§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sharples.]
§ 8.54 p.m.
§ Mr. George Lawson (Motherwell)
My purpose in asking for the Adjournment tonight is to draw the attention of the House to many serious injustices which are being perpetrated in Scotland and which, in many ways, seem to be growing. As hon. Members are aware, there is legislation which is designed to give legal protection to people who engage in hire purchase.
It is my contention that means have been found whereby the clear intention of the House of Commons is being circumvented. Means have been found of getting round the protection which it was intended to give to those who engage in hire purchase. In asking for this Adjournment debate I said that its title was "Personal, Credit Schemes in Scotland". This is one form, but there are other means whereby hire-purchase protection is circumvented.
I am concerned with hire purchase and hire-purchase customers. The people I have in mind are those who go to 482 certain types of shops which they take to be hire-purchase shops or something akin to them. They go there with the intention of obtaining goods or services on what normally would be described as hire-purchase terms, whereby they pay over a period on a regular instalment basis. First, therefore, it should be seen that I am concerned to bring out the fact that those whom I claim are suffering injustice are the type of persons normally dealing with hire-purchase dealers They would, therefore, clearly be brought within the orbit of those whom the House of Commons had in mind in passing the various hire-purchase Acts.
I want to mention what seem to me to be three important forms of safeguard that hon. and right hon. Members had in mind when passing those Acts. There was, for example, the right of those who undertook hire-purchase agreements to cancel an agreement. The goods could be returned to the shop. I know that there was a penalty—I need not go into details—but there was a clear legal right that the would-be purchaser of an article on hire-purchase terms could, by returning the article, cancel any obligation that he had incurred.
It was also the clear intention of hon. and right hon. Members that hire-purchase deals should always he such as would enable the customer to know precisely the extent of his commitment. It was demanded of the hire-purchase dealer that a clear statement be made of, for example, the down payment, and that the terms be so presented that any customer could easily, without doubt, calculate exactly what he had to pay for the article concerned.
Although it might be more difficult to explain exactly how this safeguard was ensured, there was no doubt that hon. and right hon. Members were concerned to ensure safeguards under hire-purchase dealings against the customer being induced to commit himself beyond what he could freely undertake. On many occasions, hon. Members have spoken of the danger of over-sales talk and of pressure in various ways to induce a customer to commit himself to debts substantially beyond his means of payment. Those were three of the principal safeguards with which the House of Commons was concerned and which the House sought to establish by means of hire-purchase legislation.
483 My complaint tonight is that practices have grown up in Scotland which effectively nullify the clear intentions of Parliament and which get round these safeguards. In fact, a very large part of the business taking place in Scotland that properly could be seen as hire-purchase business is being carried on in such ways as not to afford the protection which this House had in mind.
In raising this matter, I am directing my complaint towards the Law Officers of the Crown in Scotland. It seems to me that it is the duty of the Law Officers of Scotland to ensure that the laws of Scotland are properly carried out. If there is evidence that means have been found of circumventing the intention of the law of Scotland it is the public duty of the Law Officers to find ways and means of stamping out these practices.
There are examples which I wish to give of the circumventing of the intentions of this House. My first point is that the hire-purchase agreement should be an agreement that the person engaging in it can terminate. We know, of course, that there is a penalty, but this is not the case under the substitute hire purchase—that, in fact, is what it is—that we are calling personal credit.
Under the substitute hire purchase or personal credit scheme, the sale is final and absolute. There is no question of returning the goods. I should like to quote a short passage from a letter from a constituent of mine which illustrates that there is no right at all to return the goods. This man had a lengthy period of illness and lost his work. He was finding things exceedingly difficult and was faced with having to return his furniture to the shop. He went to see the manager of one of the shops that operate this kind of scheme. He writesI asked the manager then if they could not take the television back as I still wasn't working and every month the account increased by 2 per cent. I was told and I quote 'We don't want the television back; we want the money or your furniture'.My constituent goes on to say:I was quite amazed at being told such a thing by what I thought was a reputable firm.I quote this merely as an example. It is not something which requires to be substantiated because we all know that under this substitute hire purchase there is no right to repudiate the bargain even 484 at the cost that goes with the repudiation of such a bargain.
