§ 3.40 p.m.
§ Order of the Day for the House to be put into Committee read.
§ Moved, That the House do now resolve itself into Committee.—(Lord Drumalbyn.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD MERTHYR in the Chair.]
§ Clause 1 agreed to.
§ Clause 2:
§ Requirements relating to hire-purchase agreements and credit-sale agreements
§ (2) The Board of Trade may by regulations provide that in any document which constitutes a hire-purchase agreement to which the principal Act applies, or constitutes a credit-sale agreement to which that Act applies under which the total purchase price exceeds £20, the signature of the hirer or buyer shall be inserted in a space marked in such manner, and accompanied in the document by such words, as may be specified in the regulations; and the regulations may include provision as to the size and colour of the lettering of those words and as to their location in relation to the space in which the signature is inserted.
§ LORD SHEPHERD moved, in subsection (2), after "buyer" to insert: "and the date of affixing same". The noble Lord said: The Deputy Leader 716 of the House, Lord Blakenham, in his speech last night spoke about the ponderous machinery of Parliament and wondered whether some new method could be devised to deal with what may be regarded as non-controversial Bills. This Bill received a warm welcome from every quarter of the House, yet to-day, on the first day of the Committee stage, we are confronted with 105 Amendments. I think the Government will accept that all these Amendments have been tabled, not in any sense of seeking to make Party points, but in an honest endeavour to improve the Bill, and if there is to be any consideration about how Bills of this nature could be dealt with in Committee I should hope that nothing would be done that would prevent a wide range of Members of this House from being able to take part from the initial stage.
§ We have had some difficulty, in view of the time, in considering this Bill. The House will know that there are only two Amendments regarding the Scottish provisions, and both are from the Government. I think that the House may have to consider the Scottish part on Report stage when some of us have had an opportunity of consulting with Scottish lawyers. T hope that the Government in this Committee stage will approach it in the same spirit that we do, of meeting points that are genuinely made. I think that the Committee must also appreciate that we are trying to improve the Bill in such a way as to ensure, for the sake of those people who undertake hire-purchase agreements and who normally have very little knowledge of the law, or even of their rights, as the Molony Commission reported, that the terms of the Bill will be perfectly clear and understood, not only to the hirer but also to the hire-purchase company.
§ The first Amendment which I move might well appear to any Member of the House as a perfectly elementary requirement, but I was surprised to find the other day when looking at a hire-purchase agreement that in the instructions to the hirer for the completion of the proposal form it was stated that in no circumstances should he put the date of his signature on the proposal. I think the Committee should appreciate the effect of Clause 2 on the principal Act. Where in the past a note or memorandum had to be delivered within seven days to 717 the hirer, Clause 2 removes the words "a note or memorandum" and inserts the word "agreement". It would, therefore, appear—and I have given a great deal of thought to this matter—that Clause 2 requires that a hire-purchase company, the owner, should return what is called in the Bill the "requisite copy", or, in the principal Act, the "copy" to the hirer within seven days. If there is a failure to deliver such a document signed by the owner or the seller, then the contract will be void—although I am not sure that the hirer could not proceed against the hire-purchase company for a breach of contract. This seven-day period becomes very important: it is an essential part, I believe, of Clause 2. The only way in which we can ascertain when the seven-day period commenced is obviously the date of the signature of the prospective hirer.
§ If one were to look at a number of these hire-purchase agreements one would see that the dates are often put in a distant corner and that they are not the dates of the signatures of the prospective hirers but merely the dates of the agreements. I would stress that the date I wish to insert is not the date of the agreement; it is the date on which the hirer or buyer signs the agreement and puts into effect the first stage of the agreement. It means that seven days hence from that day the hire-purchase company must (because of the Amendment in Clause 2) pass the "requisite copy" or the "copy" to the hirer. I believe that this date is essential in the agreement. I beg to move.
Page 2, Line 34, after ("buyer") insert ("and the date of affixing same").—(Lord Shepherd.)
§ BARONESS ELLIOT OF HARWOOD
I should like to support this Amendment. I do not need to add anything to what the noble Lord, Lord Shepherd, has said except to say that I think it is very important that in all these transactions we should have as much accurate information as possible and that if someone is signing a document it is essential that the date on which that document is signed is put on the paper.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD DRUMALBYN)
I would agree very much with what the 718 noble Lord, Lord Shepherd, said in his opening remarks. I, personally, regard this as entirely a non-controversial Bill, and certainly not in a Party sense. I would also agree with the noble Lord that the object of the Bill in many ways is to give as much certainty with as much simplicity to the hirer. Where I do not agree with him in this particular case is that the date of the signature of the hirer is particularly relevant to the protection of the hirer.
