I think 1797 that the new methods of selling are, by and large, to the advantage of the public.
I suppose that I have to accept that the Retail Trading Standards Association, which represents retailers—and of which the chairman, I believe, is a director of Gamage's, and other members of the Association Council are directors of big retailing organisations like Selfridge's—will be angry at our methods, which prevent the retailer getting his normal 30 per cent. cut.
I do not mind the case of my firm being brought up in this House, provided that the picture can be seen in its proper perspective. My hon. Friend said that he had heard indirectly that one newspaper group had had 250 complaints. I can tell him the name of that group. It was the Daily Mirror Group, and the precise number was 256, which extended over four years and during a period when 300,000 inquiries had been coming from this group. Hardly any of those complaints apparently related to hire purchase, and therefore I do not know why he brought the matter up at all. The great majority of the complaints were of late delivery at a time when the company was just getting on its feet again.
My hon. Friend should be more careful. I am sorry to have had to attack him like this, but I believe that he has misused his position as a Member of this House and abused his position as a signatory to the Bill. Despite that, I do not propose to allow personal animosities to alter my decision to support this Bill, and I have one or two suggestions about what could usefully be incorporated in legislation of this sort. The first point I have already referred to—the condition that the husband must be present. Secondly, I cannot see what is wrong in essence with the 48-hour "cooling off" period.
What happens when a sale is made to a customer on hire purchase? Am I not right in saying that the sale is actually to the finance company and that the customer is really the hirer? In my company, it is administratively impossible to get the details of the so-called sale to the finance company in under 14 days. I would have thought that in that period the customer, if he only knew his rights, could go back on 1798 the purchase. But the great mass of the public do not know that the finance company will not actually sign the documents before about 14 days.
In the Bill there will have to be a clear definition of what is meant by the words "entered into." Strictly speaking, a sale is not entered into until the finance company has had the documents and has said it will accept. At any time up to then, the purchaser can go back on the deal. This is something which should be more widely known and should be made clear in legislation.
Notification of terms is something which I would have thought was elementary. We certainly do it on the written receipt which is given to every customer. It is not good enough merely to say that the terms are set out in full on the enormous hire-purchase form which eventually reaches the customer, perhaps a month after the sale has taken place, and which is in very small type which some people cannot read. The notification of terms should be on the very first document given to the customer at the time the sale is made.
Credit should be kept down to two years. There is very seldom any justification for selling anything on hire-purchase over a period of more than two years. Houses are probably the only exception where one is justified in giving any longer time.
The cash deposit should always be at least 25 per cent. The hon. Member for Glasgow, Craigton (Mr. Millan) said that many of the difficulties in which hire-purchase companies now found themselves were the fault of the finance companies and the Government who simply took off the hire-purchase restrictions in 1958. I would have thought that that was unarguable. Of course it is true that when all restrictions were removed, everybody went in for hire purchase as hard as he could, and the result is that many finance companies have now found themselves in difficulties.
If hire purchase is to work satisfactorily, there has to be a tight credit control organisation. In my company the arrears rate is .03 per cent. compared with a national average of 7 per cent. That is because we do not allow anybody to fall into arrears. One of the troubles about hire purchase in which people are apt to find themselves is that 1799 the finance company concerned does not get on to them quickly enough when they begin to get into arrears. It is a kindness to customers to have a tight credit control organisation and so prevent an unfortunate situation from arising when people fall into such arrears that they cannot pay them.
Another provision which should be inherent in hire-purchase law is the right of the customer to switch over from a hire-purchase deal to a cash deal, without any cost to the customer. We do that in my company. I will disclose that of all our sales of washing machines, now about 1,800 a week, 55 per cent. are on hire purchase and 45 per cent. cash. Within one month 10 per cent. of the hire-purchase customers turn over to cash and we allow them to do so without any additional cost to them.
The reason is that many people enter into hire-purchase commitments not because they do not have the money to pay cash, but because they want to see whether the appliance works. What they say to themselves, but not to anybody else, is that if it does not work, they will not pay the instalments. When they find that it does work, they are happy to switch over to cash, if they have the opportunity. Why should not every firm give such facilities to its hire-purchase customers?