The second of the safeguards—to my mind this is a very important one—is the necessity that those who enter into an agreement or bargain should know precisely what are the terms of the bargain. Under this substitute hire purchase there is no clear or easy means whereby it is possible to arrive at any precise understanding of what are the obligations. I know that a person who is well versed in higher mathematics might be able to work it out, provided he acted in a certain way.
I have had experience of a salesman of one of these concerns which operate on this basis coming to me and my asking him to describe how the scheme operated and what was the eventual charge. I spent a considerable time with him trying to find out how he would describe the scheme to customers, and I found that he did not understand it himself. For example, one of the schemes I had in mind was one which charges 2 per cent. per month compound interest. I pointed out to the salesman that 2 per cent. per month merely at simple interest was 24 per cent. per annum. He would not accept this and yet he was a salesman.
The position that arises among people dealing on a basis of this substitute hire purchase is one which must leave them totally unable to calculate what they should pay or what they think they really ought to pay even under the terms of the agreement. I have a letter concerning person who paid for a television set on the basis of this substitute hire-purchase. The charge for the set and the costs that went with it amounted to About £99. Apparently the set went wrong soon after it had been bought. The dealers refused to do anything about it and the set was out of action for months.
I should have thought, naturally, that the person concerned would refuse to pay as soon as he was receiving no service from the set, but in the result the cost was mounting all the time, being charged at 2 per cent. per month. At the stage when I received the letter this person had actually paid £51 towards a sum of £99 but had reduced his debt by only £13, so great had been the accumulation of the debt over the period.
485 I have particulars of another case which brings out this difficulty of estimating the extent of the commitment. I had a letter from a man who was not himself a debtor. He had not incurred a debt personally but he had undertaken to act as guarantor for some other person. He told me that the person who bad contracted the debt had fallen ill and could not meet his obligations and the firm had demanded that he should meet it.
He wrote:To try and reduce the crippling burden of the so-called operating charges I realised insurance policies to raise £100 which I sent to"—and he named the firm, which of course I will not do. The receipt for the money was dated the first day of one of the months of last year, but he added:Despite this payment I was charged the 2 per cent. interest for that month on total balance, taking no account of my payment.He paid £100 to liquidate a debt on the first of the month and he was charged the full 2 per cent. over the whole of that month. On my calculation, that means in simple-interest terms 700 per cent. per annum.
§ Mr. Deputy-Speaker (Major Sir William Anstruther-Gray)
I am reluctant to interrupt the hon. Member, but I take it that he has in mind a remedy for this state of affairs which will not entail legislation, because we cannot discuss legislation.
§ Mr. Lawson
Yes. I am not asking for legislation. I am giving examples of injustices which are being perpetrated in Scotland. In this case I am trying to show the impossibility of arriving at any clear understanding of the amount of the debt, because there is a charge of more than 700 per cent. interest.
The necessity for knowing the extent of commitments applies particularly to those persons who take on the task of being guarantors. In some cases the guarantor accepts an obligation that ex tends to the grave. He undertakes that his estate shall bear the responsibility. Not only is it a case of the guarantor accepting responsibility beyond the grave; it is a case of his accepting an unknown responsibility. 486 In many cases he accepts responsibility for what is described as a revolving credit. It is not a question of a guarantor guaranteeing that he will meet, say, the cost of a television set, but of his guaranteeing to meet, let us say, the sum of £200 given as a credit.
The television set may be paid for. The customer may then obtain another article, or two articles, and the guarantor remains responsible in perpetuity, or so long as the account remains in debt to the amount of £200 incurred under the revolving credit. No person—not even a half-sensible one—would undertake such an obligation if he understood what he was doing, and many of my hon. Friends have evidence of people who have come to them and said, "I signed a statement. I thought that I was witnessing a signature but I find that I have undertaken all these commitments."