If the noble Lord will look at Section 2(2)(d) of the principal Act he will see that one of the requirements specified is that a copy of the note or memorandum is delivered or sent to the hirer within seven days of the making of the agreement. It is not within seven days of the signature by the hirer. It may be in certain cases that the agremeent comes into force right away; that is to say, that the hirer and the owner sign simultaneously. I believe that is very much the exception in hire-purchase transactions and that in the normal way the hirer makes a proposal or offer, signs his name on the document, which is then taken or sent away to the finance house, and the finance house in due course appends its signature. It is when the finance house signs that you have an agreement; and it is seven days from that time which is the relevant date so far as the passing of the agreement is concerned. I would doubt, therefore, whether there is any great value in the hirer being required to append the date to his signature. From what the noble Lord has said so far—and I am quite prepared to listen to further argument—I really see no advantage to be gained from prescribing its inclusion. In fact, it might even lead to confusion.
§ LORD SHEPHERD
I am rather disappointed that the words I delivered to the noble Lord yesterday have not borne more fruit because it is rather difficult to argue on legislation which is by reference back, particularly to convince the House, let alone convince the Minister. I have made very careful enquiries and I should like to say this to the Minister. Clause 2 amends Section 2 of the principal Act. I think he will agree to that effect. Clause 2 removes from Section 2(2)(a), (b), (c) and (d) the words "note or memorandum". I hope 719 the noble Lord is with me so far. Therefore, (a) would read that the hire-purchase agreement would not be enforceable against the hirer or guarantor until—and the words would now read, in view of the Amendment:the agreement is made and signed by the hirer and by and on behalf of all other parties to the agreement".In other words, there are two signatures to the agreement. It is to me quite clear that by the removal of the words "note or memorandum" and the inclusion of the word "agreement" we are now talking about a hire-purchase agreement.
If the noble Lord will also consider paragraph (d), he will see that we are removing the same words and it would now read:A copy of the agreement is sent by post to the hirer within seven days of the making of the agreement".I would have assumed, and I have taken considerable advice upon it, that the effect of Clause 2 of the Bill in amending Section 2 of the principal Act means that where the prospective hirer or buyer has to sign a proposal form—and I have one in front of me, one which is an orginal and one marked "copy"—the hirer signs the original and also the copy. In practice these documents go to the hire-purchase company and the copy which is signed, as now to be required in the principal Act, is then signed by the hire-purchase company. It is said in Clause 3(5) that the requisite copy should be signed. In fact the words "seven days" appear in Clause 4, so that it must be signed and delivered to the prospective hirer within seven days. I believe, and all the advice I can receive shows, that this particular document, this copy which has been signed by the prospective hirer and by the hire-purchase company, is in fact the contract, and this is the contract on which all hire-purchase companies operate. I am quite convinced that by this seven-day period which the Bill requires we clearly have the seven days established.
I would ask the noble Lord to consider very carefully the various points that I have raised. I will not press the Amendment because I know he is not a lawyer. Nor am I, but I have taken advice, and I am quite satisfied that the 720 copy, referred to in the principal Act, which has to be delivered by the owner or seller within 7 days is in fact the contract. I hope the noble Lord will undertake to take advice on this matter, and if he will do so I am quite prepared to leave it at that and raise the matter at Report stage.
§ LORD CHORLEY
Whatever the legal position is, surely the noble Baroness who supported this Amendment is quite right in saying that the more precision we get about these documents the better, and I should have said that clearly the date is very relevant from that point of view. It is a point the Minister did not attempt to answer and it seems to me just as important as the point my noble friend has argued.
§ LORD DRUMALBYN
I am very grateful to the noble Lord for the way in which he has presented this. He and I had some very useful discussions yesterday. Apparently he thought he had convinced me while I thought I had convinced him. After the discussions I took further advice on this matter. I am bound to say I thought his entire argument in support of his Amendment showed that the Amendment was not necessary, because it is the date of the signature of the finance house that normally constitutes the agreement. There is no requirement at all that the finance house should sign within a certain period after the signature by the hirer. The finance house does not need to sign the following day, or within a week, or anything like that. Generally speaking, the date on which the hirer signs is not relevant to the contract. I will certainly look at this matter again and take further advice and different advice, if he will be good enough to withdraw the Amendment on this assurance.
