§ Order of the Day for the Second Beading, read:
Motion made, and Question proposed—
That this Bill be read a second time."—(Lord James of Hereford.)
THE EARL OF KIMBERLEY
My Lords, I desire to make a few remarks on this Bill. I quite recognise, as I suppose we all do, the manifest evils which arise from the practices at all events of that class of money-lenders who, I observe, were called by Sir G. Lewis, in his evidence, by the very appropriate names of "touts" and "thieves." Of course, the most important clause in the Bill is the one which enables the court to reopen a case of money-lending, and if the amount of interest charged exceeds 10 per cent, to take an account as between the parties, and make an order as to the amount due. No doubt, upon the face of it, this is a very strong Measure. This is, I believe, although I am not a lawyer, a precedent in the action of the Court of Chancery, which was referred to by the noble Lord in moving the First Reading of this Bill, in reopening hard and unconscionable contracts of a money-lending character made against an expectant heir. However that may be, I think that the evils of this system of money-lending are so great that Parliament is justified, at all events, in attempting to mitigate them—I say to mitigate them, because I feel convinced that neither this nor any other legislation will really put an end to these evils, for the reason that in a large 926 number of cases the money-lender trades upon not only the need of the borrower, but also his dread of coming into open court and making public his position and the cause which led him to have recourse to these money-lenders. I do not believe that any legislation, even legislation more stringent than this, would entirely destroy the evils of money-lending. However that may be, it docs not, in my opinion, afford sufficient reason for not making such an attempt as is made by the noble Lord in this Bill for the diminution of the evils. There are certain provisions in the Bill which I think will not meet with anything but approval—those, for instance, which require that there should be a register kept of money-lenders, and also those which require that he shall give to the borrower a full and complete statement of all the conditions on which the loan is advanced. Mr. Justice Matthews, in his evidence, said—It is, in the case of the borrower, his money or his life. The borrower will do anything, as a general rule, to conceal from those about him, and those who know him, what his position is, and the money-lender may do with him what ho pleases.I feel, even after this Bill passes, that that description will apply to a great many borrowers. They will be at the mercy of the money-lenders, because they will be prepared to do anything which will save them from appearing in a court. Although I am afraid the Bill will not have all the effect the promoters of the Bill hope for, yet I trust it will have some effect, and, therefore, I shall support the Second Beading. Everyone must approve of the provision requiring a money-lender to register himself, and that he should give to the borrower a full and complete statement of all the conditions upon which the loan is obtained.
§ *LORD JAMES OF HEREFORD
My Lords, I have to thank the noble Earl for the support he has given the Bill. If my only duty was to secure the Second Reading of this Bill by your Lordships' House. I should not have a very difficult task to accomplish. But since the Measure was introduced it has, as was to be expected, attracted a great deal of criticism, and from different classes of the public there 927 have been many suggestions for its improvement, while from the particular class which will be affected by the proposed legislation the criticism has been in some cases, in a moderate and businesslike spirit, and in others in an intemperate manner. I have been unable to deal with all the correspondence on the subject, and I am seeking, therefore, this opportunity of making a somewhat general reply. There has been one class of criticism, that which has proceeded from the Duke of Argyll, which, I am sure, will meet with the respect and consideration of your Lordships. I speak most sincerely when I say that everything that falls from the noble Duke, either from his tongue or pen, will be treated by me with full respect. The criticism of the noble Duke is of a general character, but he admits, and eloquently states, the evils of money-lending, and thinks that the Legislature ought to deal with them. The Duke of Argyll bids this House and the Legislature to take some steps to correct these evils; he approves of the effort made in the Bill, and, if he were here, would, I presume, vote for the Second Beading. But my noble Friend, among many political virtues, includes that of consistency, and takes exception to the clause enabling the Court to revive a hard and unconscionable bargain made by the leader. I deeply regret that this clause has met with such criticism, and I think my noble Friend has overlooked that this second clause contains the whole pith of the Bill, and without it the Bill would be worth very little—indeed, I am pretty sure that it would add to the power of the money-lender, who would be able to say his proceedings had Parliamentary sanction. Therefore, my view is that the Bill stands or falls by virtue of that second clause. The noble Duke says that a contract made by a sane adult who knows the nature of the contract he is making should be sacred, and should not be touched—the Legislature should not interfere with it. Well, as I said just now, the consistency of my noble Friend has been proved, and those who read his letter will now find in it an echo of a speech he delivered here in August 1881. He used almost the same phraseology when speaking in opposition to the Irish Land Bill. He 928 then objected to interference with contracts made between man and man; but, my Lords, you were not influenced by his arguments then, you passed the Irish Land Bill, and, more than that, after years of experience, you extended the principle of it to the leaseholders and improved the Act in other directions, thus admitting the principle that contracts made under the conditions mentioned by the noble Duke may be, and ought to be, from certain economic considerations, subject to review by a court. That was a much stronger case than this we have before us, because you had to deal with the bargains made by a not unmeritorious class of men—Irish landlords—who made