Another thing which my company is not doing at the moment but which we hope to do next year is to provide that every hire-purchase customer is insured against inability to pay arising through illness or accident. The insurance rate for this is very small—a matter of about 7s. on goods costing £60 or £70, which is very small and might save a lot of people a lot of trouble, both at the customer's end and at the finance house end.
Lastly, any guarantee which is given under a hire-purchase contract should preserve the customer's rights under the Sale of Goods Act, 1893. It is useless to give a guarantee which cuts down a customer's rights, as many do. I will give a pat on the back to the Consumers Advisory Council—this really is turning the other cheek—because it has done some very useful work in this direction in examining these guarantees. One big motor corporation 1800 has changed its guarantee because of the investigations made by this Council. We have done our best to bring our guarantee into line in this respect. Without repentance to my hon. Friends, who I know are furious with me for even suggesting it, I think that there is merit in the Bill, because there are a number of anomalies, difficulties, and hardships which occur on the fringe of the whole hire purchase world which need looking into, and which, with small alterations, could save a lot of heartaches and trouble for a lot of people.
§ 3.30 p.m.
§ Mr. David Weitzman (Stoke Newington and Hackney, North)
I was delighted to hear the speech of the hon. Member for Heston and Isleworth (Mr. R. Harris). I had not realised what good sense there was in some parts of the House.
May I also take the opportunity, as other hon. Members have done, of congratulating my hon. Friend the Member for Warrington (Mr. W. T. Williams) on bringing in this Bill. I do not think that it goes far enough, but it is an excellent little Bill. It deals with much needed reforms which ought to have been brought about a long time ago.
I put the matter in two ways. Like other hon. Members, I meet many of my constituents in my "surgery". We all receive many letters of complaint from our constituents about these hire-purchase transactions. As the hon. Member for Heston and Isleworth said, it is true that in the majority of cases the transactions are all right. The sale goes through and there is very little room for complaint, but it is also true that in many cases there is serious abuse, and there are many housewives, and complaints from the husbands of many housewives, who have been led into hire-purchase transactions which they have afterwards bitterly regretted.
We know, for example, of many cases where glib salesmen have come along and tempted people into buying goods which they probably did not want, and perhaps could not really afford, and got them to sign documents which quite obviously they did not understand at the time of signing.
I think that everybody is agreed that something ought to be done about this. 1801 I do not think that anybody is satisfied with the present state of affairs with regard to hire purchase. Yet, when we suggest that some limited reform should be made, what answer do we get from the Minister on behalf of the Government? He poses a number of questions. He asks whether these reforms will be for the benefit of the hirers, because—he says—the amount they will have to pay might be increased. He puts these questions and answers them with the eternal phrase, "Wait for the Report of the Committee", in this case, wait for the Report of the Molony Committee.
I ask the Minister seriously to consider that answer. If he had said today, "The Molony Committee will report in the next month or so, and I give you an undertaking on behalf of the Government that legislation will be brought in within a year from now."—I am being quite reasonable—well and good. I am sure that my hon. Friend the Member for Warrington would equally have said, "Well and good. We will postpone the matter so that the whole thing can be gone into, the Report of the Molony Committee can be considered in detail and if necessary we can alter the whole of the hire purchase law and deal with the matter in that way."
It is monstrous to suggest that we should wait for that Report. I have personal experience of reports by Committees appointed by the Government. I was a member of the Tucker Committee which was appointed four or five years ago. Lord Tucker was the Chairman. A number of important people—important apart from myself—spent a whole year going into all sorts of details, weighing up evidence oral and written with regard to the subject-matter for which we had been appointed. We were urged by the Home Secretary to get on with the job expeditiously and report as quickly as we could, and we presented a unanimous Report three or four years ago. Questions have been asked in the House about that Report, but the answer has always been, "I am not in a position to say anything in regard to it."
