MONEY-LENDING BILL.

HL Deb 01 May 1899 vol 70 cc928-41

Motion made and Question proposed— That it be an instruction to the Committee to confine the provisions of the Bill to the securing of honest dealing in money-lending, and to strike out the provision that fixes the rate of interest."—(The Earl of Wemyss.)

THE EARL OF WEMYSS

said he felt that the Motion would more properly stand in the name of his noble Friend, the Duke of Argyll, as it was simply the embodiment in Parliamentary form of the noble Duke's wise views on the subject which he put forward some time ago in the letter to the "Times." He agreed with the noble Duke that it was desirable to prevent fraud, but that it would be impolitic and uncalled for to fix the rate of interest. By all means let the Government make the law more stringent, but it would be taking a step backwards if they attempted to re-enact the Usury laws which were repealed many years ago. He did not see how they could justify this retrograde step. In his opinion it was a bit of grandmotherly legislation. In a grandmotherly spirit they were going to save the fool from his folly, and, in his opinion, the Bill would prevent people, who were not fools, and who wanted money for good purposes, from getting it, and would in that way do more mischief than it could possibly hope to do good. He had been informed that the feeling on the part of borrowers was not one of gratitude to the noble Lord for his proposal in this direction. The effect would be that money would be much more difficult to get, and people would not undertake the risks as limited by this Bill. He had no doubt this kind of legislation was put forward with the most excellent intentions, but it was disguised under all sorts of humanitarian and philanthropic phraseology. Under the specions phrase that the Bill was to protect the weak against the strong, they were apt to forget that this was retrograde legislation, against which they should protest. He would suggest that whenever the Government brought in a Measure of such a retrograde character the Member of the Government who brought in the Bill should appear, whether in their Lordships House or in the other House, in the dress of the period to which he asked Parliament to retrograde. How would this work out in the present case? The usury laws were first mentioned in 1334. They were in the hands of the Bishops of that day, and therefore if his suggestion had been adopted in this case his noble. Friend would have appeared in ecclesiastical canonicals—no doubt those of the Bishop of Hereford of that day. He had no knowledge as to what the canonical dress was so many years ago, but he had no doubt it was of a highly ritualistic character such as would have sent a cold shiver through the frame of Sir William Harcourt, but would have warmed the heart, perhaps, of Viscount Halifax. No doubt the Government, under the guidance of Mr. Chamberlain, would bring about a new heaven and a new earth. In taking this backward step they were thoroughly consistent with what they had been doing since 1870, when the Irish Land Act was passed. Upon what Ground—it had no principle—was that Act passed? It was said that the state of Ireland was thoroughly exceptional, and that they were justified in dealing with it in an exceptional manner. The Government had fixed the price of land and rents, had cancelled debts, and two years ago fixed the price of a man from his head to his little finger under the Workmen's Compensation Act. The result of that Act had been that one great company, of which the Duke of Devonshire was the head, declined to take any man into their works over the age of 50. They had gone back very much to the dark ages of the Plantagenets. They had Bills before Parliament at the present moment designed to interfere with the rights of the owners of property and of their tenants without any regard to the contracts entered into between them. But the Bill which might be regarded as a reductio ad absurdum of this kind of legislation was the Seats for Shop Assistants (Scotland) Bill, which was read a third time in the House of Commons, and would shortly come before their Lordships' House. The Bill provided that seats should be supplied for shop assistants in Scotland, but there was nothing in the Bill to say whether the seats should be stuffed seats, and if so whether they should be stuffed with hay, straw, or horehair, or covered with canvas or leather. It would require an amending Act to define more clearly what was meant by "seats." He hoped, however, that such trifling, pettifogging legislation would be cast out by their Lordships. The modern tendency was rather to bring in Bills which would please, which would be popular with the masses, whether they were founded on principle or not. These Bills, in fact, generally threw all principle aside. The basis of all legislation should be liberty, and this was the only sound basis upon which they could properly legislate. He desired respectfully to enter his protest against this kind of legislation, believing, as he did, in the liberty of one man to deal with another in all matters of money, trade, and commerce without State interference. It was on that basis that their great national prosperity had been built up, and he was perfectly certain it was only on that basis that they could hope that trade, commerce, and industry could prosper and progress. Therefore it was that he had ventured to put this notice on the Paper.

