§ The Marquess of Lansdownehaving moved the order of the day for the House to resolve itself into Committee on the Bills of Exchange Bill, and the House having gone into Committee, the noble Marquess ob- 724 served, that as the House had permitted the second reading of the measure to pass without explanation, they would probably expect some statement on the present occasion. The object of the bill then on their Lordships' Table, was to render perpetual a law that had been temporarily in force during the last two years. The bill had been under trial, the experiment had proved successful, and he did not hesitate to say, that it would be a great boon to the commercial interests of the country, if it were rendered permanent. Some time ago, when inquiries were instituted for the purpose of ascertaining the expediency of renewing the charter of the Bank of England, it was ascertained, that a measure such as he now desired to see renewed was a matter not only of justice and expediency but almost of necessity. The Bank of England was accordingly relieved from the operation of the usury laws, and in a year or two afterwards it was thought to be only just and reasonable, that the latitude afforded to the Bank of England should be extended to all other commercial bodies, and that they should enjoy similar facilities in the transaction of business, A bill had been introduced in the House of Commons which came up to the Lords, and the noble Duke opposite persuaded their Lordships to limit its operation to two years. That bill had become law; bills of exchange were discounted at rates exceeding five per cent., and the experiment had proved not only harmless, but eminently beneficial; he therefore contended that it should not be a measure enacted and re-enacted from time to time, but that it should be embodied in the permanent legislation of the country. He said nothing of the bearing of the usury laws upon the landed interest; the object of the present measure was merely to remove a bar which operated to the disadvantage of the mercantile community. When they went into committee, he should move a clause extending the operation of the measure to collateral securities. India bonds, Exchequer-bills, and other negotiable securities, were frequently lodged to guarantee the payment of the promissory notes given when loans were obtained. The deposit of these securities had in the present state of the law, the effect of rendering a discount exceeding five per cent. illegal. Feeling that it was the duty of the Legislature to render all securities for money borrowed as perfect as possible, and to afford the borrowers every reasonable facility for making them as 725 complete as circumstances permitted, he should certainly feel bound to submit to the committee the proposition to which he alluded; confidently believing, however, that it would meet with no opposition. He trusted, that their Lordships would not object to the principle of the measure. He trusted, that their Lordships would allow the commerce of this great country to look in times of need for that assistance which they could not now obtain.
§ The Duke of Wellingtondid not so much object to the measure itself, as to its being made perpetual. His objection to its being made perpetual was, that it gave temptation for the commission of a vast number of frauds, many of which had come to his knowledge in consequence of the intercourse which he had had with a number of persons who were more liable to frauds than others—he meant the officers of the army and their families, who had suffered considerably by the frauds to which he had referred. He was therefore anxious, that although the bill should pass in order to relieve the public from any oppression upon the commerce of the country at this particular moment, yet he felt that the general profits of trade in this country could not be expected to yield an interest of more than 5 or 5½ per cent., and that they should not hold out to the public the permanent expectation of a higher rate of interest than that, and enable those who had been fraudulent in intention, to carry that intention into execution, with respect to the unfortunate individuals to whom he referred. He thought, that their Lordships therefore would guard those persons from such misfortunes by providing for that for which it was necessary, that they should provide at this present moment, and limit the duration of the bill to the 1st of January, 1842. He would move a clause to that effect.
§ Lord Wynfordsaid, this bill was equal to the repeal of the old usury laws. By the present bill, after a bill at twelve months became due, exorbitant usury might be charged. Unless some proviso were introduced into the bill to prevent this, young men in the army, and others, might be induced, when the first note was expired, to give another note, and be robbed on that to an exorbitant extent. He should move a proviso to be added to the first clause to prevent interest being paid on notes at more than five per cent. after the first twelve months had expired. Were this proviso not added, cases of the 726 most extravagant nature would be occurring. He knew that it was usual for money-lenders to lend money at very great amounts of interest, and as the bill now stood, they were left at liberty to do so.
§ First clause put and carried.
§ Lord Wynfordthen moved his amendment as a proviso of the first clause.
