§ Order of the Day for the Second Reading read.
§ LORD CARSON
My Lords, in the early part of this Session I put on the Paper a Motion calling attention to the effect of dealings between moneylenders and public officers, of the Army or Navy or Civil Service, or anyone who derives an income as a result of being engaged in carrying on the public business of the country. I want to say frankly to the House that I was led into that inquiry by having to go into a number of dealings with moneylenders with reference to one of my own family, though I am thankful to say that from the early stage of my own career, when I commenced without a shilling in the world, I never had personal dealing with a moneylender. I can only express the hope that the bitterest enemy that I have made in the whole of my career may never have the misfortune of going to a moneylender. I was so convinced that it was utterly impossible for many of those who are carrying on our public business to-day to do so properly and efficiently once they had got into the grips of a moneylender, that I determined to raise this question in your Lordships' House. But, as I proceeded with the inquiry, I received so many letters and so much evidence of the general mischief to the community caused by the existing state of the law, that I yielded to the suggestion of some of those who were also interested in another place, 530 that I should draft a Bill in general terms and so bring the subject before your Lordships' House.
There is very little to learn about this moneylending business. It was fully sifted during my time in the House of Commons by a Committee of very great importance which reported in 1898. It made many recommendations, some of which at any rate, as I think I shall show your Lordships, were very wise, though little attention was paid to them in the subsequent legislation that eventuated in the Act of 1900 which, with a slight amending Act, passed some time later, regulates the moneylending business at the present moment. That Committee reported, and I say without the slightest fear of contradiction that what they stated then is absolutely true now. They said this:—After carefully considering the evidence which has been given in regard to particular transactions and the general expressions of opinion of persons so well qualified to form a judgment as Sir Henry Hawkins, Sir James Charles Mathew, Sir George Lewis, the Inspector-General in Bankruptcy and the County Court Judges, your Committee have unhesitatingly come to the conclusion that the system of moneylending by professional moneylenders at high rates of interest is productive of crime, bankruptcy, unfair advantage over other creditors of the borrower, extortion from the borrower's family and friends, and other serious injuries to the community.The argument is sometimes used that even with all these disadvantages there are sometimes advantages that accrue to individuals through allowing these loans to be made at high rates. That point also was considered by the Committee, and they came to this conclusion:—And although your Committee are satisfied that the system is sometimes honestly conducted they are of opinion that only in rare cases is a person benefited by a loan obtained from a professional moneylender and that the evil attendant upon the system far outweighs the good.That, I assert, is the position at the present day.
The Act of 1900 contained really only one section which was supposed to set matters right, and that was the section which enabled the Courts, in any case where they thought that the transaction was unconscionable and the rate of interest excessive, to reopen the transaction and to put in whatever amount of interest they thought right. At the time when that Bill was passed there were 531 many who thought that this would be entirely ineffectual, and it was pointed out by the Committee that many witnesses, including the late Lord Justice Mathew, who had evidently given a great deal of attention to this subject, thought that you would never have any really cohesive principle laid down by the Courts but that each Court would act according to its own view unless some principle were laid down by which it could act. Mr. Justice Mathew, as he then was, was one of those who thought that such a proceeding would lead to a great variety of judgments, and that it was preferable to limit the rate of interest on these transactions to 10 per cent. That which Mr. Justice Mathew said is perfectly true. There has not been, nor could there be, any consistent view laid down to guide the Courts. The question came to the House of Lords, and the only thing that the House of Lords was able to lay down was that you were to consider the whole transaction.
But the first question that arises is: What is your standard? If moneylending is an unrestricted and proper business to carry on, why is anything excessive if the individual understands it and if he is prepared to take upon himself the obligations of a moneylending contract? That Act has therefore broken down. And a few moments' consideration will show yet another way in which it has broken down. What a splendid thing it is for Parliament to say to a man or woman—for women are very much concerned in these matters—"True it is that you are paying 300 per cent.; true it is that it was because you had not a shilling in the world that you paid 300 per cent.; but you can go into the superior Courts and, if you fight your ease with counsel, you may get some reduction"! It is almost a denial of justice. No person, or very few persons in that position, could go into the superior Courts. In the particular case in my own family to which I referred, one case was taken into the superior Court, but you cannot bring it into the superior Court under at least £130 to £200, and then, with this ambiguous wording, no one can say whether you will succeed or not. If you are beaten you have to pay another £200, so that in order to discover whether your 532 bargain is considered unconscionable or not you are, or may be, put to the expense of something between £400 and £500. That is, in my opinion, a worthless remedy, and has to a large extent prevented the use of the Act.
Therefore, in the forefront of my Bill, I have enacted that all proceedings with reference to moneylending transactions are to be taken in the county courts. There is no reason in the world why the county courts should not take these cases. Parliament, including this House, has already enacted that all proceedings under the Workmen's Compensation Acts are to be taken in the county courts, and in those cases far more difficult questions arise, as we who sit on the judicial side in this House know too well, than any of the questions that will arise under this Bill. It is the moneylender who has the money; the borrower has none; any which he had is in the moneylender's pocket; and if you are to confer benefit by anything that you enact you must not say to the borrower: "Go into the Supreme Court, spend £200 or £300, get good and eminent counsel who will fight your case well," when you know perfectly well that the borrower is unable to do any such thing and that the moneylender has all the advantage in being able to bear the expense of fighting such proceedings.
The second proposal that I make in the Bill is one which I have noted as being included in a Bill now before the House of Commons, and that is the prohibition of moneylenders' circulars. This has become a great scandal, as I will show you in a minute, but I have also put into my Bill the provision thatNo moneylender or any person on his behalf shall employ any agent or canvasser for the purpose of inviting any person to borrow money or to enter into any transaction involving the borrowing of money from such a money lender.What happens is this. Let me say, in passing, that with regard to young officers I am told from a very reliable source that a large number of them are involved in these moneylending transactions. I regret very much the information that was supplied to me. In these cases you will find that there are agents in every place where these young men join, and the moment they are over twenty day after day they are offered facilities to bring them to moneylenders. In the particular case which led me on 533 the inquiry what happened was this: My young relative began to back horses of which he knew nothing. He got into difficulties and at once the bookmaker said to him: "Oh! that need not stop you; I know a jolly good moneylender." He went on and carried on the transactions for some four years, until, as a result, he had paid back the whole sum he borrowed plus 50 per cent. at compound interest, and still owed £600. Everywhere there are these touts of moneylenders. A great many of these people are mixed up together. They toss people about from one to another and so get these young men into their clutches.