LORD JAMES OF HEREFORD

My Lords, I had hoped that several Members of your Lordships' House would have taken part in this discussion, but I do not propose to allow the matter to rest with your Lordships without a word or two being said by me in reply to the speech of the noble Earl. I could consent to this instruction without any interference to the Bill, but if I did so some misunderstanding might arise. My noble Friend is mistaken in saying that this Bill fixes the rate of interest. That is an impression which I see some of those who have written to the newspapers entertain, but there is no clause in the Bill which fixes the rate of interest, and I am quite certain my noble Friend has not looked at the Amendments on the Paper which fortify me in what I am now saying to the House. I do not propose to follow my noble Friend in his discursive speech, but I am certain every one of your Lordships, if you will look carefully at the Bill, will see that there is no intention of repealing the usury laws, and an examination of the clauses will, I am convinced, lead to the conclusion that the undertaking that there should be no such repeal has been fully carried into effect. Clause 2 gives power to our to courts to revise contracts only when, in their opinion, they are hard and unconscionable. I could have left the clause there, but in order to protect persons with whom there is no intention of interfering it has been thought better to afford that protection by providing that if a certain rate of interest should be charged, or below a certain rate, the court shall not have power to interfere at all. A man may charge 100 percent. when this Bill is passed so long as the contract is not hard and unconscionable. I have put this clause into the Bill in order to protect the fair and honest dealer, and the noble Earl wishes to strike it out, and to give full power to the interfere with any contract. But that is not the intention of the Government or of those who drafted the Bill. My noble Friend is shocked at what he calls this retrograde movement, but in 1872 this House passed a Bill which did fix the rate of interest. There was then exactly the same state of things—a man borrowing and a man lending; but instead of going to the money-lender's office the borrower went to the pawnbroker's shop. By the Act of 1872 it is distinctly laid down that the more than 20 per cent. interest in certain cases, nor more than 25 per cent. in others. There is the whole principle against which my noble Friend is contending—namely, the principal of limiting the interest charged. If my noble Friend is right in his construction of the Bill, then the Government are following the precedent same amounts have been taken. If the money-lender charges more than the pawnbroker, however, he is in the position that he may be able to recover the money he has lent with interest, unless the Court should decide it was a hard and unconscionable bargain. The Court of Equity has always been reviewing bargains of such a character. This Act does nothing more. It does not give power to review bargains unless they are of a hard and unconscionable character. I understand my noble Friend to contend we ought never to interfere with a contract made between men capable of judgment.

THE EARL OF WEMYSS

Unless immoral.

LORD JAMES OF HEREFORD

I would ask my noble Friend to consider whether we are not now precluded from saying that no such legislation shall exist, for it does exist under the Truck Acts and the Pawnbrokers' Limitation Act. The noble Lord says we are introducing a novelty and a retrograde action, but I can give him many instances in which the Legislature has stepped in in the manner now proposed. The Legislature has fixed the exact sum that a cabman may demand from a passenger, and you constantly interfere with the freedom of contract there. It is far too late now for us to attempt to say that there shall be no such legislation as that proposed, and I submit that of all the legislation affecting the controlling of contracts there has never been one attempt more meritorious than the present, which is to prevent injury being done by the strong to the weak, whose necessities are being affected by causes that they cannot possibly avoid.

THE DUKE OF ARGYLL

said the Amendment proposed by the noble Earl on the Cross Benches in general terms expressed the opinion which he entertained, notwithstanding the speech they had just heard from the noble and learned Lord in charge of the Bill. But, at the same time, he did not agree with much that had been said by the noble Earl in his rather wide and discursive essay on the legislation of the past half century. There was a general feeling that they should not interfere with grown men as to freedom of contract, unless there was a great public necessity for doing so. Some years ago, by a mere accident, he was called upon to look into a case of ruination by a scoundrel of a money-lender, and what especially struck and shocked him was the evidence which came before him that these swindling transactions were strictly within the law, and, what was more, not only within the law, but actually facilitated by the law. He inquired closely into the matter, and he came to the conclusion that there was no remedy except by directing the attention of Parliament to the subject, and securing an alteration in the form of the law under which debts were recoverable. He heartily approved of the present Bill as a whole, except the clause which seemed to fix the rate of interest. He under- stood from what his noble and learned Friend opposite had said that that was not the intention of the Government, and the noble Lord had put certain Amendments down, but until he saw the Bill in the amended form in print, he could not finally judge of the effect they would have. Their object should be to prevent fraud or facilities for fraud; but so far as the rate of interest was concerned, he thought it would be a mistake to mention it at all in the Bill. The Society of Writers to the Signet of Edinburgh had made several recommendations with regard to the Bill, which he hoped the noble and learned Lord would carefully consider.