That is the very opposite of the intention of this House to ensure that where such commitments are entered into the persons entering into them should clearly be aware of what they are doing. I know that we cannot always protect people from themselves, but we should recognise tendencies to act in a foolish way and try to make provision for them.
§ Mr. James McInnes (Glasgow, Central)
Will my right hon. Friend tell the House of certain guarantors who, because of their experience of their colleagues' having been done down, have asked Napier's to supply them with a copy when signing such guarantees?
§ Mr. Lawson
I am not speaking of any particular firm; I am speaking of a scheme which is operating in Scotland in a way which clearly circumvents or nullifies the intentions of this House.
I will give an example. I know of a case concerning two tramway men. One of them wanted a television set and he asked his workmate to act as guarantor. The total obligation, with the various extra charges, amounted to just over £89. The first tramway man paid £31 19s. 6d. and then died. I will read two paragraphs from a letter sent out by the firm concerned to the widow of that tramway man. The letter says:We duly received your letter dated"—487 a day in 1958—and we regret very much to note the circumstances in which you are placed and trust that you will accept our deepest sympathy in your recent sad bereavement.That is the first paragraph. The second paragraph says:We note that you are unable, meantime, to make any payments towards the account contracted by your late husband and we regret that therefore we will require to apply to your guarantor to fulfil his obligations in terms of this guarantee.There are two paragraphs from the same letter—one expressing the deepest sympathy with the widow in her recent sad bereavement and the other telling her that the firm would have to compel the guarantor to meet his obligations. This guarantor was compelled to meet his obligations. I have calculated that since that time, mid-1958, he paid rather more than £61, so that towards a debt which was initially £89, there was paid slightly more than £93. In December of last year, the tramway man who was paying the debt of his deceased colleague was told that he had still some £26 to pay. I calculate that the operating charges amounted to rather more than £26 and that the interest on the initial debt was about 29 per cent. The interest varies in many ways according to the length of time. Here was an example of sympathy being expressed for a man who had undertaken an obligation—I am sure that he had no clear knowledge of what he was doing—and then a drive towards getting the last possible penny.
My third and last point is that the third of the safeguards which the House had in mind was that those who embarked on hire purchase should be safeguarded, as far as possible, from over-committing themselves, from taking on debts which they could not reasonably be expected to pay. There is abundant evidence in Scotland to show that far too many people are being induced to take on debts which they cannot be expected to pay. It is significant that in 1949, 36,000 decrees for debt were issued in Scottish courts. In 1953, the number had jumped to 64,000 and in 1957 it rose to 103,000. Those figures will be found in the report on diligence, although they are official figures.
I have a stack of letters, some of them almost heartbreaking. I have one example of a man whose initial debt was 488 about £46. This man has been charged three times for court fees and four times has had his furniture poinded. He once had his wages arrested. The total amount taken from him has amounted to slightly less than £56. When I looked at the papers, I found that he still owed more than £6. He may have been a bad debtor, but this is evidence of the length to which the practice is being taken in extorting payment. Clearly, such a person ought never to have been permitted to take on that kind of debt.
It is far too easy to collect debts and to arrest wages. Wages can be arrested, leaving a man with only 35s. a week, no matter what the size of his family. Through the efforts of my hon. Friend the Member for Central Ayrshire (Mr. Manuel), we are trying to alter the position, but as it stands, a man can have his wages arrested, leaving him with only 35s. If he does not have a job and is receiving National Assistance, his furniture can be poinded. I am sure that more than one of my hon. Friends has been called in at the last minute to stop poinding of furniture on debts arising in this fashion. It is all too easy and, because it is all too easy, these difficulties arise. Some firms are excellent, but not all are concerned to ensure that when they sell goods or provide services the person to whom they sell or provide the services is reasonably likely to be able to meet his obligations.
That is the third of the safeguards which are clearly being violated in Scotland. This is not a matter which has gone on for only one year. It has continued for a number of years and it is not good enough that the intentions of the House to protect the hire-purchase customer should be nullified in this way.