This evil of circulars is really becoming a pest. I do not know why I am inundated with them, because I have never been extravagant and I have never borrowed. Perhaps that has been the reason. I suppose your Lordships, too, got them. I know that many people very much resent getting them. One clergyman the other day sent me sixty-two that he had received in a month, and, remember, they are a great temptation even to the clergy, who are very badly paid and have to keep up a position as regards their families and the education of their children, which is almost impossible for them to keep up out of the miserable pittance that they get. If they are inclined, owing to family difficulties or the desire for a holiday, to borrow money, I am sure no one can blame them; but some of them do not want these things fired at their heads day after day. And some business people resent that these circulars should be sent to them with a half-penny stamp, so that their clerks or anybody else can look at them and think their employers are impoverished. I have looked through hundreds of these circulars, and I assert that not one of them is true upon the face of it, from beginning to end. They are all plausible. There is no actual lie, and probably no legal misrepresentation on the face of them, but there is a suggestio falsi and a suppressio veri. That is the thing which marks the whole of them.
I have here one which commences with the words: "A long-felt want." In the middle of the card the long-felt want is described as follows:… it may be that a wise and beneficent Government will deem it expedient 534 to found a State Loan Bank, where the responsible, business-like and sanely-balanced individual eau obtain a temporary loan at a reasonable rate, without feeling like a small boy caught in the act of stealing jam. Until that day arrives the only obvious tiling to do is to apply to Allan Foster & Co., Ltd.There you see the great advantage of a State Loan Bank, and they are really illustrating to their clients and the public what a great advantage it will be to have a State. Loan Bank, and therefore those in favour should go to Allan Foster and Co., Ltd.
I will take another one. Here is "The Regent Trust, Ltd." It sounds so well to be a trust. There is a name, I think, at the top of the card, but it is so small I cannot make it out. The big print is as follows: "Four per cent. per annum," and then underneath that is this very fair and proper statement: "£100 promissory note, repayable in twelve monthly payments of £8 6,s. 8d.; larger amounts in proportion."When you come to look into it the 4 per cent. per annum has nothing to do with the £100 promissory note, and the suggestion that you should only pay £8 6s. 8d., which would only give back the principal, is all the information you receive. But, of course, to anybody who looks into it, the purpose is to dupe people into the belief that they lend at 4 per cent., which, of course, is absolutely untrue. One lady who received this paper from this so-called Regent Trust was entitled to a trust fund, and, knowing of this trust fund, they sent her a letter making her an offer of an advance, which she gladly accepted. She thought it was her own trust.
Here is the same sort of thing, in another letter from a moneylender, who must spend many thousands a year, because I have so many of his circulars. He apologises for his contribution "to the flood of letters you doubtless receive with offers of financial assistance." Then he says:—We would particularly draw your attention to the fact that we make a speciality of short-dated loans, our charge being £5 for each £100 for an agreed period; this, in effect, means that you pay at the rate of guineas for pound for the agreed period.But when you come to sift what that means you find it means that for a month they will lend you £100 for £5, or, in other words, at the rate of 60 per cent. 535 per annum. There is, however, not the slightest intimation that what they really ask for is 60 per cent. interest, and you have to remember that their clients are not always educated people. That, however, seems to be a very favourite form of humbugging the public.
Another moneylender speaks of loans without security, at interest to be mutually agreed upon, and "repayable on the basis following"; and, again, setting out that all you have to pay is £4 3s. 4d. a month, if you borrow £50, without one word as to what the amount will eventually make. There is another of the same kind, and I am sorry to notice that the lender is called "Harmsworth, Limited." I do not suggest that there is any connection with a highly honourable family of that name, but I should have thought that that family would very much resent their name being in a limited company of that kind. Here is one from a company that calls itself the West-End Finance Company, Limited. That sounds well. I see underneath that the directors are D. Swires, a naturalised British subject, and D. Vineberg, a Russian subject.
There is one other matter to which I must call attention, as showing the dangerous position in which the public stand, and that is the way in which these people search out for those who are in difficulties. If a bill of sale is published—and a bill of sale has to be registered, and is, of course, published in all the mercantile magazines—they immediately come down upon the unfortunate man. Here is the circular of a man who found out that a certain man or woman was in difficulties, and it is valuable as showing the writer's view of moneylenders. He says:—Dear Sir,Consequent on the recent announcement in the mercantile gazettes that you granted a bill of sale, you have been, or will be, the recipient of many letters and perhaps visits from financial touts and other individuals extending alluring promises, such as making or obtaining for you a larger advance, lower rate of interest, easier repayments … As time goes on"—here is his description of his own fraternity—owing to unfair and harsh methods, so often pursued by the professional Jew moneylender—a gentleman who skilfully disguises his name and racial origin—you 536 might wish to make a change and be able to do so without being placed at considerable financial disadvantage. In such possibility may we ask you to file this letter, taking notice that"—they were a British company and had been established for a number of years? I call that gentleman in aid, to show that some change in the law is necessary. because he bears witness to the harsh and unfair methods so often pursued by the moneylender. But where did he get this information about this person, and why does he go touting and hounding her down? He gets the information by studying the mercantile papers and finding out the misfortune of a woman who has had to have a bill of sale, probably on every stick of her furniture, so that, finding her in that position, he may be able to go and exercise the domination that a person who has money has over one who is in the last straits of misfortune.
Here is another way in which they get information, and just look at the cruelty! All this is relevant to my Bill as affecting the necessity of stopping these circulars and this touting. I have a letter here from a solicitor, who said he was acting for the trustees under the will of a certain gentleman, who left a cousin of his some money. The will contained no address of the cousin. A few days after the death of this gentleman, when his will was filed in Somerset House, and probate had been granted, a letter was addressed to the legatee to the nursing home in which the man died, in which a moneylender said—Under the will of the above you are entitled to a very large sum. We wonder if you would care to let us make you an advance on this reversion, which we can do quite easily at a fraction above bank rate. You can rely on all dealings with us strict secrecy is observed.What right have these people to hound down, in circumstances such as these, the person who has been left a legacy of that kind, knowing full well that, once they get him into their hands, all the special methods that the moneylender has of involving persons and increasing the liability will be employed?
