Moneylenders Act (Hansard, 17 October 1988)

The Secretary of State for Trade and Industry (Lord Young of Graham)
My Lords, we have no plans to do so. The Moneylenders Act 1927 has been superseded by the Consumer Credit Act 1974. This Act regulates the very wide range of consumer credit agreements now available, including those which fell within the scope of the Moneylenders Act 1927. The Government consider that the existing statutory provisions are more appropriate.

Lord Bruce of Donington
But is the noble Lord aware, my Lords, that the loan sharks in the big cities such as Birmingham, London, Glasgow, Cardiff and elsewhere are driving a coach and horses through the provisions of the Consumer Credit Act 1974, which was passed in circumstances when the activities of 936moneylenders were not quite so prevalent as they are in the unfortunate circumstances of today? Will he undertake to have a further look at this in view of the fact that the provisions of Section 137 of the Consumer Credit Act are much less stringent and precise than those of the Moneylenders Act 1927 and make it virtually impossible for borrowers to obtain redress?

§ Lord Young of Graffham
My Lords, I fear that the noble Lord suffers from a delusion if he believes that any legislation will stop loan sharks operating. Loan sharks operate outside the law because they are not licensed by the Office of Fair Trading. They are not registered moneylenders in that sense and many of their other activities, including the use of threats and confiscation of social security books, are in breach of legislation or are criminal offences in themselves. I agree with the noble Lord that some areas of existing legislation—which cover far more than moneylending and include the grant of credit generally across the board—should be looked at. In our current review of the Consumer Credit Act my department is therefore proposing, with the agreement of the Lord Chancellor, to amend Section 139 to allow the court to re-open an extortionate credit agreement of its own motion. This will be a step forward because at the present time only the borrower can complain about the rate of interest.

§ Lord Molloy
My Lords, in so far as the noble Lord has indicated that he might be prepared to look again at the points submitted by my noble friend Lord Bruce of Donington, is he aware that it is usually the smaller businessman who gets stung? I do not believe that either House of this Parliament should be able to say that there will always be folk who will defy the law of Great Britain. That is a bad policy. Will the Minister now say quite clearly that the small businessmen of England will so far as is humanly and legally possible be protected by any amendment that the Act requires?

§ Lord Young of Graffham
My Lords, with the greatest respect. this aspect does not cover small businessmen. All moneylenders must be licensed with the Office of Fair Trading if they are in the business of giving small loans. The Consumer Credit Act covers all forms of lending money, as well as the giving of credit. The noble Lord, Lord Bruce, referred to loan sharks. That is an illegal activity which is subject to criminal law. I was pointing out to the noble Lord that it is a matter for the police and not for passing Acts of Parliament.

§ Lord Elwyn-Jones
My Lords, have any criminal proceedings been brought against any of the loan sharks?

§ Lord Young of Graffham
My Lords, I can write to the noble and learned Lord giving that information. However, the difficulty is in obtaining evidence because many of their victims are often unwilling to provide such evidence. That is a real difficulty.

§ Lord Meston
My Lords, will the Minister agree that the reason lenders are not deterred and 937 borrowers are not protected is one of terminology? The concept of an extortionate bargain under the 1974 Act does not work in practice because, before it can help a borrower, the court is required to find not that a loan was exorbitant but that it was grossly exorbitant.

§ Lord Young of Graffham
My Lords, the Act provides that a credit bargain is extortionate if it requires a debtor to make payments which are grossly exhorbitant or otherwise grossly contravene ordinary principles of fair dealing. The rates of interest charged under different forms of loan must be looked at by the court. Under the old Moneylenders Act there was a prima facie point of 48 per cent. A rate above that was considered to be prima facie exhorbitant; a rate under that was, in many cases, considered to be reasonable. We went beyond that in the Consumer Credit Act; it looks at the circumstances. There have been circumstances in which interest rates over 48 per cent. have been considered to be reasonable.

§ Lord Mishcon
My Lords, is the Minister aware that there is a great deal of concern among welfare officers and others interested in our citizens about the way in which loan sharks are operating in various urban areas? In view of his reply to one of my noble friends, will the Minister see whether his department can issue a widely publicised notice indicating that any complaints regarding unregistered moneylenders are to be sent to his department and will there be dealt with?

§ Lord Young of Graffham
My Lords, I shall look into the point which the noble Lord has made to ascertain whether it is at all possible. However, we are dealing with a criminal offence. Those who operate as loan sharks are doing so outside the law and it is important that people accept and realise that fact.
I shall look into the matter to ascertain whether it is the responsibility of my department or whether there is any way in which I can take steps to bring that to the notice of the public.

§ Lord Stoddart of Swindon
My Lords, did the noble Lord see a recent television programme about upmarket pawnbrokers who are charging their clients 68 per cent. interest? Is that not extortionate by any standards? Does he accept that most of the British public believe that kind of interest charge to be totally unacceptable in a decent society?

§ Lord Young of Graffham
My Lords, I have learned to take the information provided by a number of television programmes with a certain degree of scepticism. However, I shall inquire into that programme.
I fear that there could be circumstances in which, because of the enormous risk of bad debts and the nature of the business, the court could find even that rate of interest to be acceptable. I find that hard to understand but I am told that there are some such circumstances.
The normal law exists to be enforced. If such people are not registered moneylenders there is a 938 contravention of the law. It is perfectly possible for each and every borrower paying that rate of interest to bring an action in the courts. It is then for the court to decide whether the interest rate is grossly exhorbitant or whether it otherwise grossly contravenes the ordinary principles of fair dealing and it can then take action.

Lord Bruce of Donington
My Lords, on two occasions the Minister has referred to "enforcement" and to the illegality of certain forms of money-lending. Is he aware that the enforcement officers in this case belong to the Office of Fair Trading whose numbers are woefully inadequate not only in dealing with the ordinary problems with which they are faced but manifestly inadequate in dealing with this growing and horrendous problem in some of our cities?

§ Lord Young of Graffham
My Lords, it is not for the Office of Fair Trading to deal with the activities of loan sharks. It is a criminal matter for the police to deal with. The Office of Fair Trading exists to license moneylenders—

Lord Bruce of Donington
And to enforce.

§ Lord Young of Graffham
My Lords, and to revoke a licence if a trader has relevant convictions or engages in business practices which appear to the Office of Fair Trading to be deceitful or oppressive, or otherwise unfair or improper.
Crime is crime and it is a matter not to be enforced by that particular department but by the police forces generally.

Lord Bruce of Donington
My Lords, is the Minister aware that Section 161 of the Consumer Credit Act lays responsibility for enforcement upon the director of the Office of Fair Trading?

§ Lord Young of Graffham
My Lords, for the third time I shall endeavour to remind the noble Lord that that section applies to people who are registered moneylenders, and who then behave improperly, and gives power to revoke their licence. If people are behaving outside the law—if they are engaged in activities outside the law—it cannot be for a government department to enforce that section. Surely it must be for those authorities responsible to bring prosecutions.

§ The Countess of Mar
My Lords, is the noble Lord aware of the valuable work carried out by the citizens' advice bureaux and money advice centres in urban areas? Can he state Her Majesty's Government's policy towards such centres when the Section 137 funding ceases with the poll tax and the new funding comes into force?

§ Lord Young of Graffham
My Lords, I am grateful to the noble Countess. That is another matter and I shall write to her about it. It is outside the activities of my department. We support the citizens' advice bureaux and I should like to pay considerable credit to the work that they carry out in the field. I hope that it continues.