The Law Officers have a very clear duty. They should be watching this kind of practice and should have taken action long ago to stop it. They have ample power to do so. There is evidence of the law having been broken in respect of an Order made in 1957 restricting hire purchase. There is very little evidence of any stringent effort by the Law Officers to see that the law is observed. I should like to hear from the Solicitor-General for Scotland that the Law Officers are determined that this practice, which is so widespread and so strongly established, is to be speedily stopped.
§ 9.23 p.m.
§ Mr. William Hannan (Glasgow, Maryhill)
I support my hon. Friend the Member for Motherwell (Mr. Lawson) in his complaint and I sincerely hope that the Solicitor-General for Scotland will take note of the tenor of my hon. Friend's remarks and complaints. The practice of which my hon. Friend complains is plainly due to the cupidity, naivety and, admittedly, in some cases, stupidity, of some of the people who are enticed into these agreements.
I had one case during the General Election when a constituent was about to be turned out of her home by the sheriff's officers at 12 o'clock midday because the terms of one of these agreements had not been observed. To assist an unemployed brother, who was a tailor, the lady had entered an agreement of this kind to purchase a type of sewing machine. As a result the furniture was poinded and the woman was threatened with eviction from her corporation house. In the midst of the election we had to go to see the local authority, which is the great saviour in many of these cases.
My hon. Friend is right. The intention of the House to protect people who enter into these agreements is being flagrantly breached and broken by subtle roundabout methods. It is essential in any agreement that it should be open to the purchaser to cancel the contract by returning the article. However, in some of these instances the firms concerned are refusing to accept the article back. It is now becoming the practice that the article is considered to be finally and ultimately sold to the customer at the time he enters into the agreement.
The second point that my hon. Friend made was that the purchaser should be entitled to know what the ultimate price of the article would be. He should be told how much the article costs, how much is being allowed for working and office expenses, and thus he should know the total cost of the article. My hon. Friend's contention, which I support, is that the terms of the Acts of 1932 and 1952, and indeed the Advertisements (Hire Purchase) Act, 1957, have been broken by these personal credit schemes.
On 8th December I wrote to the Solicitor-General for Scotland. I am not complaining, but may I remind him 490 that I have not as yet received a reply to my letter which drew attention to another aspect of this problem. The details of the case I quoted were as follows. The original debt incurred—and when I say debt I mean that the individual thought that it was a hire-purchase agreement—was for £53 2s. 6d. The man repaid £36 18s. 11d. leaving, as one would have thought, a balance of £16 3s. 7d. It has now been found that this man, or the guarantor, owes the firm £46 6s. 0d.
§ Mr. Hannan
I do not want to enter into the merits or demerits of the kind of debtor the man was. He too had been taken to court and the court expenses had been added to the original figure.
What manner of contract, hire purchase or otherwise, was that? It is the responsibility of the Solicitor-General for Scotland to give us an explanation about that.
A month or two ago my hon. Friend the Member for Central Ayrshire (Mr. Manuel) introduced a small though important Bill to amend the previous legislation which permitted a man's wages to be arrested to the extent of leaving him only 35s. a week. My hon. Friend's proposal was to alter that sum to £4 to make it comparable in value to the sum of 35s. allowed by the previous legislation. In the case to which I draw the attention of the Solicitor-General for Scotland my constituent has had his wages arrested to the extent of £5 9s. 11d. each week and he was left with only 32s. a week on which to keep his wife and two children. That is a breach of the existing legislation even without the change proposed in the Measure introduced by my hon. Friend the Member for Central Ayrshire.
§ The Solicitor-General for Scotland (Mr. William Grant)
It would be awkward if I dealt with that personal case tonight. I have just received a report on it and I will communicate with the hon. Gentleman. I am sorry it has taken so long, but there have been intensive investigations into this matter.
§ Mr. Hannan
I am not raising this case in order to complain about the delay in answering my letter. I raise it 491 because I think it is a very good example of the bad effects which follow from the methods which have been outlined by my hon. Friend the Member for Motherwell.