§ LORD CHORLEY
May I ask the Minister this question? He has referred to the date of the signing by the finance company as being the important stage, and obviously from the legal point of view it may well be that that is the operative date. I cannot myself see, and I do not remember noticing it when I read the Bill, that the finance company itself is under any obligation to date the signature. Can the Minister elucidate that?
§ LORD DRUMALBYN
The date on which the finance house signs is material because of the obligation that they must send a copy within seven days.
§ LORD DRUMALBYN
That may be so, but it is not what the Amendment says. I will certainly consider that point also. I do not think this has given rise to any great difficulty in the past. All along the position has been that at any rate a memorandum of the agreement would have to be sent within seven days of the completion of the agreement, and there has been no provision that the date should be on the agreement, but I imagine that in most cases the date is put on the agreement.
§ LORD SHEPHERD
I am quite prepared to take the noble Lord's offer to consider this matter again. I also will offer to take even further advice. I do not quite know where I can go for it—perhaps to my noble friend Lord Gardiner. Perhaps even the noble Lord would accept his advice. In those circumstances, I do not wish to delay the Committee, and I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
LORD PEDDIE moved, in subsection (2), to leave out all words after "and as to" and to insert:
any other terms or statements contained in the document".
§ The noble Lord said: I would echo the expression of my noble friend that this is a Bill that has no great element of political controversy and is one which in principle is welcome by this side of the Committee. Therefore, I am sure the noble Lord opposite should have very little difficulty during the course of this Committee stage, though I am not greatly heartened by the reception of the first Amendment. I am quite certain the majority—perhaps not all, but the majority—of the Amendments are calculated to strengthen and improve the Bill.722
§ I am moving Amendment No. 2, and the purpose of this Amendment is to enable the Board of Trade to regulate the size and colour of the lettering of the whole of the agreement, or the more important terms within the agreement, such as those of repossession, minimum payment, exclusion clauses and the rights of the hirer. It is not suggested that acceptance of the Amendment would automatically ensure that every hirer or buyer would read the agreement, but it would remove many of the grounds on which some agreements are commonly criticised, particularly by the courts. Furthermore, even if the more intelligent consumer is deterred from reading the agreement in minute lettering, it is quite likely that the acceptance of this Amendment, giving greater power than is already laid down in the Bill, to put important sections of that agreement in larger type, will ensure that the agreement is read.
§ Section 2 of the principal Act, as amended by Clause 2(1) of the Bill, already requires that certain information shall be set out in the agreement at least as prominently as the rest of the contents of the agreement. Details of the information that has to be set out in the agreement are indicated in the Schedule to the 1938 Act, and relate to the right of the hirer to terminate the agreement and the restriction of the owner's right to recover goods. This Amendment goes a little further and would give power to the Board of Trade to underline and make as clear as possible all the essential elements within an agreement, so that they can be clearly recognised, if not understood, by the signatory to the agreement. I know there has been a great deal of criticism in the past of certain agreements which are produced in almost minute lettering. Indeed, say, the Gas Board. This is regrettable, guilty in that regard, particularly, I may some of the nationalised Boards are although no one would criticise the Gas Board in the sense of their using that lettering in order to mislead the consumer. At least this Amendment gives to the Board of Trade the opportunity to make much more clearly understood any agreement that is signed by a consumer. 1 beg to move.723
Page 2, line 38, leave out from ("to") to end of line 40 and insert the said new words.—(Lord Peddie.)
§ 4.12 p.m.
§ LORD DRUMALBYN
The purpose of subsection (2), to which this Amendment refers, is to make regulations about the size and colouring of the warning words and about their location in regard to the space or box in which the hirer is to sign the document. I am not quite certain whether the noble Lord, Lord Peddie, quite understands what the effect of his Amendment would be. As at present drafted, the Bill empowers the Board of Trade to include in its regulations provisions about the size and colouring of the words intended to warn the prospective hirer of what he is doing—namely, that he is signing a hire-purchase agreement—and also about their location in regard to the space in which the hirer has to sign.