It was not as if the Report was the subject of disagreement among the members of the Committee—not as if there had been a Minority Report. It was a case of urgency, and we were told to act with expedition. But the matter 1802 has not even been brought up for discussion in the House. When the Government adopt that sort of attitude in a matter of importance requiring legislation, what right has the Minister in this case, where he has confessed that a wrong exists and that something must be done to put it right, to tell us to await the report of the Molony Committee? Is it fair to the great number of people who suffer from these abuses. The Minister has told us that the report will not be issued for a considerable time, and that there can be no question of the Government's giving any undertaking with regard to legislation.
Furthermore, we know what happened to the Interim Report issued by that Committee. I do not want to use words wrongly, but I feel that it is rather impudent for the Government to adopt that attitude. I use words that are strong because it is utterly wrong for the Government to tell the House to wait for the report of the Committee when they know that a wrong exists. It is wrong for them to refuse to give any undertaking as to when legislation will be brought in when we know that from a practical point of view admitted wrongs will continue for many years without anything being done.
When the Minister examines the very limited scope of the Bill he must agree that it ought to go to Committee. There are many points for criticism about it. Hon. Members may not agree with certain of my hon. Friend's proposals, and they may wish to suggest alterations. The Committee is the place to thrash out these matters. Even at this late stage I earnestly beg the Minister to advise the House that where a wrong of this kind exists, and where something can be done to remedy it to some extent in the immediate future, that course should be adopted.
I now want to say a few words about certain parts of the Bill. Clause 1 proposes to raise the limit from £300 to £1,000. I would have thought that everybody would agree with that proposition. Apparently the Minister does not agree. He apparently takes the view that this provision might not be applicable to certain cars of that value. I cannot see what his objection is. I would have thought that the figure of £1,000 would be the proper one to take 1803 today, bearing in mind that a figure of £300 was taken in 1954 and £100 in 1938.
One criticism apparently is that the county court has jurisdiction only up to the sum of £400. That is a simple matter to remedy. If we want the county court to deal with these matters—and it cannot at the moment—then a few words inserted in the Bill would give the necessary jurisdiction to the court. There is no difficulty in regard to that. Indeed, the county court already has jurisdiction beyond £400 in certain matters, so there is no difficulty as far as that is concerned.
§ Mr. McAdden
Surely the hon. and learned Gentleman will have recognised during the debate that all the instances of abuses and hardship advanced have, in the main, been in relation to cases in which a sum of under £300 is involved. Door-to-door selling and things of that description do not involve goods to the value of £1,000. People do not sell goods worth £1,000 on the knocker.
§ Mr. Weitzman
I agree, but is there any reason why the court should not deal with cases involving goods to the value of over £300? I fail to see where the objection to Clause 1 lies, I should have thought that the Clause would have received the approval of every hon. Member.
I would suggest that if it is of advantage to alter the law in regard to hire purchase so that the maximum sum was £1,000 and not £300, that reform in itself would make the Bill worth while. We do not want to wait for the Report of the Molony Committee to see whether or not £1,000 is the proper sum. It is already well recognised that it is.
I now turn to Clause 2. I am very attracted by the Clause which my hon. Friend has inserted in the Bill with regard to the notification of the proposed terms. The hon. Member for Heston and Isleworth strongly approved, I thought, of this Clause. When one remembers the temptation offered to housewives by salesmen who call at the door and endeavour to sell them goods, and how easy it is for housewives to fall for that temptation and to be unable to resist the temptation to get goods on payment of a small 1804 deposit, it is surely very sensible that there should be in hire purchase what I might call a pay pause. Let us copy the Chancellor of the Exchequer in this and have a pay pause—perhaps the only good way of looking at something which the right hon. and learned Gentleman has put forward. At any rate, it would give the housewife an opportunity to talk the matter over with her husband and to consider whether she could afford to make the purchase.
I am very much in favour of something on the lines of this form of notification. It may, perhaps, be thought better to increase the length of time or to alter it in some way so as to get the signature of the husband as well. But let there be some provision of this kind so as to enable the housewife to think carefully before she becomes committed to the transaction.