There is much evidence in Scotland of this kind of thing. I am sure that many of my hon. Friends can add to the instances which are manifesting themselves north of the Border. Something must be done about it. The tenets of good business are being abused, and many people in the business world are disturbed because this is the sort of thing which they do not wish to see happening. I am glad to have had the opportunity to support what has been said by my hon. Friend the Member for Motherwell.
§ 9.33 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I wish to support my hon. Friend the Member for Motherwell (Mr. Lawson) and thank him on behalf of my constituents for having raised this matter. From communications which I have received and meeting numbers of my constituents regularly every Saturday I know that they will be grateful to my hon. Friend.
This is a sordid story to hon. Members who represent constituencies in the West of Scotland. I have a case which I shall be sending to the Solicitor-General for Scotland. Accountants have considered it, and two friends of mine from Bearsden have examined it, and it seems as if the woman concerned will have to pay twice as much for the article which she bought as it is worth; and she will be lucky if she ever succeeds in completing the payment. We cannot get hold of a copy of the document she signed. There is a paying-in book which reveals that 2 per cent. is charged for managing a personal credit on which she bought the article from a shop which I believe belongs to the same company.
There are hire-purchase payments and it is difficult to know what the whole thing is about. Whether it costs £700 with the interest I do not know, but it costs a lot more than it would have cost had the article been purchased at the co-op. When these people come to me saying that they have bought something worth £100 and have paid £160 for it 492 I tell them that they could have bought it more cheaply at the co-op. One can obtain a copy of the scheme of purchase from the co-operative store, but one cannot get the same thing from this company.
I tell these people that if they had gone to the Clydebank co-op. and bought an article worth £100 on hire purchase they would have had to pay only £115. But, in fact, they may have had to pay about £150. Something must be done to stop the scurrilous activities of the salesmen from this company.
When I read in the newspapers of gentlemen losing thousands of pounds to astute salesmen of ideas I learn that these salesmen end up in gaol on charges of fraud or of misleading people. They are called "confidence tricksters". I am a Welshman and not a Scotsman but, by heaven, they would never catch me with some of the tales they tell. Some of the people who come to me must have been told fabulous stories to have been caught in the way in which they are caught.
Not long ago I was at Dumbarton Castle where, by the side of the Clyde, there is a marine engine which is a monument to a famous name connected with the development of marine machinery to a tremendously high level. That was the means of making a great contribution to the wealth of this country. I refer to the Napier marine engine, which is a beautiful machine and a really creative job. It is shocking that things should happen which people might be led to believe are connected with the descendants of this great personage.
The Solicitor-General for Scotland has had evidence of many of these cases. I have another which he can sort out. I have been trying to sort it out, but I cannot make any sense of it. But I expect the hon. and learned Gentleman to make something of it and to stop what, to me, is scurrilous exploitation of innocent people in the West of Scotland.
§ 9.36 p.m.
§ Mr. James McInnes (Glasgow, Central)
My hon. Friends have gone into the character and nature and construction of these personal credit schemes and they have gone into great detail about the operation of this scheme, 493 particularly my hon. Friend the Member for Motherwell (Mr. Lawson). If time permitted, we could go on talking about this matter until 10 o'clock tomorrow night, explaining the type of complaint we receive from our constituents. Almost every day in our correspondence there are one or two letters from individuals suffering grave hardship and anxiety as the result of the operation of these schemes. No one knows better than the Solicitor-General, because he himself receives complaints from his constituents.
The object of my hon. Friend the Member for Motherwell in raising the subject this evening is to discover whether it is not about time that some real action was taken. We cannot go on month after month replying to these letters. I regard the situation as very serious. So does the Scottish Council of Women Citizens' Associations. I had a communication from that body stating that at a recent meeting its members unanimously passed this resolution:'That the Scottish Council of Women Citizens' Associations view with concern the distress which is being caused by the operation by certain Scottish firms of a system known as a 'personal credit scheme' for the purchase of household goods; that they believe that the operation of this scheme is causing serious hardship not only to the gullible who participate in it but to those who stand as their guarantors.The council fervently appeals to Scottish Members of Parliament to take action as quickly as possible. That is my hon. Friend's purpose in raising the subject tonight.