May I refer to another circular of a somewhat similar character? This is one which was received by a gentleman whose relative had died—Under the will of the above you are entitled to a very large sum. We wonder if you would care to let us make you an 537 advance on this reversion which we can do quite easily at a fraction above bank rate,and so on; it is just the same as the others. Not only was this circular sent to the gentleman who was one of the persons interested under the will, but a copy of it was sent to his son, aged nineteen, an undergraduate at Oxford, and to his nephew, aged fifteen, a boy at Harrow, both of whom were expectant heirs under the will referred to in the circular. The moneylenders had, of course, committed a breach of the law, which docs not allow these things to be sent to boys. Unfortunately, however, the boys, I am told, burnt the circulars, not thinking. I suppose, that they were going to get money in that kind of way; and there was no prosecution.
I ask the attention of your Lordships to this letter which shows the extent to which these people go. It is a letter from the manager of a bank, and he sends me these facts. He says that he had seen somewhere in the newspapers that it was alleged that there was evidence that, at the price of the security of their positions, bank clerks had been compelled to disclose the business of the customers of their banks, and this is his comment upon it—As a banker of more than twenty years' experience I very much doubt whether there is any such evidence. My personal experience tends to show that the leakage is from some other source. My own experience is as follows: Up to about three years ago I never received a moneylender's circular. But in 1921, I was obliged, much to my regret, to borrow from my employers"—the bank by which he was employed—in order to buy a house to live in. The interest charged on my overdraft"—this, I suggest, is a very proper and liberal arrangement. Some of the banks now supply money to their employees at a very moderate interest to enable them to buy houses, and this was done in the case I am quoting—is shown as an outgoing on my Income Tax return. Ever since I have made a return showing the item 'bank interest' I have been inundated with circulars from all and sundry. To make matters worse, these circulars come to my branch office, addressed to me personally with the word 'Manager' following my name. These touts cannot plead that they did not know that they were writing to a bank official. In the ordinary course of things I shall one day leave this office I hope on promotion, but these circulars will no doubt continue to come and will be read in the ordinary 538 course by my successor, who will very naturally jump to the conclusion that I have or have had dealings with these very generous gentlemen. I trust that you will attain your object in getting these circulars suppressed, but pending legislation to this effect"—and then he goes on to mention the steps that he finds himself bound to take. Therefore, your Lordships may take it that every method by which it is possible to get at these unfortunate people is employed by moneylenders.
I received a circular the other morning which was really amusing, and I commend it to the attention of the Lord Bishops. It is from Adam Smith, Ltd. I suppose this Adam Smith is in some way connected with the "Wealth of Nations," though I do not know; but I see his directors are named Blumenthal. What is the relationship between Adam Smith and Blumenthal it is not for me to inquire; but one of the recommendations that he sends is a certificate (not of course giving names or places or dates) from a clergyman saying what a satisfactory man Mr. Smith is to deal with. Just fancy the length to which these moneylenders go, when they take a letter from a rector—if it exists, though I do not know whether it ever did exist—to give a sort of religious atmosphere to the business and to try to show people how respectable they are.
By a very curious coincidence, on the very day that I received the circular from Adam Smith, Ltd., I got a letter from a clergyman. I do not know whether it was the clergyman who had been dealing with the same people. but this is what he says:—Dear Sir,May I, too, consult you with regard to a moneylender into whose clutches I was forced during the war.My tithe is very peculiar, having been fixed by Act of Parliament in 1798 on a special basis, so I did not share with my brethren in the general increase of tithes. But I need not trouble you with these details. Enough to say that I borrowed £70, hoping to be able to repay shortly, but of course the hoped for time has never come.As I could give no security I did not think £30 a year very extortionate"—that is, for the £70—but after refunding the loan in full and half as much again I wrote to this lender and asked for reduced interest, as it was no risk as during the first year. He flatly 539 refused. I have now repaid the £70 three times over, and still owe the full sum and still pay £30 a year.I would advise Adam Smith, Ltd., out of fairness to publish that certificate from a lector with the other one, but I do not believe they will.
I think I have said enough about the circulars, but there are many methods one cannot help. There is the constant ringing up by the moneylender if he knows there is a clerk in an office. There is the constant ringing up that I had in the case the other day of a poor school teacher. There is the constant ringing up of every kind of employee. There is the constant calling at offices, and so on, leading the people who have got into the moneylender's clutches and do not know when they may be dismissed for this kind of thing, a very terrible life. All that I have told your Lordships in regard to these circulars was exposed in the Report, to which I have referred, as far back as 1898. The Report says this:—The evidence shows that moneylending transactions frequently owe their inception to misrepresentation of a fraudulent character.Misleading advertisements, or circulars, offering to lend money 'without sureties' 'at low rates of interest,' or at 5 per cent., when in fact the lender's practice is to require sureties and the actual rate is 5 per cent. per month, equivalent to 60 per cent. per annum, are very common.They go further into that and quote a recommendation of the Law Society as to putting an end to these circulars and advertisements. But nothing was ever done, and I ask your Lordships to say that I have made out a case for Second Reading so far as that part of my Bill is concerned.
I have proposed a penalty for a breach of the provision in the Bill in regard to that matter. The first is a fine or imprisonment on summary conviction. But I have also asked that it may be enacted that:Where it is shown that any moneylending transaction was brought about by conduct which constitutes a contravention of any of the provisions of this section such transaction shall be void.I have also given power to the Post Office to use the powers they have under Section 16 of the Post Office Act of making rules for the stopping of these circulars, as they do in the case of indecent or obscene and other documents under that section.
540 Clause 3 of my Bill is, of course, of the very greatest importance, and goes really to the root of the Bill, because I propose in Clause, 3 so to amend the provision that I have already stated is contained in the Act of 1900 as to fix a standard. I am not wedded to the particular figure which I have put in, but I desire that there should be no misunderstanding. I have seen it incorrectly stated in some newspapers what this proposal is. I have told you that under the section of the Act of 1900 you have to show that the interest is unconscionable. The difficulty that the Courts have had was in knowing with what to compare the interest in order to decide whether it was unconscionable. What I have suggested in my Bill is that, wherever the interest charged exceeds the rate of fifteen per cent. per annum, the Court shall presume that the interest charged is excessive, and that the transaction is harsh and unconscionable within the meaning of subsection (1) of the Moneylenders Act, unless the lender proves to the satisfaction of the Court that the interest charged is not excessive, and that the transaction is not harsh and unconscionable, and is, under all the circumstances, beneficial to the borrower.