I have only one criticism to make with regard to the form of notification as provided by my hon. Friend in the Schedule to the Bill. There is one point that seems to have been omitted and which, in my view, is of considerable importance. I think that every would-be hirer ought to know, and that there should be inserted in this form, the effective rate of interest to be paid. I use the words "effective rate of interest" advisedly. Of course, the hirer is told in the form what the cash price is. He knows how much has to be paid at the end of two years. He can deduct one figure from the other and find out the difference. But that is not the effective rate of interest, because he should realise that he is making repayments at the same time. Many ignorant persons who sign these forms do not realise what the real rate of interest is. I think that they should be told what it is and that the rate should be inserted in the form.
I wish to pass from that to another consideration. This Bill permits the hirer, in transactions up to £1,000, to have the benefit of the provisions in Section 8 of the Hire Purchase Act, 1938, let me remind the House of what is done by Section 8, because I think this very important. It means that the hirer has the benefit of the implied condition that the goods are of a merchantable quality except for any defects of which 1805 the owner could not possibly be aware or defects which would have been revealed on examination or from a sample. But it should be noted that that condition does not apply to second-hand goods. Is there any reason why the condition should be limited to new goods?
It is to be noted that this limitation does not apply in the analogous section of the Sale of Goods Act, Section 4 (2). In other words, the condition that the goods shall be of merchantable quality applies only to the sale of new goods. Why it should not be applied in the case of second-hand goods sold under a hire purchase agreement I do not know. Surely the vast trade in second-hand cars makes such a protection desirable and that is a change which I would suggest to my hon. Friend.
In addition to the condition of merchantability to which I have referred, Section 8 of the 1938 Act says that where the hirer, expressly or by implication, makes known the particular purpose for which the goods are required there is an implied condition that the goods are reasonably fit for that purpose. But both the conditions to which I have referred, that of merchantability and the implied condition, are excluded where it is shown that such exclusion is brought to the notice of the hirer before he makes the agreement. I suggest that the prohibition against exclusion ought to be absent. I do so for this reason.
There are many people who sign a form containing a clause which excludes these conditions and who do not understand what they are signing. That must be within the experience of all hon. Members. They may have had constituents come to them to complain who say, "Here is a long form. I signed it. I did not understand it." And if one looks at the clause it excludes liability on the part of the owner with regard to the conditions which I have indicated.
The Section is designed for the protection of people and in my submission it is not right that the vendor should be able to sell goods which are bad and defective, and be able to get away with it simply by saying that there is a clause in the agreement permitting him to do so. So much for Clause 2 and my criticisms with regard to it.
1806 I wish now to refer to Clause 3 (1, a). The hirer has a right to rescind as against the owner in cases of misrepresentation made by an agent. I fully agree that that is a proper provision. But it does not give a right of damages against the owner. It might be said that he would have such a right against the dealer. But many of us are aware of cases where the dealer might have gone out of business; or he might be a man of straw; or the hirer may have kept the goods for a period of six months or a year or more, and has lost the right to rescind. I suggest that it would be equitable if the right to recover damages were given against the owner as well as the right to rescind. Let me say a word on Clause 3 (1, b). That is the provision which the Minister criticised. I do not know why he criticised it. It is surely only fair that where we get a person making a representation, warranty or statement which is untrue, there should be a right of damages against the person for doing so. If he is the agent of the owner and makes that statement in order to effect the transaction on behalf of the owner, surely there ought to be a right of action against the owner for recision if it can he brought about, and, if not for recision, for damages.
I would criticise this provision in one respect. It does not seem to me to add very much to the state of existing law and I do not think it goes far enough. I think that the agent of the owner, who is the dealer as a rule, is the person who has actually sold the goods, and if that is so, should he not be liable for any implied representation? Under this Clause he is only liable for an express warranty or representation made by him. In my view, he should be liable for an implied representation that the goods are merchantable and/or fit for the purpose for which they are required.