Will the Solicitor-General give us an undertaking that action will be taken by the Law Officers on this issue? Citizens throughout the whole of Scotland are disturbed and alarmed. I hope that we shall hear from the right hon. and learned Gentleman that definite steps are being taken to eliminate this vile and vicious practice.
§ 9.39 p.m.
§ Mr. Douglas Johnston (Paisley)
I intervene only for a moment to congratulate my hon. Friend the Member for Motherwell (Mr. Lawson) on bringing to the notice of the House, and I hope to the notice of the whole country, the avoidance and evasion of the intention of the House when the hire-purchase Acts were passed. What he has said has given 494 life, meaning and explanation to the startling rise in the number of decrees granted in the sheriff courts in Scotland in the last few years. I am sure that every Scottish Member, at least from the west of Scotland, could give individual examples of the evils complained of which have been brought to his attention by his constituents. There are two which I particularly draw to the attention of the Solicitor-General. The first is the evil of the system of requiring guarantors. I am convinced from what I have seen in my constituency that the vast number of persons who sign guarantees are not aware of the obligations they are incurring.
§ Mr. Speaker
Order. I am sorry to interrupt the hon. and learned Gentleman, but I am in great difficulty in understanding what is the remedy sought by him which does not involve legislation. I shall have to trouble him about that.
§ Mr. Johnston
I apologise, Mr. Speaker. As I said earlier, I am convinced that the intention of the House in passing the hire-purchase Acts, for the enforcement of which the Law Officers of the Crown in Scotland are responsible, is being avoided in some cases and evaded in others. I hope that wider publicity will be given to the debate so that persons will not enter into those commitments. I hope that we shall hear from the Solicitor-General for Scotland that he is taking active steps to prevent the evils complained of.
§ 9.42 p.m.
§ The Solicitor-General for Scotland (Mr. William Grant)
The hon. Member for Motherwell (Mr. Lawson) has raised this evening a question of very great concern to many people in Scotland, because there is no doubt that in recent times personal credit scheme transactions have been operated on a very extensive scale. A circular sent last July by one firm to hon. Members for Scottish constituencies stated that it had 80,000 open accounts. That was not the whole story, because some of them were family accounts where more than one person was operating.
I am grateful to the hon. Member for Hamilton (Mr. T. Fraser) for sending me his copy of the circular. There is also no doubt that a number of customers and guarantors had entered into such transactions and then found themselves 495 with financial liabilities which they had extreme difficulty in meeting.
Letters have been reaching my right hon. and learned Friend the Lord Advocate and myself over a considerable period, some from hon. Members, some direct from the persons concerned. These letters support the view which hon. Members have expressed tonight, that many people appear to enter into these agreements or transactions without fully appreciating the liabilities that they incur. I would say from my experience of those letters, and of the investigations which have followed, that this applies particularly to the guarantors.
We have investigated one or two cases to ascertain whether there was any fraud, but so far we have been unable to find that evidence.
§ The Solicitor-General for Scotland
The hon. Member for Glasgow, Central (Mr. McInnes) is expressing a view which, I know, he holds strongly. The difficulty is that he is expressing it in lay terms. Although it might be a fraud in inverted commas—
§ The Solicitor-General for Scotland
—the cases we have investigated have not disclosed a fraud in the criminal sense of the word.
We are not concerned tonight with the credit granted on personal security by the joint stock banks. As I understand the hon. Members who have spoken, they are in no way complaining about the activities of the banks. I thought it proper to make that clear in case any misinterpretation might have been placed on the debate.
§ Mr. D. Johnston
I should like to make it clear that, so far as I am concerned, the majority of credit traders trade honestly and behave well. My complaint, from my knowledge of my constituency, is confined to a comparatively small group of traders.
§ Mr. Lawson
I endorse that. I, too, recognise that the bulk of the firms are honest. There are, however, a few others.
§ The Solicitor-General for Scotland
I entirely agree with what hon. Members have just said. That is borne out by the correspondence and complaints which I have received.