That gives power to the lender to charge, at his own risk, whatever he likes, but he must justify the circumstances that made him charge that high rate of interest, and he must show that the transaction was for the benefit of the borrower. I do something more than that. Let it not be said that I am laying down fifteen per cent. as the highest rate of interest chargeable. I am doing no such thing. I have done something more. In the second subsection I have suggested that any lender and borrower may get rid of the fifteen per cent. limit by making an application that the limit shall not apply. I have left it to the Registrar of the County Court to go into the whole question, and if he comes to the conclusion—he will have an opportunity of discussing the matter with both the borrower and the lender—that there may be a higher rate of interest than the fifteen per cent., he shall make an order to that effect before the loan is granted
My next case is that of small loans. This is a very desperate business. I have asked your Lordships to enact, in the 541 case of a loan made by the moneylender when the amount advanced does not exceed £20, that it shall not be lawful to charge a rate of interest exceeding ten per cent. per annum. The risk there is a risk of £20, which to a moneylender is not very much. But something must be done. There has been an inquiry in Liverpool into the whole condition of moneylending there. The inquiry has been made by the Social and Industrial Reform Committee of the Liverpool Women Citizens' Association, and the hon. secretary of that body has very kindly been in communication with me upon the matter. The result of their inquiry has been made public. When I tell your Lordships that there are 1,380 moneylenders in Liverpool, and that of those 1,100 are women, you will see the kind of transaction which occurs there. The moneylenders lend out small sums in poor streets. The investigators of this society have gone round to many houses, and this is what they found. In every case in poor streets the investigators found that the interest charged was one penny in the shilling weekly; that is 433⅓ per cent. per annum. One penny in the shilling or 1s. in the £ per week does not sound much, but the point is the way in which these people are induced to enter into the loan. Several borrowers stated to the investigators that some lenders charged twopence or threepence in the shilling, and that equals 866⅔ per cent. and 1,300 per cent. per annum respectively. I have asked your Lordships to say that in cases where the loan is under £20 it should not be lawful to charge a rate of interest exceeding ten per cent. per annum.
The next proposition in my Bill is that in no case shall compound interest be charged or allowed. This is really the cruellest part of the moneylenders' methods. I have heard of a bill given by a moneylender for £800. He deducted as interest in advance £300, so that the actual advance was £500, although the bill was for £800. Then the instalments by which it is to be repaid run for a year, and are set out in the bill. Then conies this: "If default shall he made in any one of the above payments the whole of the amount remaining unpaid becomes due and payable forthwith." The note goes on to state that the amount owing is to carry interest at the rate of 1s. in the £ per month from the time of 542 any default. That means that, having deducted £300 already for interest, the moment there is a default by the individual who has had to consent to such terms as this—and, of course, he is an individual who is most likely to default—he has at once to pay 60 per cent. not merely on the £500 that he got but also on the £300 that was deducted for interest. That is one of the most common forms of moneylending, and it goes on from day to day.
I have a long list of accounts here which run up to many hundreds of pounds, although the borrowers kept trying to pay. Every time there is a default the borrower has no course open to him but to go to the moneylender again and say: "What will you renew the bill for?" "Oh! well," the moneylender will say, "what interest is due? Sixty per cent. from the date of your default. We will add that on to the bill, but in addition to that I must take another £50 off to secure me for interest in the future." So they roll up the interest in this compound way—a sort of double compound method—until every case that comes before them becomes absolutely hopeless. I venture to suggest to your Lordships that in no case shall compound interest be charged or allowed. If they get the rate of interest which is on the face of the document they ought to be satisfied, like everybody else.
In Clause 4 I suggest that—Every acknowledgment, bill of exchange, promissory note, bill of sale or other security given by a borrower to a moneylender after the passing of this Act shall state the amount actually advanced to the borrower and the interest per annum to be charged thereon, and shall not be enforceable against the borrower for any higher sum than the sum actually advanced with interest as aforesaid.That is an endeavour to put a stop to the kind of thing I have referred to in the ease of the loan of £800, where £300 was deducted for interest before any loan was made. No such transaction ought to be allowed. A bill ought to be good for the sum actually advanced, and the interest ought to be stated in clear terms on the face of the bill. It ought not to be security for anything else. Clause 5 deals with the obligation of a moneylender to supply information as to the state of the loan. I know this is very difficult to get sometimes. Clause 6 makes a provision that before any proceedings 543 in bankruptcy for a moneylender's loan are taken there must be personal application to the county court to order the loan to be paid either in whole or by such instalments as the county court thinks proper in the circumstances.
The Court of Bankruptcy is the great weapon of the moneylender. I had a letter from a General who went to a moneylender and said: "I have some securities here: will you lend me a sum of money on reasonable terms?" "Oh! no," said the moneylender, "I do not want your securities. I will lend you the money without security if you like. If you want to give securities go to your bank. I do not deal on those terms. I want 60 per cent." He said: "Surely, you would do better to lend at a smaller rate of interest and take the securities." The moneylender said: "I have the best security in the world for an English General, and that is the Bankruptcy Court." That is perfectly true. By a threat of the Bankruptcy Court they have terrorised every public official who has had the misfortune to deal with them, and, therefore, I propose that no proceedings in bankruptcy shall be taken for a moneylender's loan except after an application to the county court.
Clause 7 means that in the case of public officers who are paid out of public funds no proceedings in bankruptcy shall be commenced or prosecuted by a moneylender "if the pay, salary or emolument of such person is forbidden by law to be assigned or to be taken in execution of any debt due to such person." There has been omitted here accidentally by the printer these words: "Unless he is prepared to show that the public officer has money outside what he gets as pay, salary or emolument which may be made available in bankruptcy." It is the law of this land that the pay or emolument of public servants, whether they are Judges, whether they are officers in the Army, Navy or Air Services, or any person holding any public office, cannot be taken or levied in execution for such debts; and the same thing applies to certain wages. And why? Because it is against public policy that money given for the discharge of duties in relation to the State should be diverted from the object of supporting the man, keeping him in a proper position and free from 544 temptation in the exercise of such offices as ho might be given.