practically fair bargains: they were not unconscionable and were freely made, but circumstances had arisen causing them to become oppressive to the tenants, and the Legislature said—We will review these contracts made by sane adults, and the Court shall say if the terms shall be changed or not.So the noble Duke's argument was not accepted 18 years ago, yet still ho asserts contracts should not be interfered with. It is certainly a very strange result that the name of the noble Duke, who is a friend of this Bill and a bitter opponent to the class of money-lenders with whom we are endeavouring to deal, should be employed as the champion of the money-lending fraternity, and that appeals should be made to them to enroll themselves under the banner of the Duke of Argyll to support the sanctity of contracts entered into with money-lenders. I do not think for a moment such considerations should prevail. The noble Duke treats the principle with which we are dealing as a novel principle in law, but that is a misapprehension. The Noble Earl opposite has referred to a principle which is the foundation of this Bill, and by which the Courts have long intervened in hard and unconscionable bargains where an expectant heir has had dealings with a money-lender. The sale of reversionary interests has always been within the review of a Court of Equity. In 1880 the principle was applied by Mr. Justice Denman to a case where a person lent money to one who had no means, in the hope that he could obtain 929 the money from his family, and the contract was set aside as a hard and unconscionable bargain. My noble Friend Lord Aldenham, who is unable to be here to-day, has written to me referring to a class of cases affecting clerks in commercial firms. He referred especially to clerks in the Bank of England. It seems that a rule exists at that Bank that any clerk who borrows money shall be immediately dismissed. A certain money-lender having discovered this, lent money to a clerk who borrowed from him, and brought pressure to bear upon him to borrow a second time by threatening to inform the Bank authorities. This represents one of many cases showing how money-lenders obtain power over their unfortunate clients. As will be seen from the evidence taken before the Committee in 1897, a witness, who was a money-lender was called before the Committee, and the following letter addressed by him to a clerk in the Bank of England was placed in his hands—As you will probably be taking your holiday before long, it may be convenient to anticipate your salary for a short time. I am prepared to advance you £10 or £20, or more, according to your position and requirements, on your postdated cheques, at the moderate interest of 2s. 6d. per month for each £5. I do not think you will meet with easier terms. Having already a connection amongst gentlemen in the Bank of England, I am perfectly acquainted with the rules and regulations. Your transactions will be known only to myself, as I keep my own books, and am not a professional moneylender.The witness admitted that he knew the clerks were liable to instant dismissal if they borrowed money, and that he had in one case threatened to 'inform the Bank directors, but had never done so. Now, my Lords, would it not be fair for a Court of Equity to say that where pressure of this kind is brought to bear it is a hard and unconscionable bargain? Can anyone object to a Court saying that a man shall be relieved from the terms of a contract which ho had no power to refuse to enter into? It is on such a principle that this Bill has been drawn. These are the general principles under which this interference with contract is placed before you; it is not a new, but an old doctrine. It is only slightly advanced in its operation, but it deals with an evil greater, I believe, 930 than any evil of a like kind that has ever been dealt with by similar legislation. Years ago one of the most astute of our judges, writing on the subject of moneylenders, said that most cruel actions were constantly brought to enforce extortionate demands—actions in which the law, instead of being the handmaid of justice, was really prostituted and made an accomplice in the perpetration of a most iniquitous and cruel robbery. That was written by Mr. Justice Byles 50 years ago, and since then this system of money-lending which he thus described has increased to an enormous extent. The House may not be aware that this country is mapped out into different areas, in which the members of the money-lending fraternity are in the habit of dealing. They make inquiries as to the circumstances of an intending borrower; if he has any expectancy, and what means his family have to save him from disgrace. Then comes an appeal to a person who perhaps does not really wish to borrow; then the yielding to the temptation to borrow thus offered; and so the borrower is led on to his certain ruin. It is said there are cases in which borrowing money has been beneficial to the borrower. But such cases are few compared with the cases in which the borrowers have been ruined. Sir George Lewis, a solicitor of great experience, says that for 40 years he has been acting for men who lent and borrowed money, and he has never known a single instance in which the borrower has benefited. One of our most experienced county court judges says that a borrower who has little necessity to borrow often yields to temptations held out to him by a money-lender: he cannot meet the first demand; has to borrow again; then comes an aggregation of claims upon him; and, to meet these claims, betting and Stock Exchange gambling is resorted to, which only ends in failure, and, as a last resort, comes embezzlement or theft, and perfect ruin ensues. There may be some inconvenience to men in not obtaining the loan they desire. It may drive them to the extremity of the bankruptcy court, but much better begin in the bankruptcy court than end in goal. There are one or two other matters of general interest to those affected by the 931 Bill. I admit we ought to be careful in this legislation not to inconvenience the public who may wish to borrow legitimately, or to interfere with that portion of the trade of the country which is carried on by passing money from hand to hand. I have had a good many suggestions made to me by those who support the Bill. They ask that the Bill shall go further and deal with bills of sale. I cannot agree to that. Bills of sale are of general interest apart from professional money-lending. The