The type of scheme complained of is, I think, of overseas origin and it is only relatively recently, in the last four years or so, that it has developed in Scotland on any extensive scale. As has been pointed out, it differs from hire purchase in some important respects. One basic difference is that the property in the goods passes to the customer right away. In hire purchase, the property does not pass until the instalments have been paid.
It was the hon. Member for Glasgow, Maryhill (Mr. Hannan), I believe, who mentioned the question of contravention of the 1932 Act as recently amended. The 1932 Act applies to hire-purchase and credit sales. The difficulty is that a credit sale as defined in the 1932 Act does not cover the type of transaction under the ordinary personal credit scheme.
The scheme as operated in Scotland covers two types of case. The first is where the credit is used by the customer to buy goods from the operators of the credit scheme out of their shop. The second type of case is where the customer uses the credit either to settle his debts with a third party—a moneylender or other trader—or, alternatively, to buy from a third party. I refer to that second type of scheme as the third party type of case. I mention that because the legal implications of the two types of schemes may have some importance. The one does not exclude the other. A man may get £100 on credit, may use £25 to pay off a moneylender, use £25 to buy goods from the operators of the scheme, and use £50 to buy goods at another shop.
The one important question which has arisen is whether the operation of this scheme, by one or other or both of the ways I have mentioned, is a contravention of the Moneylenders Acts, and that is where the Law Officers come in. That involves the very vital question whether the operator of the scheme is a moneylender within the terms of the Moneylenders Acts.
497 Under the Moneylenders Acts, moneylenders, for the purpose of those Acts, include every person whose business is that of moneylending, or who advertise, announce or hold themselves out in any way of carrying on that business, but there are certain exceptions and exemptions. The one which is in point here is that a moneylender does not include any person, first, who is bona fide carrying on the business of banking, or, secondly, who is bona fide carrying on any business not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money.
I am not going to say that it is a very easy branch of law to interpret, and I am not going to interpret it, but I hope I may be allowed to say what has been happening. There have been certain civil cases in which the customer in a personal credit scheme has argued as a defence, when being sued for the balance, that the contract is void and unenforceable because there was a breach of the Moneylenders Acts. The reply by the operators concerned is that they are bona fide carrying on the business of banking, and that, therefore, the Act does not apply to them, or they come within the second leg of the exceptions to which I referred.
There was one case in the Sheriff Court in Jedburgh which was brought to my notice by the right hon. Member for East Stirlingshire (Mr. Woodburn). I am speaking from memory, because I returned the papers on that case to him, but if I remember rightly, die sheriff-substitute held that the operators were bona fide carrying on the business of banking, and accordingly did not come within the Moneylenders Acts. But my recollection also is that there were certain other matters in the case, particularly with regard to misrepresentation, and I am not at all sure that this particular point was fully argued in that case.
There have been other cases in Edinburgh, and there is one which is still proceeding there. I cannot, of course, comment on what is likely to happen to it, but I think I would be in order if I said what has happened so far. In that case, the sheriff-substitute held that he would not decide whether the firm concerned were bona fide carrying on the business of banking unless he heard 498 evidence in order to ascertain the exact nature of the transaction. I understand that there will in that case be a proof and evidence will be led. Of course, I cannot express a view about the final outcome, but it may clarify matters when it is decided.
With all respect to the hon. Member for Motherwell, I think that he was a little unfair to the Crown Office and the Law Officers. We can take proceedings if the law is broken. He used the word "circumvention". The hon. and learned Member for Paisley (Mr. D. Johnston) used the words "evasion and avoidance". The difference there is vital; one may be an offence while the other is not. Unless the law is broken criminally, there is no action we can take in the Crown Office. To use a slang expression, we may think that there is a "fiddle", but, if the law is not broken, we cannot take action. We have had the matter under consideration, and we have taken action on several occasions recently.