§ Lord Ashburtonsaid, that this was undoubtedly a question of considerable importance. He had been of opinion for many years, that if they provided to do away with all measures relating to the interest of money, that money, like everything else, would find its level in the market. He agreed with the noble Duke in the view he had taken of the measure. He should further state as a circumstance that should induce their Lordships to pause on this subject, and to give it some consideration, that however desirable this measure might be as a theory, it was in opposition to the practice of every other state on the face of the earth. There was no other country, either in Europe or in the new world, in which there was not restriction by law on usury except in the town of Hamburgh. That example of the experience and practice of mankind was an authority against having no restrictions on money-lenders. If this bill should pass, bills could be discounted at any rate of interest, though they had twelve months to run. He hoped that their Lordships would adopt the amendment proposed by the noble Duke, not at once to make this measure perpetual, but to give it a little further time of probation. That would not be a great inconvenience to the public, and it would enable the legislature before coming to a final decision to ascertain more correctly the operation of the law to pursue. He had made inquiries among classes of well-informed people as to what had been the effect of the alteration in the usury laws. He believed that, as to its working, with respect to this country, the benefits had been very much overrated. He very much doubted that any practical good would arise from it. He was convinced that much increased confusion was created in the circulation of the country by the assistance given by the bank. He doubted very much whether any increase of capital could be brought into the market by an increase of interest. His opinion was that unfortunate persons, and persons reduced to great distress, would be induced to give great interest, if it were allowed. Whatever their Lordships might think of the 727 measure, he did not think it would be of any considerable use, in mitigating the distress which was supposed to exist. He had been informed by solicitors in town that many usurious transactions had been opened and certainly, were it not for the pressure which was supposed to exist at that moment, which would make him hesitate in disposing of this question to say anything which might tend to produce inconvenience, and perhaps injury—if it had come before the House in quiet times, when the question could be more safely discussed, he should have moved that it be sent to a committee up stairs, and he could produce some information which would surprise their Lordships. He was told that very extensive usury was obtained, and that the greater facility of raising money on usurious terms had greatly increased the number of improvident young men. For these reasons his desire was, that the measure should be temporary, rather than permanent. This would give further time to perfect an inquiry into the operation of the relaxation of the usury laws, leaving them to others to discuss what were the causes of the present state of things in the money-market; and leaving to the noble Viscount at the head of the Government to consider whether the Bank of England had acted right in the late transactions; leaving these subjects, he would only say that he believed that by the exercise of a little common sense and a little of that prudence which the people of this country always applied to their difficulties, the present unfavourable state of affairs might be expected speedily to right itself. He should vote for the motion of the noble Duke.
§ The Lord ChancellorThe effect of his noble and learned Friend's (Lord Wynford's) amendment, however, desirable in his own view, was perfectly unattainable. The effect of it would be, that a party not bringing his bill within the circumstances allowed by his noble and learned Friend's amendment, would cause to be issued an illegal instrument. A bill being a negotiable security, who could say which of those presented to him was legal? So that the effect of it would be not only to vitiate those bills to which it applied, but all others. And suppose his noble and learned friend's amendment were attainable, what was it meant to answer? A party, at five per cent., has raised a sum of money by bill. At the expiration of the period to which it is to run he finds he cannot pay it, not from any fault of his own, but be- 728 cause, from the change in the value of money, it cannot be had on the same security. The holder of the bill might be willing to trust him, but not at the same interest as that at which the money was originally borrowed. But if he were bound by law to provide payment for the bill, and was precluded from raising it by paying a higher rate of interest to the holder, he would naturally go next door and procure the money at eight, ten, or twelve per cent., for the purpose of meeting the bill. Extortion would be sometimes practised under any system that could be devised. The only question was how it could be most effectually restrained. In this town, and in this country, and in all towns and in all countries, there would be found persons who having money were desirous to lend it at the highest interest, and others who must borrow it at all events. According to the law as it stood by the present bill, the party wanting the money was by law permitted to raise it at an interest higher than five per cent. If that were not the law, as it was not formerly, what would be the effect? One man having money to lend and the other wanting to borrow it, the former must do one of two things; either lend it at an illegal interest and indemnify himself by charging an exorbitant one, or taking an insurance on the life of the borrower, in addition to the legal amount of interest, and charge him with both. Therefore, the more illegality was interposed between the borrower and the lender, the more burthen was necessarily thrown on him who wanted money. When bills at the present legal rate of interest were illegal, of course they were not heard of so often as now; but he could not conceive how their being made legal aggravated the burthen of the borrower who was relieved from all charge for the risk which was formerly run.