LORD JAMES OF HEREFORD

I have considered them, and have prepared Amendments to meet them.

Question put.

Instruction negatived without a Division.

Motion made— That the House do now resolve itself into Committee.

House in Committee, the EARL of MORLEY in the Chair.

LORD JAMES OF HEREFORD

I think it will be convenient to your Lordships if I state in general terms the nature of the Amendments I have placed on the Paper. The suggestions put forward by the Writers to the Signet of Edinburgh, the Procurators of Glasgow, and the Law Societies of England, were suggestions of a practical character, and I have endeavoured to meet every one of them in the Amendments which I propose to move. I am perfectly well aware of the delicacy of the subject with which we are dealing. I think we ought to confine the remedy to the disease, and ought not to interfere with the commercial transactions of the country. Of course, commerce depends upon the circulation of money, and that is represented to a great extent by the borrowing and lending of money. I agree that every care ought to be taken not to interfere with the legitimate lending and borrowing of money, and therefore I propose to exempt by name all loan societies, building societies, and societies which lend money to their members. I take them out of the jurisdiction of the Court, and for this reason: they are all subject by Statute to certain specific regulations, and so long as they obey the Statutes under which they exist, we ought not to interfere with them by fresh rules. I have also endeavoured to alter the definition I had placed in the Bill of those who should not come within the term "moneylenders." All bankers, insurance societies, solicitors, and all persons who do not make the lending of money their primary object will be exempt from the operation of the Bill. I am narrowing its application to those persons who notoriously carry on their business under conditions injurious to borrowers. In clause 2, from which my noble Friend has drawn a wrong inference, I have extended the limitation as to the amount of interest charged which shall give jurisdiction to the Courts. It was pointed out that it was somewhat anomalous that pawnbrokers might charge, without any restriction, 25 per cent. when the loan was under 40s., and 20 per cent. up to £10. I have accepted the pawnbrokers' rates of interest for small sums, because it seems from experience that those rates are not excessive for such sums lent for a short time. The money-lender will be entitled to receive, without the jurisdiction of the Court coming into play, if he can obtain it by his contract, in respect of a loan not exceeding 40s., 25 per cent. per annum; for a loan exceeding 40s. but not exceeding £10, 20 per cent. per annum; and for a loan exceeding £10, 15 per cent. per annum. For larger sums I think 15 per cent quite sufficient to charge. I have provided in the Bill as it stands that the contract of the money-lender, if he does not register as a money-lender, shall be voided. It was pointed out to me that this would hamper transactions in mortgages and various negotiable securities, in respect of which the borrower might be ignorant as to whether the lender had registered or not. These were arguments of a practical character, and therefore I have considered them, and have struck out the clause rendering the security void, and have made non-registration by the money-lender the subject of a penalty only in the case of a man who ought to have been registered. That will be a great protection to the commercial transactions which are not sought to be affected by this Bill. There are other Amendments of a minor character, and I claim that the Bill, if these Amendments are inserted, will not do injury to any man who carries on his business honestly, but will be a strong, and, I hope, conclusive remedy against that numerous class who now inflict systematically great evil and great injustice on persons who are unable to protect themselves against their own necessities.

Amendments then considered.

On clause 1—

Amendments proposed— Clause 1, page 1, line 12, leave out 'every' and insert 'a'; line 12, leave out 'shall'; line 13, before 'register' insert 'shall'; line 19, before 'carry' insert 'shall'; line 22, leave out 'down' to end of the clause. and insert— (c) shall not enter into any agreement with respect to the advance and repayment of money or take any security for money otherwise than in his own name; and (d) where the advance of money to a borrower is evidenced or secured by any document, shall furnish to the borrower at the time when the advance is made, a copy of that document; and (e) shall not take any document evidencing or securing the repayment of money unless the document specifies his true name and states on the face of it that he is a registered money-lender."—(Lord James of Hereford.)

Question put.

Amendments agreed to.

Question put. That clause 1, as amended, stand part of the Bill.

Motion agreed to.

On clause 2—

Amendments proposed— Clause 2, page 2, lines 9 and 10, leave out 'for the recovery of money lent.' Clause 2, page 2, line 10, after 'moneylender' insert 'for the recovery of any money lent after the passing of this Act, or the enforcement of any agreement or security made or taken after the passing of this Act, in respect of money lent either before or after the passing of this Act.' Line 11, leave out 'loan' and insert 'sub actually lent.'"—(Lord James of Hereford.)

Question put.

Amendment agreed to.

Amendment proposed— Clause 2, line 12, leave out 'ten per cent, per annum,' and insert 'interest mentioned in the schedule of this Act.'"—(Lord James of Hereford.)