The Amendment before your Lordships first of all deletes the power to prescribe the location of the warning words. The noble Lord may not think that is important, but he did not actually say that. We think that this power is necessary; it will enable us to ensure that the words are so placed in the document that the hirer is bound to see them when he is about to sign. The second thing that the Amendment would do is to extend the Board's power to make regulations to cover other terms or statements contained in the agreement. I understood from the noble Lord that what he had in mind particularly was the size of the lettering. It is perhaps relevant that subsection (2)(c) of Section 2 prescribes, as one of the requirements specified, that the note or memorandum that is now the contract contains a notice which is at least as prominent as the rest of the contents of the note or memorandum, the purpose being that the words shall not be tucked away in small print in a part of the contract where one would not be likely to read them, and that that notice shall be in the terms prescribed in the Schedule to the Act. We are not aware of any further points to which attention should be drawn in this way.
I suggest to the Committee that there are dangers in prescribing that certain parts of the contract should be in larger lettering than others, because inevitably 724 this would be likely to be the only part of the contract that would be read at all. You would be emphasising that in the view of the Government or of Parliament, certain parts of the contract were more important than other parts. We do not really see any need for this power. We are quite prepared to look into the matter further to see whether there would be any usefulness to be gained from it; but in any case we should like to keep the words that the Amendment seeks to delete.
§ LORD PEDDIE
I thank the noble Lord for that comment. I would emphasise that the purpose of this Amendment is merely to widen and extend the permissive powers of the Board of Trade to make regulations to ensure that the lettering and the colouring of the lettering is of such a character as to make the contract quite clear to the consumer, and that there is brought to his attention the more important parts of the agreement. But if the noble Lord is prepared to examine the whole matter, I am perfectly prepared to withdraw the Amendment.
§ LORD CHORLEY
May I add to what my noble friend has said that this Amendment is intended to give to the Board of Trade the possibility of using powers which it does not possess under the present Act? We cannot have an Act like this except at substantially long intervals and it is obvious that if it is found that further powers are needed by the Board of Trade in this connection it will be difficult to get an amending Act to provide them, and when the Board of Trade want to use these powers they will not have them. I should have thought that the case for giving the Board of Trade ample power while we are dealing with this Bill at the present time was overwhelming. I hope that the noble Lord will look at this point again in a sympathetic manner.
Bearing in mind the type of persons we are seeking to guard against abuses in this matter, I believe that the Government's method of doing it is probably the best. We have to remember that a great many of these people have been turned out from their schools literally without being able to read more than the simplest words. For that reason, to call attention to some particular portion of a complicated legal 725 document is, to my mind, of no greater avail than merely to call attention to the fact that they are signing an important document, which may lead them to ask somebody to tell them about it and what it all means. I do not believe Lord Peddie's Amendment would further the cause which we all have at heart.
§ LORD CHORLEY
Is the noble Lord who has just resumed his seat aware that on numerous occasions judges have pointed out how in these documents most important clauses are to be found in small print, such as one cannot read without a magnifying glass; and is not the object of this clause to see that that sort of thing is not continued in future?
§ LORD DRUMALBYN
Perhaps I may help by saying that the real object of this clause is to carry out a recommendation of the Molony Committee, to the effect that the attention of the hirer should be drawn, in no uncertain fashion, to the fact that he is signing a hire-purchase agreement. That is the whole point of the box, and of the special prominence given to the box. I think it would be a pity to neutralise that in any way. We are not at all convinced that we need further powers; but I would draw attention to the fact that the powers here suggested are very wide indeed—they would be tantamount almost to providing hire-purchase safeguards by regulation. They go far. But, as I have said, we will look at this matter in the course of the re-examination of the Bill.
§ LORD SILKIN
This is a rather important question of principle which the noble Lord has raised and which the noble Lord, Lord Hawke, dealt with—namely, is it right at all to stress certain parts of a hire-purchase agreement which are of particular importance to the hirer? I quite agree that it is of the first importance to draw the attention of the hirer to the fact that he is signing an agreement at all. That is accepted. But in addition, there are some rather dangerous clauses to which, in my view, the attention of the hirer ought to be drawn. If the noble Lord is saying that that would be wrong, because it detracts from the agreement as a whole by drawing attention to one part, in that the hirer is more or less discouraged from reading the rest, then I think that is a mistake. The Board of Trade ought to have the power, where they think it 726 right, to draw to the attention of the hirer not only the fact that he is signing an agreement, but the fact that certain clauses specially require his attention. This is the aspect which I hope the noble Lord will look into. It is really a difference of principle.