§ The Duke of Wellingtonwas most desirous that the House should not extend this power of discounting bills at a higher rate of interest than the usual rate for more than two years, or thereabouts. He wished this with a view to put upon their guard people who, having money, are liable to extortion. He had met with instances of sufferers in this way, who had been led to believe, that the profits of trade reached the same per centage in general. He said two years, because he thought that was the period for which the measure might be wanted by the state of trade in this country.
§ Lord Wynford's amendment withdrawn.
§ On the question, that the Duke of Wellington's proviso, limiting the duration of the measure till 1842, being put,
The Marquis of Lansdownesaid, he thought that the experience of the last two years afforded a better reason for making this a permanent law, than having recourse to temporary expedients from time to time. Of course, he should agree in the noble Duke's proposition, if he (the Marquess of Lansdowne) could see the necessity of putting people upon their guard, as to their own interests, or teaching them the value of money. If money-lenders were prevented from lending money at the market rate of interest at the time, they would, in consequence, go all the further in extortion; and thus the borrower would be obliged to pay, not only for the risk of loss, but for all the additional subtleties imposed by the state of the law upon the lender. He could not consent to the amendment.
§ Their Lordships divided on the proviso:—Content 69; Not Content 52: Majority 17.
730| List of the CONTENTS. | |
| DUKES. | Glengall |
| Rutland | Eldon |
| Wellington | Munster |
| MARQUESSES. | Ripon |
| Tweeddale | VISCOUNTS. |
| Salisbury | Sydney |
| Bute | Gage |
| Downshire | Hawarden |
| Thomond | St. Vincent |
| Londonderry | Combermere |
| Ailesbury | Canterbury |
| Ormonde | |
| EARLS. | BISHOPS. |
| Sandwich | Lincoln |
| Cardigan | Exeter |
| Galloway | LORDS. |
| Aberdeen | Willoughby de Broke |
| Dunmore | Kenyon |
| Dartmouth | Douglas |
| Harrington | Rolle |
| Warwick | Bayning |
| Bathurst | Bolton |
| Mansfield | Wodehouse |
| Roden | Dunsany |
| Clanwilliam | Redesdale |
| Mayo | Prudhoe |
| Wicklow | Glenlyon |
| Bandon | Maryborough |
| Rosslyn | Ravensworth |
| Wilton | Delamere |
| Limerick | Forester |
| Charleville | Bexley |
| Lonsdale | Wharncliffe |
| Harewood | Lyndhurst |
| Verulam | Stuart de Rothesay |
| Beauchamp | Heytesbury |
| Wallace | De Saumarez |
| Wynford | Ashburton |
| List of the NOT-CONTENTS. | |
| DUKES. | Falkland |
| Somerset | Holland |
| Argyll | Poltimore |
| MARQUESSES. | Lilford |
| Lansdowne | Montfort |
| Normanby | Barham |
| Conyngham | Wrottesley |
| Tavistock | Methuen |
| EARLS. | Portman |
| Fingall | Stuart de Decies |
| Errol | Leigh |
| Cork | Vaux of Harrowden |
| Effingham | Lovat |
| Charlemont | Lurgan |
| Zetland | Stanley |
| Ducie | Colborne |
| Burlington | Cottenham |
| Clarendon | Langdale |
| Camperdown | Foley |
| Radnor | De Freyne |
| Minto | Belhaven |
| Bruce | Teynham |
| Scarborough | |
| Sefton | BISHOPS. |
| Lovelace | Norwich |
| VISCOUNTS. | Salisbury |
| Melbourne | Durham |
| Duncannon | Ely |
| BARONS. | Ripon |
| Lismore |
| Paired off. | |
| CONTENTS. | NOT CONTENTS. |
| Ely | Hill |
| Westmeath | Vernon |
| Jersey | Hamilton |
| Selkirk | Albemarle |
| Bathurst | Durham |
| Beverley | Hatherton |
| Carnarvon | Shrewsbury |
| Bradford | Sherborne |
| Sheffield | Petre |
| Brecknock | Ilchester |
| Doneraile | Kintore |
| Exmouth | Strafford |
| Gloucester (Bishop of) | Chichester (Bishop of) |
| Saltoun | Roxburgh |
| Cowley | Bateman |
| Skelmersdale | Seaford |
§ Bill reported.