LORD DAVEY

objected to the court having power to reopen a transaction on the mere ground that the interest exceeded a certain sum. He felt sure they all sympathised with the noble and learned Lord in his endeavour to protect the weak from the strong, and to put an end to those shocking cases to which the noble Duke (the Duke of Argyll) had referred, and the extortionate and unconscionable proceedings which, no doubt, had taken place in connection with money-lending. The noble and learned Lord said the Bill did not fix the rate of interest, and that the clause was intended merely for the purpose of giving the courts jurisdiction in the case of unconscionable and harsh bargains irrespective of the rate of interest. He confessed he did not read the clause in that way. The clause at present provided that— Where proceedings are taken in any court for the recovery of money lent by a moneylender, and the court has reason to believe that the interest charged in respect of the loan exceeds the rate of 10 per cent. per annum, or that the amounts charged for expenses, inquiries, fines, bonus, renewals, or any other charges, are excessive, the court may re-open the transactions.

LORD JAMES OF HEREFORD

But it must be hard and unconscionable in addition.

LORD DAVEY

said he could not find those words in the Bill. If the Bill had been framed in that manner, and it was stated definitely that the court had power to reopen transactions in the case of hard and unconscionable and oppressive bargains, and where there was evidence of fraud, it would have removed many of the objections.

LORD JAMES OF HEREFORD

Lord Knutsford has framed an Amendment which the Government has accepted, and which will meet that objection.

LORD DAVEY

said that even reading Lord Knutsford's Amendment into the clause, he still thought that the court would have power to reopen a transaction on the mere ground that the interest exceeded a certain sum. What he objected to was making any particular rate of interest the ground for reopening the transaction. The interest might be exorbitant without the bargain being harsh and unconscionable. This would depend upon the particular circumstances of the case. A certain interest might be harsh and unconscionable in some cases which would not be so in others. It was impossible to predict beforehand, until they knew the circumstances of a certain case, whether a particular rate of interest was harsh and unconscionable in that case or not. The risk was a large element which had to be covered by the rate of interest, whilst in cases where the risk and expense were not so great, the same rate of interest which was not unreasonable in one case might be perfectly unreasonable in another. In his opinion, it was an entirely false mode of legislating on the subject to adopt the rate of interest as the ground or the standard on which the court was to act.

*LORD KNUTSFORD

explained that the object of the Measure was to stop harsh and unconscionable bargains, and it was so stated in the Preamble. But it was necessary to provide for this in the enacting part of the Bill, and he therefore proposed to move an Amendment to insert in clause 2, after the words "are excessive," the words "and by reason thereof or otherwise the transaction is harsh and unconscionable." If those words were inserted, the court could not re-open the transaction on account of the interest charged unless the contract was harsh and unconscionable.

THE EARL OF KIMBERLEY

I would, submit to my noble Friend opposite that this Amendment, as it is worded, does not carry into effect what he desires. He proposes to insert "and that by reason thereof or otherwise the transaction is harsh and unconscionable," and if you read these words into the clause, it runs as follows— Where proceedings are taken in any court for the recovery of money lent by a moneylender, and the court has reason to believe that the interest charged exceeds the rate of 10 per cent. per annum, or that the amounts charged for expenses, inquiries, fines, bonus, renewals, or any other purpose, are excessive, and that by reason thereof or otherwise the transaction is harsh and unconscionable, the court may re-open the transaction. According to my reading of the clause, as amended, my noble Friend's words will apply only to the amounts charged for expenses, etc., and not to the interest. If the Amendment applies to the whole of the words in the clause, then I think it meets to a very considerable extent the objections of my noble Friend behind me, but I should like the learned and noble Lord in charge of the Bill to assure us on the point.

LORD JAMES OF HEREFORD

The intention is that the words "and that by reason thereof or otherwise the transaction is harsh and unconscionable" shall apply to both—the rate of interest, and the amounts charged for expenses, etc.—and care will be taken in the Standing Committee or on the Third Reading that that intention is carried out.

Question put— That the words 'ten per cent. per annum' stand part of the clause.

Motion negatived.

Question put— That the words 'interest mentioned in the schedule to this Act' be here inserted.

Motion agreed to.

Amendment proposed— Clause 2, page 2, line 14, after 'excessive,' insert 'and that by reason there of or otherwise the transaction is harsh and unconscionable."—(Viscount Knutsford.)

Question put.

Amendment agreed to.