I am suggesting that the language of Section 14 of the Sale of Goods Act ought to be adopted and that the liability ought to be upon the dealer in the same way. I would extend subsection (1, b) in order to make the dealer liable not only for any express representation, warranty or statement that he makes, but for any implied representation or warranty arising in the transaction.
1807 In other words, as I said a few moments ago, I see no reason why a dealer should be allowed to sell goods which are bad or defective, unless they are expressly sold to the person as being bad and defective and the appropriate price is paid. I put that forward as a proposition. I do not know if any hon. Member could possibly quarrel with that as being a fair and just way of looking at the matter. In my submission, the Bill ought to follow those lines.
There is one further point which is of great importance. There are in hire-purchase agreements terms under which a hirer is bound to pay damages for breach of the hire-purchase agreement where such damages purport to be liquidated damages, but which in fact exceed the real damage that has been suffered. In many of those cases the courts have held that the damages are not liquidated damages at all, but are a penalty and are not recoverable.
In a decision in a recent case in the Court of Appeal it was held that it was possible to frame a clause which the court would not hold to be a penalty, and which the court must therefore enforce. In other words, a clause could be so drawn that when the hirer committed a breach of the agreement the owner would be able to recover against him damages amounting to more than the whole price of the goods. When I speak of the whole price of the goods I include interest, charges and so on. I have only got to state that to hon. Members for them to realise what a harsh position it creates.
When I mention this further fact, it will be seen to be still harsher. It has been held that the whole principle of the penalty does not apply where the hirer terminates the agreement. The position, therefore, is—I think it was the Court of Appeal which pointed this out—that a man who is honest is in a worse position than someone who breaks a contract deliberately or knowingly. It is clearly wrong that the owner should be in a position to recover more than the total price of the article including interest and charges, but, to take the case of the hirer who knowingly breaks a contract in the way I have indicated, in that case it might be held to be a penalty.
1808 I should like to have seen in the Bill a provision which carefully sets out a limitation of the amount of damages recoverable where an action is brought against a hirer for breach of the agreement. It is surely right that in no case should it be held that an owner would be entitled to damages in excess of the total cost price shown in the agreement.
I know that it might be said that the points I have raised should be dealt with in Committee. I have deliberately raised them on Second Reading for this reason. The Minister does not advise that the Bill should be given a Second Reading. Apparently, he takes the view that it ought to be thrown out. The matters which I have mentioned, and others which other hon. Members have mentioned, are of the gravest possible importance today. If constituents come with grievances to a Member of Parliament, it is the duty and right of the Member to do everything he can to see that those grievances are remedied in some way. It would be wrong of such a Member to sit quiet, saying and doing nothing, when he is told by the Minister that a committee is sitting to consider the matter, that in course of time, no doubt, the committee will report, and that, when it does report, the Government will consider the subject and, if they have time in their very heavy programme, they will endeavour to bring in legislation to deal with it.
This must inevitably mean that constituents will continue to suffer these admitted grievances for a long time to come. That is wrong. Something should be done immediately. We have here a very good opportunity of doing it. My hon. Friend the Member for Warrington has chosen this occasion, the luck of the Ballot, to bring in his Bill. The Bill contains many provisions with which many hon. Members will agree. It may well be that hon. Members criticise certain parts of the Bill and will wish to alter it in some way. But it is worthy of consideration by a Committee, and the House ought to give the Bill a Second Reading because of it great importance.
I take the last opportunity I have, in the half-minute or so at my disposal, to say to the Minister that he should do his duty on behalf of the consumers and advise that a Second Reading should be 1809 given to the Bill. It should most certainly go to a Committee.
§ 3.59 p.m.
§ Mr. Stephen McAdden (Southend, East)
I am most grateful—[HON. MEMERS: "Shame."] I have been here for practically the whole of the debate and have listened with great interest to what has been said. Most of the arguments which have been advanced, those alleging support of the Bill and those definitely against it, all come to the same conclusion, namely, that the Bill has been very badly drafted. That seems to be the general impression on both sides of the House.
§ It being Four o'clock, the debate stood adjourned.
§ Debate to be resumed upon Friday next.