How can a young officer, whoever he may be, whether he is in the Civil Service or the Army or the Navy, whether he be a young clerk, or any person who is carrying on public business—I do not care what the particular position is—carry on his duties when, morning after morning and night after night, he sees this amount lulling up against him by this process of compound interest and double compound interest, and all the methods and manœuvres of these moneylenders? Probably he is half-starved, trying to scrape together a few pounds in order to stop the mouths of these people. And all the time there is hanging over him, as he knows very well, this ultimate resort to a bankruptcy summons which will put an end for ever to any chance he has of going on in the public career which he has adopted. The cruellest thing of all is this. We have now a great democratic Army and Navy and Civil Service. The men who come into the Army and into the Navy have to rely on their pay; very few have anything else. How can they discharge their duties to the State in the circumstances I have mentioned?
Parliament has over and over again said that the pay of these people must be left for the object for which it is given; to enable the parties, without any difficulty, to carry on in the honourable careers before them. But the moment the moneylender knows that a man is in Government employment, I care not what it is, he knows perfectly well that by an exposure he can entirely destroy the career, however efficient, of the official who has been unfortunate enough to get into his clutches. The moneylender knows something further. He knows that rather than have such a person ruined in that way, if there is a father or mother, an uncle or an aunt, a cousin or anybody else in the family, they will pay up rather than allow the particular individual to suffer. And that is how money-lending is akin to blackmail on many occasions.
In the Report of the Committee which sat in 1898, to which I have referred, Sir George Lewis, who had a great experience in advising people who were in trouble in this way, said—The effect of this moneylending by all these people in London is that young men 545 are encouraged to bet, because they know they can go to the moneylender next morning and probably raise the money. The moneylender will give them money, not that he think that the debtor can pay, but because his father can pay or his relations can pay; and most of the money is squeezed out of the relations in that way. Another mode in which they carry on their business is, that they see that the man must have money, and they say: You must make a sworn declaration what your debts are. He makes that declaration; he does not tell the truth (I have nothing to say for him); the moneylender pretty well knows it. Then he has his sworn declaration and if the money is not paid by the father, a summons is taken out at the police court, the charge is brought, and all this disgraceful exposure is hushed up by the money being paid to the moneylender.In 1913 my noble friend Lord Newton brought in a Bill which passed through this House. It did not go into all the questions into which I have entered, but it certainly went into some of the abuses, including the sending out of circulars and the touting. Your Lordships passed that Bill, and it went to the House of Commons and stopped there.
This Bill is far overdue. I am glad to see that a Bill has been brought into the House of Commons, and I am told that at least one Committee has been brought together with a view to seeing how that Bill can be got through or another Bill promoted. Above all, the matter has been seriously taken up, and rightly, by the Service members in the House of Commons, the Services being so much concerned in such a Bill as this. The Bill may appear to be a severe one, but it is no use whatever trifling with the question. We have two things in view. One is to make the moneylender hesitate more, and the other is to make the borrower less likely to please the moneylender by getting a loan. It is far better, on the whole, that people in straits—and God knows that I know well what they are, and the difficulties about money—should face the circumstances then and there. Once they get into the moneylender's clutches, within a year things will be ten times or a hundred times worse than they were before. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Carson.)
§ VISCOUNT HALDANE
My Lords, this is a well-thought-out Bill. It bears the marks of great study and of a close examination of the subject. I am not at all disposed to resist the Bill. I am in 546 favour of it because it deals with a great evil, but I rise for the purpose of drawing your Lordships' attention to the fact that this Bill by no means exhausts the evil or the source of the evil. Like the noble and learned Lord, I had to do with these cases when I was at the Bar, and at the Chancery Bar I used sometimes to have to appear for the moneylenders. The moneylender is not always the ruffianly person that he is taken to be. I am afraid that he often is, perhaps in the vast majority of cases, but your Lordships remember the name of one very well-known moneylender in this City who is recorded in books and in biographies as having often done very generous things and saved people from ruin.
There are moneylenders like that on a smaller scale. I remember one of them for whom I had appeared and who, I think, had been very badly treated by an unscrupulous young gentleman who, having made a bargain which was a bad bargain but no better than he deserved under the circumstances, brought an action to set it aside. I remember the moneylender saying to me: "I will take any terms if I can get back my money." I said: "You are entitled to more than 5 per cent. in consideration of the immense risk you ran." "That may be," he said, "but my business is a very difficult one, and I am thankful enough if I get my money back. I am not disposed to look too closely into terms. One must take the rough with the smooth." There is a great deal of that kind of thing.
But I have not risen to defend moneylenders to your Lordships. It would, I fear, be only a very small percentage of that profession that is capable of defence. I rise for the purpose of pointing out the extraordinary difficulty that always arises in dealing with transactions and prohibiting engagements which have arisen from the necessities of mankind. It may be well to prohibit them. I think that in this case it is. But the point is that they arise from a source which you cannot get rid of and which will reappear at another part of the ground in a different form. What is a moneylender? The Bill of the noble and learned Lord is directed against moneylenders. I suppose, as there is no definition, that a moneylender is a person who lends money.
§ LORD CARSON
May I remind the noble and learned Viscount that there is a definition in the Act of 1900? I have put the two Acts to be read together.
§ VISCOUNT HALDANE
Yes, but in the Act of 1900 there is very little more than the definition of a moneylender as a person who lends money. I am speaking from memory.
§ VISCOUNT HALDANE
There are many definitions recommended by Committees that do not come to very much. I will make my meaning plain to your Lordships by an illustration. Suppose that you succeed in prohibiting people from lending money at more than 15 per cent. What will happen? They will not lend money, but they will deal with people who require their services in another form. Generally the person who goes to a moneylender is able to say: "I have by way of security a reversionary interest." It may be only a contingent reversionary interest; or it may not even be that, it may be only an expectation. The moneylender takes such security as he can get. But there is another way of dealing with the matter—namely, not to lend money at all, but to buy the reversionary interest on ruinous terms. The wisdom of our law used not to allow these transactions. In the real property law, which even I can remember, you were not allowed to assign possibilities and contingent interests in that easy way. The law did not like that, seeing that advantage would be taken of expectant owners by means of what used to be called, in the old phrase of the law, catching bargains.
Now what will happen when this Rill becomes an Act will be, I venture to predict, that there will be a great growth of these catching bargains. People will be inveigled into parting with these reversionary interests and expectancies at ridiculous rates, and when an attempt is made to set them aside there will be the same power as there is now in the hands of the moneylender, to make the lives of these unfortunate persons miserable by informing their families. Although I have said that, I have said it only for the purpose of bringing to your attention the fact that this Bill, even if it passes in exactly this form, will not 548 get rid of the whole of the evil of moneylending. It will get rid of a great deal of it, but it will not get rid of a transaction which will not assume the form of moneylending at all but will assume the form of buying, at a ridiculous rate, the expectancies of the person borrowing of the moneylender.