Amendment proposed— Clause 2, line 13, after 'bonus,' insert 'premium. 'Clause 2, line 26, after 'moneylender,' insert 'and if the moneylender has parted with the security may order him to indemnify the borrower.' Clause 2, line 35, at the end of the line insert as a new sub-section: (4) 'Provided that nothing in the foregoing provisions of this section shall affect the rights of any bonâ fide assignee or holder for value.'"—(Lord James of Hereford.)

Question put.

Amendment agreed to.

Question put— That clause 2, as amended, stand part of the Bill.

Motion agreed to.

New clause proposed— Insert as a new clause after clause 2:—1. "Where a moneylender fails to register himself as required by this Act, or carries on business otherwise than in his own name, or elsewhere than at his registered address, he shall be liable on conviction under the Summary Jurisdiction Acts to a fine not exceeding one hundred pounds, and in the case of a second or subsequent conviction, to imprisonment, with or without hard labour, for a term not exceeding three months, or to a fine not exceeding one hundred pounds, or to both.' 2. 'Where a moneylender fails to comply with the requirements of this Act as to the form and contents of agreements and securities, or as to furnishing copies of documents to the borrower, he shall be liable on conviction under the Summary Jurisdiction Acts to a fine not exceeding fifty pounds for each offence.'"—(Lord James of Hereford.)

Question put.

New clause agreed to.

Question put— That clause 3 stand part of the Bill.

Motion agreed to.

New clause proposed— Insert as a new clause after clause 3—"(1.) A prosecution for failure to register as a money lender under this Act shall not be instituted except by or with the consent of the Attorney-General. (2.) In this section the expression "Attorney-General" means the Attorney or Solicitor-General for England, and as respects Scotland means the Lord Advocate, and as respects Ireland means the Attorney or Solicitor-General for Ireland.'"—(Lord James of Hereford.)

Question put.

New clause agreed to.

New clause proposed— Insert as a new clause after clause 3—'4. Where in any proceedings under section 2 of the Betting and Loans (Infancy) Act, 1892, it is proved that the person to whom the document was sent was an infant, the person charged shall be deemed to have known that the person to whom the document was sent was an infant unless he proves that he had reasonable ground for believing the infant to be of full age.'"—(Lord Norton.)

LORD NORTON

said his object in moving this clause was to render operative the very useful Act introduced by the late Lord Herschell, and carried with perfect unanimity through both Houses of Parliament, making it penal for a moneylender to incite an infant to borrow money. Unfortunately, the Act threw the onus of proof on the prosecutor of the moneylender that he knew that his victim was an infant. He believed, owing to this being the case, that the Act had been rendered inoperative, and that the Public Prosecutor had refused to prosecute in certain cases because there were no means of proving that the moneylender knew the boy was an infant. He (Lord Norton) called Lord Herschell's attention to this fact, and the noble and learned Lord agreed that it was necessary the words should be altered, and promised to introduce a Bill for that purpose. The new clause which he was moving was in exactly the same words as the late Lord Herschell would have adopted. He could hardly suppose there was any Member of their Lordships' House who would not be most ready to accept this new clause.

LORD JAMES OF HEREFORD

I am glad enough to accept it. I knew that Lord Herschell wished this Amendment, and I do not think any injustice can be inflicted by asking a moneylender to show that he was not aware that the borrower was an infant.

Question put— That this clause be here inserted.

Motion agreed to.

On clause 4,

Amendment proposed— Clause 4, page 3, line 7, after 'person' leave out to end of clause and insert 'whose business is that of moneylending or who advertises or announces himself or holds himself out in any way as carrying on that business; but shall not include—(a) any pawnbroker in respect of business carried on by him in accordance with the provisions of the Pawnbrokers Act, 1872; or (b) any registered society within the meaning of the Friendly Societies Act, 1896, or any registered society mentioned in sections 2 or 4 of that Act; or (c) any person bonâ fide carrying on the business of banking or insurance or any business not having for its primary object the lending of money.'"—(Lord James of Hereford.)

Question put.

Amendment agreed to.

Question put— That clause 4, as amended, stand part of the Bill.

Motion agreed to.

Clauses 5 and 6 agreed to.

Amendment proposed— Insert as a Schedule—'Schedule.—Rate of Interest.—In respect of a loan (whether made by one or more advances)—Not exceeding 40s., 25 per cent. Per annum; exceeding 40s., but not exceeding £10, 20 per cent. Per annum; exceeding £10, 15 per cent., per annum.'"—(Lord James of Hereford.)

Question put—

Schedule agreed to.

Bill reported with Amendments to the House.