§ LORD SHEPHERD
I support my noble friend in this matter. I have a hire-purchase agreement in front of me and when I look at the list of terms—and I have fairly good eyesight—it is just a mass of blue. Unless one reads it very carefully, it is impossible to segregate the different paragraphs. In fact, there is one here which I do not suppose many people appreciate:The hirer's acceptance of delivery of goods shall be conclusive that he has examined the goods and found them to be in complete good order and condition.I wonder how many people are aware of that fact. May I put forward one suggestion? At the present moment the signatures of the hirer and the owner appear under a form of schedule setting out all the figures. The terms relating to the agreement, which perhaps are the most important, are usually on the back of the form. I wonder whether, in order to draw the hirer's attention to the fact that the terms exist, there should not be a provision that a signature or initial to the terms should be a requirement of the agreement. Would the noble Lord consider that possibility?
§ LORD DRUMALBYN
I am most willing to consider all suggestions put forward and I will certainly consider that one. I feel, however, that this has been quite a useful debate, and, if your Lordships agree, we might perhaps, on the assurances that have been given, leave the matter there.
§ LORD PEDDIE
The noble Lord opposite made considerable play of the question of power to indicate the location of the particular features of the agreement. I appreciate that the location is important, but I would express my regret that there has not been a more willing acceptance of this Amendment. All that is sought is the right and power on the part of the Board of Trade, if they think it necessary, to make it clear to the person signing the document that all the essential features which are in his interest are brought 727 to his notice. That is all that is requested in this Amendment—nothing more—and I am disappointed that there has not been a more ready acceptance of it.
§ LORD DRUMALBYN
I am grateful to the noble Lord for making his intention clear. As I have explained to the Committee, the actual wording of his Amendment gives very much wider powers that the powers he apparently has in mind, and this has been one of the difficulties. But this debate has been useful in clarifying his intention.
§ Amendment, by leave, withdrawn.
§ 4.15 p.m.
LORD PEDDIE moved to add to the clause:
(5) Any power of the court—
§ The noble Lord said: This is a simple and straightforward Amendment, the purpose of which is to restrict the exercise of the court's discretion as in Clause 4(5) of the Bill. Under the 1938 Act the court is given discretion where it was felt the non-supply of all relevant information did not prejudice the hirer or the buyer. The purpose of this Amendment, in my opinion, makes for greater protection of the consumer. It ensures that all relevant documents are completed and that the copy of the agreement should be sent within seven days. If that period is exceeded the court can exercise its discretion. I beg to move.
Page 3, line 13, at end insert the said subsection (5).—(Lord Peddie.)
§ LORD DRUMALBYN
The noble Lord has explained quite accurately the purpose and effect of the Amendment. As he says, the court cannot dispense with the requirement to send or deliver a copy of the hire-purchase or credit-sale agreement unless the court is satisfied that the hirer or buyer has not been prejudiced. As I understood the way in 728 which he moved this Amendment, his purpose was, to use the Scottish expression, "to mak' siccar". It is true that a similar provision to that contained in the Amendment is provided in Clause 4(5) of the Bill in those cases to which the cooling-off period applies. But here the hirer's knowledge of his right to cancel (that is in the cooling-off cases) may depend on the receipt of the statutory copy, and the termination of the period during which he may cancel the agreement depends on the receipt of that copy. That was the reason it was felt necessary to make it absolutely clear that in no circumstances could the rights of the hirer or buyer in the case of cooling-off be diminished. In the case with which this Amendment deals no specific rights flow from the delivery of a copy of the agreement, and I am advised that in the 25 years since the 1938 Act was passed the Department has no knowledge of any abuse which would be remedied by the Amendment. It therefore seems that the Amendment is unnecessary, and, with that explanation, I hope that the noble Lord will be willing and prepared to withdraw it.