The legality of this type of scheme was first considered nearly four years ago, in 1956. The question raised then related to the 1955 Order. Certain proceedings were taken at Kilmarnock, but, when the Crown began to lead some vital evidence, the sheriff-substitute ruled that it was incompetent and, since the case was on indictment, as the hon. and learned Gentleman will appreciate, the Crown had no right of appeal. By the time that case was concluded in 1957, there was another Order which had come into force and, as a result of further investigations, several charges were brought against a firm operating this kind of scheme in the Sheriff Court at Hamilton. In September, 1958, the sheriff-substitute found the firm and, if I remember rightly, the directors guilty, and, on appeal, the conviction was upheld.
That Order is no longer in force; it went with the easing of hire-purchase restrictions. The real issue at the moment is whether these transactions contravene criminally the Moneylenders Acts. Several investigations have been made. They are not always easy to make. Criminal proceedings have been instituted in the Sheriff Court in Glasgow against a particular firm alleging contraventions of Section 5 of the Moneylenders Act, 1927. That is the Section which places certain restrictions upon 499 moneylending advertisements. The case will be tried on 14th March. I understand that the evidence may take a few days.
At any rate, that is, as it were, the next step. I certainly could not guarantee that the case will clear up all the problems which we have, but I think it may—I use the word "may"—act as a signpost to people who are in difficulties with this particular matter in civil cases. The Law Officers' job is limited. We cannot intervene in civil cases except in a very limited class of circumstances, and we are really confined to the criminal side.
One thing which emerges from nearly all the complaints which I have had is that people sign documents without understanding them. We all do it. I could have been cheated many times, because I have more than once signed a document without having read it. As has been said tonight, this applies even more to the guarantor than to the customer. One letter which I had from a gentleman, who said that he had been caught—
§ It being Ten o'clock the Motion for the Adjournment of the House lapsed, without Question put.
§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bryan.]
§ The Solicitor-General for Scotland
I had a letter from this gentleman who admitted, frankly, that he had been foolish. He put it even more strongly, I think, but what he did was this. He was in the Services. We wanted to sell his motor car. He found someone who was prepared to buy it but who had not the money. The prospective purchaser went to the firm concerned, which said, "We will give you the money if you get a guarantor." The seller then acted as guarantor. The purchaser defaulted, and the guarantor is now paying for the motor car which he sold. If we can get a little publicity for that sort of thing people may be a little more careful in signing on the dotted line.
I am grateful to the hon. Member for Motherwell for raising this matter, because I think that if publicity is given 500 to it people will be less likely to enter into unknown or semi-unknown commitments. If that is the effect of the debate, I think that it will have served a very useful purpose.
§ 10.2 p.m.
§ Miss Margaret Herbison (Lanarkshire, North)
I am sorry to intervene at this late stage, but, having listened carefully to the Solicitor-General for Scotland, there are two points which I should like him to explain. The right hon. and learned Member has given exceptions, and he gave two instances under the Moneylenders Act, one in which the firm was a bona fide trading firm. I should like to ask, in particular, about the question of banking. Could a firm be considered bankers if all the transactions were concerned with paying out and none with paying in?
The Solicitor-General described how a firm may operate a personal credit scheme and a man may have used part of the money for paying off a debt, part of it for buying from the firm concerned and perhaps part of it for buying from another firm. I am thinking of a case brought to my attention only a fortnight ago which, again, involved a motor car. The man concerned wanted to purchase a motor car. He was given personal credit of £135. The motor car turned out to be very faulty. The whole family were almost gassed by the fumes from it after about a month. The motor car was returned, and the man is still paying the money which he borrowed from the personal credit firm. Can the Solicitor-General give us any information on how that firm would be classified under the Moneylenders Act?
§ The Solicitor-General for Scotland
By leave of the House, may I answer the hon. Lady's point? I am in a slight difficulty here, not because I do not think that I know the answers but because this is the sort of question which will come up in the case which I said is pending. I would be happy to discuss the matter privately with the hon. Lady, but it would be unwise and, indeed, out of order for me to express any opinion tonight.
§ Question put and agreed to.
§ Adjourned accordingly at five minutes past Ten o'clock.