Still, when that is said, I think that this Rill, even although it may only operate partially, is a very valuable Rill. It will deal a great blow at the moneylending profession. There is a moneylending profession, whether you can define it in words or not. The moneylender, to-day, is not always an individual. In fact, as often as not he is not an individual. There are companies with fine names, such as those which the noble and learned Lord mentioned, who carry on the business of buying expectancies and other things, and who also make advances. When they make advances on terms such as are struck at by this Bill then it will be possible to get at them, but it may not be possible when the transactions assume the other form to which I have referred.
I agree with the noble and learned Lord that these transactions by way of loans are an immense evil at the present time, and I do not think the community will be losing anything substantially by our striking at them. There are people, of course, to whom it is a necessity to borrow money, and for whom it is difficult to get the money from any reputable source. They have the more difficulty because they have no reversion. Somehow or other, they will get through the Act, possibly by means of sureties, who will be got at, not by suing on the loan but in other ways, by putting pressure upon the family and through publicity. If the Rill succeeds in killing the pestiferous profession which, as the noble and learned Lord has shown, and as your Lordships all know, flourishes at the present time, it will be something accomplished For my part, therefore, I propose to support the Bill, and I wish it a safe passage through the other House.
§ LORD DARLING
My Lords, I wish that one who has as much influence in this House as the noble Viscount who was so lately on the Woolsack were able to give this Rill rather more wholehearted 549 support than he has promised it. When I was at the Bar I do not remember that I had anything to do with appearing for moneylenders, but I had a good deal to do with the cases that they brought before me when I was a Judge. I am bound to say that I have not that high opinion of them, and regard for them, which the noble Viscount has disclosed. While the noble Viscount was appearing for beneficent moneylenders I had little to do except read Molière, and to my mind it is characteristic of the class he was describing that he makes one of his characters in "L'Arare" speak in these terms: "II ne dit jamais: Je rous donne, mais: je rous prête le bon jour."
I had a good deal to do—not more than other Judges—with the administration of the Acts of 1900 and, I think, 1911, and the difficulty always was to decide what was "harsh" and what was "unconscionable" in the circumstances in which the moneylender and the borrower found themselves. It was not a judicial pronouncement, but I well remember that that very robust Judge, Baron Bramwell, put to counsel, when this sort of question was being discussed—of course it was before these Acts—this puzzle: "Upon what terms would you lend a mutton chop to a starving dog?" That is the kind of problem which the Judges in the King's Bench constantly are being asked to solve—what would be unconscionable in the circumstances. If you had only a moderate amount of mutton chop for yourself it would not be unconscionable to charge a very high interest. I think it is a great improvement—and that is why I wish particularly to support this Bill—that it does fix a rate of interest. My noble and learned friend does not fix it absolutely. Many Statutes have done that. He fixes a rate of interest, and if it works out in the particular transaction in dispute at more than 15 per cent., then there is a presumption that the transaction is harsh and unconscionable. That would be a great assistance to the Judge, whether the County Court Judge or the High Court Judge, who has to try such a case as this.
Now, in the Bill to which my noble friend has alluded—I do not know whether it is in order to mention the name of a member of the House of 550 Commons or not—the interest is fixed. It is fixed at 20 per cent., but I do not think there is in that Bill the same safeguard of the presumption as to interest over 15 per cent., and every lawyer will know what a valuable addition that is to such legislation as this. It has been said that Parliament has fixed rates of interest before, but the improvement in this Bill seems to me to be what I have pointed out. By the Act 37 Henry VIII the rate of interest was fixed at 10 per cent., by the Act of James I—the Sixth of Scotland, and coming from Scotland he was necessarily very economical—it was fixed at 8 per cent. Charles II, oddly enough, fixed it at 6 per cent., and Queen Anne at 5 per cent.; but the most interesting Statute perhaps of all was an Act passed in the reign of Henry VII (3 Henry VII, cap. 6). There it said thatAll unlawful chevisance and usury shall be extirpate; all brokers of such bargains shall be set on the pillory, put to open shame, be half a year imprisoned and pay £20.The noble and learned Viscount is right. It is difficult to stamp out usury, and the noble and learned Viscount says that some loophole will be found through this Bill, if it becomes an Act, through which the moneylender will be able to wriggle. May be there will. There was an Act passed. 5 & 6 Edward VI, to put an end to lending at interest altogether, but in the Preamble of 13 Elizabeth, which was not long after, it was stated of that Act of Edward VI:—which said Act hath not done so much good as was hoped it should, but rather the said vice of usury, and specially by way of sale of wares and shifts of interest, hath much more exceedingly abounded, to the utter undoing of many gentlemen, merchants. …and the people of the Realm. And, as the noble and learned Viscount apprehended, it may happen again, as it happened after the Statute of Edward VI, that usury will abound.
I think perhaps that in Committee it might be worth my noble and learned friend's while to provide something with regard to what is noticed in the Act of Queen Elizabeth—namely, usury "specially by way of sale of wares," because there is a very interesting matter with regard to that. Those who would get out of the laws of usury and their penalties were very well advised by a 551 number of ingenious people. Their names can be read most conveniently in the "Provincial Letters," and one of them was a noted casuist named Escobar, who was the inventor, so far as I can make out, of what was called the Mohatra contract. It is described in the "Provincial Letters," and very pretty reading it is. The way it was done was this. The borrower would go to a moneylender, would buy something, perhaps a roll of cloth, for £500 on credit. He would owe the moneylender, therefore, £500, let us say, a year hence. The borrower would then immediately sell the very same thing to the moneylender for £100, for which he would receive the cash. Now, according to the casuists, that is not usury. I imagine that it is the kind of thing that the noble and learned Viscount was thinking of when he said that some way would be found, I do not say by a casuist, but perhaps by a Chancery lawyer.
§ VISCOUNT HALDANE
Yes, and it was the same with the sale of annuities which was always practised here when the Usury Acts were in force. You sold the annuity to the moneylender.