alteration as to bills of sale may be desirable, but it must be done by another Bill. Now, there are those who think a good many people will be deterred from availing themselves of the benefit of the Act by fear of exposure. It is suggested that application to set aside "hard and unconscionable" bargains by money-lenders should be heard in camera. But all that is deterrent in the Bill can only be obtained by publicity. The very principle of the Bill requires that proceedings under it should be in public. If we allowed the proceedings to be in private—a practice never allowed by our law except in the interests of public decency—we should deprive the law of half its force, and establish an objectionable precedent. My noble and learned Friend on the Woolsack, the Lord Chancellor, authorises me to say that in the interests of justice he could not consent to the cases under the Bill being heard in private. If they were heard in that way the public would never know what the law, as laid down in the courts, was. Then, there are certain persons and institutions lending money to whose interest I think we ought to be careful. I should call them legitimate money-lenders, and I do not wish that they should be interfered with in carrying on a business which may be beneficial to the community. It is said that the Bill, as drawn, is retrospective in its character, and that contracts entered into before the Bill was passed will, by the Bill, be subjected to a new condition of things. There is some force in that, and I am inclined to suggest that the Bill should not be retrospective in its character, and should only apply to contracts made after it has been passed. As to clause 2, there are a class of money-lenders who object to the limit of 10 per cent. I put in that limit, not for the purpose of deal- 932 ing with the objectionable money-lender, but for the purpose of protecting the legitimate trader. I thought that would give security to men who were carrying on a fair commercial business by putting some limitation upon the jurisdiction of our courts. On reflection I do not think it would be advisable to leave out some limit, but at the same time I am disposed to consider fully the position of the objectors who think that the courts would take 10 per cent, as a guide that borrowers should pay no more. That is not the intention of those who are promoting the Bill. I think that in many cases 10 per cent, is not sufficient. In the cases of many of the mutual societies who carry on the business of lenders in good faith, and some of the traders who form federated societies, 10 per cent, would scarcely be a sufficient return. Suppose £1 or £2 was lent for a month, that rate of percentage per annum would amount to so little that it would not compensate a man for carrying on his business. The risk for lending for one month and six months is very much the same, and, therefore, the question of permitting the charging of a larger amount of interest is a fair one for consideration by your Lordships. An argument used against the Bill is that we are allowing professional moneylenders to take a sum which may be 10 per cent, only, whilst we allow pawnbrokers to take 25 per cent. In one sense that is correct, and in another sense it is not. It may not be known to all your Lordships that a pawnbroker is not a pawnbroker if he deals with loans beyond £10. The Statute of 1872 allows a pawnbroker on small sums to take a percentage of 25 per cent., but if he lends £20, for instance, he is like any other money-lender except that he has in his possession a certain pledge, and he will not take it into his possession unless it is worth more than the loan. In that respect he is in a better position than the ordinary money-lender. The Bill provides that if a pawnbroker chooses to become a money-lender he must be subject to the law, whatever it is, and I cannot, for the moment, see any reason for drawing any distinction in favour of the pawnbroker. There are a great number of very small matters with which I do not wish to deal now. The Bill has been drawn, not 933 in mere caprice or to satisfy any mere popular demand, but upon evidence given by experienced judges who have themselves asserted that this principle is the only remedy they know of for the evils which have constantly been brought before them. The result of what we wish to do is in force now in an illogical manner. The money-lender presents his case before the county court judge. There is no defence, and the judge administers the law by saying, "Here is a claim for, say, £40 or £50; I give judgment for the plaintiff, and order payment at the rate of 6d. per month." This would mean that it would take 120 years before the debt was paid. A course forced on the judges is to refuse to become the agents of enforcing contracts which are harsh and unconscionable; and they apply a scarcely logical remedy in order that they may arrive at an end which they have in mind. It is because there is no proper remedy now in force under our law for the evils which exist that the Bill has been introduced, and I trust it will pass through both Houses of Parliament.
§ *VISCOUNT KNUTSFORD
My Lords, the noble and learned Lord has stated that his desire is to aim at harsh and unconscionable bargains, and to have only such contracts reopened. I suggest that some words to that effect should be inserted in clause 2. I am aware that the preamble states that—Where as certain persons trading as, and known by the name of, money-lenders carry on their business of lending money by deceptive methods, and inflict by harsh and unconscionable bargains great injury upon those who borrow from them;but the preamble is not binding on the judges or those who administer the law. It is, as has been said, only the door to the Act. As the Bill now stands, if the interest charged exceeds 10 per cent., the contract can be reopened whether the bargain is harsh and unconscionable or not. This law is to be administered not only by judges of the High Court, but by County Court judges also, and it is to be feared, unless words are inserted in section 2 to confine the power of reopening contracts to hard and unconscionable bargains, that that power may be used wrongfully in cases where a judge has 934 a strong, though not unnatural, bias against money-lenders. I think some words should be inserted in the operative part of the Bill.
§ Question put, and agreed to.
§ Bill read a second time, and committed to a Committee of the Whole House.