§ LORD DARLING
I had long suspected that the noble and learned Viscount was somewhat of a casuist. But that is one of the ways in which it may be done. There is, I think, in the Bill introduced into the other House a proposal which I hope my noble and learned friend will see fit to introduce into his Bill—namely, that the real name of the moneylender shall be given in the document creating the contract. I wish, however, when my noble and learned friend comes to this point, that he will better the instruction of Mr. Sidney Webb. I hope that he will make the moneylender give not only his own real name, but his grandfather's real name, because I had occasion, when I dealt with these matters judicially, to notice that if you looked at the name you were very apt to suppose that the ancestor of the moneylender came into this country and took a distinguished part in the Battle of Hastings, and you would come to the conclusion that he really was not merely in the Latin sense of the word generosus; but if you looked back a little further, you would find that that was not his descent at all, but that the most illustrious ancestor he could show was one who was on the staff when 552 that great military operation took place, the passage of the Bed Sea in evading Pharaoh's army. I am perfectly certain that anybody going to borrow money from him would be on his guard if he knew the real origin of the person from whom he was borrowing. Why should the moneylender be ashamed to show his name? It may even be that the name has not been his long enough to give the proper information which the borrower is entitled to get. So I hope that, when my noble and learned friend comes to deal with this matter, he will strengthen the arm of Mr. Webb to that extent.
The noble and learned Viscount said it was difficult to define what is a moneylender. He will, no doubt, remember in a moment that it is defined in Section 6, I think it is, of the Act of 1911, and a, number of persons who lend money are thus excluded from the operation of this measure. However, if it is not done already, it can easily be done in Committee. This Bill will not interfere with legitimate lending and borrowing of money and the carrying on of business upon credit, because business, even great businesses, must be carried on on credit. There are credits even between nations; some of them pay, some of them do not, but the nations cannot go on without credit. The Bill will not put a stop to moneylending altogether, it does not profess to do that; what my noble friend aims at is to put a stop to that kind of moneylending which is absolutely pernicious and which, as he said—and I know it from my own judicial experience—often is only the preliminary step to a blackmailing action.
My Lords, I have heard in the course of this debate that moneylenders are rapacious in their habits, cruel in their business methods, and very harsh in their transactions, and with none of these statements do I desire to disagree. But it seems to me that they do not altogether exercise the wisdom of the serpent, for, if they did, I can scarcely think that they would flood your Lordships and members of another place with this constant stream of irritating circulars which, I confess, makes one apt to start with a very considerable prejudice against them. I cannot say that personally I have ever achieved the remarkable record of sixty-two 553 circulars in a month, which the noble and learned Lord who introduced this Bill mentioned, but one does receive a great many more than one wants, and they are a nuisance.
I particularly like in this Bill what the noble and learned Lord has done in making nearly all these breaches of the provisions of Clause 2 void the transaction. That seems to me a penalty that a moneylender would probably mind much more than mere fines. I do not know whether in Clause 2 (3) the noble and learned Lord has deliberately excluded from penalty—I rather think be has—the persons who act as touts of the moneylender. As I read the subsection it appears that the moneylender who employs these touts will be liable to a penalty, but the touts themselves will not be liable. That may be the intention, and it may be an advantage, because the tout may be more willing to give evidence against his principal, and the principal is, of course, the person whom your Lordships wish to hit.
As to the rate of interest, I sec the great difficulty of fixing any rate, and I appreciate the fact that the noble and learned Lord has not fixed a rate. As he says, he has laid down a certain standard, and after that standard has been passed the Court can put, the onus on the moneylender of showing that the transaction was a reasonable one. Whether 15 per cent. is enough I cannot say. But I wish to urge upon your Lordships, from the point of view of public policy, that this Bill, or some Bill of its kind, is long overdue and is urgently needed. The tremendous harm that is done by these people is probably not much realised by many of your Lordships. As the noble and learned Lord so feelingly described, they get unfortunate people in their grip and they make their lives a misery until, finally, the persecution ends either in bankruptcy, or in suicide, or very often in crime in the shape of theft from employers. But it will be useless for your Lordships to pass this Bill even with a large measure of general, almost unanimous, approbation unless His Majesty's Government are prepared to take it up in another place, and I hope that before the debate closes we may hear that His Majesty's Government are prepared to do something, if not to support 554 this Bill at any rate to support a Bill like it and to carry out some legislation on these lines. As I said before, it is long overdue. The rapacity of these moneylenders has not been curbed. Thousands of people are still suffering under it and it is time that something was done.
THE LORD BISHOP OF SOUTHWARK
My Lords, I wish to support most warmly the Bill which has been introduced by the noble and learned Lord, Lord Carson. It is impossible to exaggerate the amount of unhappiness which can be caused by an unscrupulous moneylender; but I am doubtful whether this Bill will very largely affect the moneylenders among the working classes, because, as a rule the method of such moneylenders is that which was described by the noble and learned Lord as existing in Liverpool—the method of charging one penny per week in every shilling. As a rule the money is paid back within two or three months, but frequently it becomes something like 400 per cent. on the original sum if it is not paid within the year. The worst form of moneylending among the working classes is of a much more insidious character. It is a method followed by those who go round selling various small articles of furniture at the door. They charge an enormous amount of interest upon the price of the articles sold, and I have known more than one working class family who have been brought to the verge of ruin by those people.
I rose, however, to support this measure because I believe that if it is passed it will protect one particular class which is the special prey of the moneylender. The clergy, I suppose, almost more that any other class of the community are pestered with circulars from these people. When I was a curate these inviting circulars poured in upon me. When I became a vicar I think they increased in number. Now that I am a Bishop I still receive them frequently and regularly. I am not sure whether it is a mere coincidence, but I have noticed that I usually receive three or four of them after Derby Hay. The majority of the clergy simply ignore the circulars which are sent to them, but now and again some unhappy man falls into the clutches of a moneylender. The money lenders know 555 that the clergy have very small incomes. They know that the clergy will probably do their utmost to repay any loans they may obtain. They know that it is impossible for a clergyman, by removal, to evade a moneylender and they know that the threat of publicity held over the clergy is as serious as it is to any other class of people. They know also that if it is stated publicly that an incumbent or a curate is in the hands of a moneylender, he will lose his influence with the people among whom he is working and will probably have to leave his incumbency or curacy.
I have known one or two cases in which a man's work has been ruined and the man himself brought to the verge of desperation, even of suicide, through falling into the clutches of one of these moneylenders. I have one case in particular in mind at the moment. A young, inexperienced vicar was suddenly confronted with unexpected expenditure, owing to illness in his family, and he borrowed some £60. Within five months he was owing over £500. He was unable to repay the first moneylender. That moneylender told him that he would report him to his Bishop unless he met the instalments. The clergyman borrowed money from, and fell into the hands of, several of the individuals whose names were read out by the noble and learned Lord who moved the Second Reading of the Bill, and was brought to the verge of desperation. I know of another case similar to that mentioned by the noble and learned Lord, in which a man borrowed £50 and repaid £100 and then found that he still owed £80. In the agreement which is signed there is a certain paragraph under which the borrower loses all he has paid if he misses one instalment, and the moneylender is ready to take advantage of it. I sincerely hope that His Majesty's Government may be able to find room in their programme for a measure of this kind. It is a measure directed, not against usury but against an abuse of usury which has become a scandal and a danger.
§ LORD DESBOROUGH
My Lords, on behalf of the Department for which I speak, I feel that it is unnecessary for me to say one word in favour of the measure after the very long and unanimous support which has been given to it, 556 especially as the Department welcomes it. It has been said already by the noble and learned Lord that another Bill with much the same object in view is proceeding to-day in another place, and the suggestion I have to make, in order to save time and to secure the passage of an acceptable measure, is that after this Bill has been read a second time the noble Lord should consult with the Leader of the House with a view of setting up a Select Committee of both Houses to take both Bills into consideration and to approve a Bill on such further information as my Department thinks necessary in the circumstances, especially with regard to the poorer borrowers and lenders to whom the right rev. Prelate has referred. In that way an even more perfect measure might be passed in a shorter time than would be occupied by the discussion of two separate Bills in the two Houses at the same time.
§ LORD NEWTON
My Lords, in view of the fact that everybody is practically of the same opinion with regard to this Bill, I have nothing particularly to say about it, but as in all probability it will be a long time before there is any effective Government action I would suggest for the benefit of noble Lords who suffer from these circulars, that there is a very easy remedy. Like everybody else, I have received, I suppose, many thousands of these circulars in my time. There was one particular firm which was so persistent that I eventually wrote to them and asked them to come and see me. A gentleman of immaculate appearance and manners appeared in answer to my letter and asked me in the most confidential manner what I wanted. I said that I thought it would be a kindness to bring him there to inform him that if ever I was in desperate need of money they were the last people in the world to whom I should ever think of going. To do him justice, this gentleman made me almost ashamed of myself. He professed extreme regret for having troubled me, and he undertook that I should be no longer troubled in future. I almost felt as if I were the offender in this particular case, but looking back at the circumstances, I do not think that I really was much to blame. I think it was a very salutary lesson, and one which those of us at all events who live in London are capable of inflicting on these people who pester us.
557 I, like my noble and learned friend Lord Carson, have had certain dealings with moneylenders, although I have never been unfortunate enough myself to fall into their clutches. But a near relative of mine did fall into the clutches of that notorious usurer, the late Mr. Samuel Lewis, whose actions were fully exposed by his namesake who has been alluded to in the debate this afternoon Sir George Lewis. Mr. Samuel Lewis amassed an enormous fortune at the expense of the gilded youth of this country. I have seen it stated that the late Mr. Samuel Lewis was a kind of benefactor. He has been referred to occasionally by writers in the Press as a sort of modern representative of Robin Hood, with the same kind of sentiment attaching to him as to Robin Hood. My experience of Mr. Samuel Lewis was that he made no secret of the fact that he was a man who lent his money at 60 per cent., and that there was no philanthropy about it.
I know very little about the procedure of moneylenders who lend to the working classes, but the procedure of moneylenders who lend to young officers and persons of that kind is invariably the same—a combination of bloodsucking and blackmailing. They are not influenced by security or anything of that kind. They will lend to a young man upon the expectation—a very well founded expectation—that his relatives, if they have means, will pay up in order to prevent the young man becoming bankrupt, and having to leave his profession. That is the long and short of the whole business, and that is the way in which money-lending is conducted by these particular people.
There is nothing more that I need say upon the subject. I have made my modest effort in former years. The Bill that I introduced passed through this House without any opposition, but when it reached another place it was effectively wrecked and destroyed by my noble friend Lord Banbury of Southam. In this particular case he will not be available as an opponent in the other House. If he does oppose it here he will have to give reasons and to argue why this particular Bill should not be passed. In the other place you can do it by taking off or putting on your hat, and merely saying: "I object." Therefore, I hope that my noble and learned friend's Bill 558 will have much more success than mine-had. At all events, everybody here, with the possible exception of my noble friend Lord Banbury, is extremely desirous that it should pass.
§ LORD CARSON
My Lords, may I say one word to thank the members of the House for the way that they have received this Bill? My noble friend, on behalf of the Government, suggested that this Bill and the Bill in the House of Commons might go to a Joint Select Committee. I am always afraid that those are shelving tactics. I do not impute to my noble friend that he means that to be so, but I would like the Government, who of course have complete control of the matter, to say what their attitude is. I might get the Bill through your Lordships' House, and might not be able to get it any further, but if the Government are really in earnest in having a Bill framed by a Joint Select Committee, and if this is not merely a shelving operation, and if they are prepared when the Committee reports to give facilities for passing the Bill, I should gratefully accept the offer that has been put forward by my noble friend. The Government have already the very fullest evidence of Judges, elicited during numbers of sittings. That evidence substantiated the Report to which I referred in the course of my speech. I do not see, therefore, that there should be any long delay, and if the Government would only give me some encouragement to believe that they hoped a Bill would be passed, I should be very grateful, and should think that we had made some progress in getting rid of some of these very gross cases of moneylending.
§ THE LORD CHANCELLOR (VISCOUNT CAVE)
My Lords, I can assure the noble and learned Lord that the Government, in wishing the matter referred to a Select Committee, does not by any means regard that as a shelving operation. This is just the kind of Bill that it is important should be carefully considered, and its details thoroughly threshed out. It is a Bill which in a wrong form may do more harm than good, but it is one which, if passed in the right form, may do a very great deal of good. I think to have it examined by a Select Committee of both Houses would avoid a prolonged inquiry by one House or the other 559 on the details of the Bill. What will be done afterwards I cannot say, but I can tell the noble Lord that so far as the Government are concerned they sincerely desire that this matter should be taken up and dealt with.
§ On Question, Bill read 2a.