§ LORD CHORLEY
Would the noble Lord look at this point again? I appreciate the importance of what he said about its not having given rise to any particular difficulty in the past, but the situation is a little changed under the arrangements made in the new Bill—and I think particularly by the existence of this provision in Clause 4(5) which, as he says, applies to a rather different situation. When these cases are argued in the courts it is very common for the lawyers engaged to argue by analogy, and it seems to me that a case could conceivably be based on the existence of the provision in Clause 4(5) to support an argument that non-delivery of the copy of the agreement could not prejudice the hirer or buyer under a credit-sales agreement. Therefore, it seems to me that, from the point of view of making the position really safe, even if past experience does not suggest that there is any particular difficulty, it would be advisable to insert these words. I hope that the noble Lord, with his legal advisers, will look at the Amendment again in the light of those observations.
§ LORD DRUMALBYN
I hope the noble Lord will acquit me of any discourtesy. I said at an earlier stage that of course I should be very willing to look at any arguments put forward. If he wishes a reply to what he has said, I should have thought that the question of whether in any particular agreement the hirer was prejudiced or not was a question of fact. It would essentially be treated as a question of fact by the court and not as a question of law deriving from the presence of a particular provision in regard to hire-purchase contracts which were not affected by the cooling-off provisions. However, I am quite prepared to look at this, as I will be prepared to look at all other arguments that are put up.
§ LORD PEDDIE
The noble Lord opposite has confirmed the point I made and reminded the House that this same point is made in Clause 4(5) relating to the cooling-off period. So that principle is accepted. I agree, and indeed I ought to have mentioned it, that in the period since 1938 the practice of the court has been such that, by and large, the exercise of discretion has been favourable to the consumer. But that in itself, as my noble friend has just indicated, is no good reason why this Amendment, which in our opinion makes the Bill itself far stronger, should not be accepted. But I am appreciative of what the noble Lord opposite has said—that he is willing to consider this particular point seriously—and we agree to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 2 agreed to.
§ 4.22 p.m.
§ BARONESS BURTON OF COVENTRY moved, after Clause 2 to insert the following new clause:
§ Amendment of Statutory Notice
§ ".—The notice referred to in Section 2(2)(c) of the principal Act shall be amended to read as set forth in Schedule 7A to this Act, and accordingly the said section 2 shall have effect as if for the reference to the Schedule to that Act there were substituted a reference to Schedule 7A of this Act"
The noble Baroness said: If it would be for the pleasure of the Committee, I should very much like the opportunity of speaking to Amendments 4 and 5 together because they are connected. Before doing so, I must declare once
more (I hope for the last time on this Bill) a personal and financial interest, in that I am a director of a firm engaged in the direct selling of domestic appliances; though I think I need not say that that has nothing to do with the remarks that I am making to-day. Most of my remarks will be directed towards Amendment No. 5 and I regret that this has required some three pages of printing. Indeed, all the details set down in this Amendment could be summed up, as your Lordships will know, under the general heading of "True measure of damage." This point I ventured to raise in the House a year ago, on January 31, and again on December 10 last. Without wearying your Lordships I should like if I may, to quote three sentences that I used, referring to the true measure of damage, on December 10, when I said [OFFICIAL REPORT, Vol. 253 (No. 15), col. 1173]:
… considerable sums of money are involved in this, and I think that we, as laymen, might try to find an answer to the problem. I think we all agree that real progress will not be made in this matter of consumer protection unless we are fair to both sides. I am not convinced that what is suggested in the Bill is equitable.
§ Obviously, everyone in this House, on whichever side he sits, is anxious that we shall to-day have an equitable arrangement. I myself have been greatly encouraged by comment and support on this "true measure of damage" clause from many varied quarters. Naturally, the Government, and most of your Lordships, will have seen the excellent article in the Financial Times of January 3 last. In fact—and probably with advantage—I could simply have read this out and let the matter rest; except that, while that would have been a little shorter for your Lordships, I think I ought to do my own work. This is obviously not a Party matter, and in the Second Reading debate I think all the speeches showed quite clearly that this Hire-Purchase Bill was welcomed in all quarters of this House. Our only purpose—and it is a purpose which I have always thought the House of Lords particularly well fitted to perform—is to ensure that the technical and complicated provisions of this Bill achieve the objects in view, and that an equitable, workable and intelligible Bill is the outcome.
§ In these two Amendments, Nos. 4 and 5, I seek to obtain approval less for 731 the precise wording at present set down than for the principle of what has become known as a "true measure of damage" clause. The drafting was necessarily hurried. I felt that on a matter like this it was essential that the Committee had as much notice as possible. We had the intervention of the Christmas Recess, which meant that I and my advisers (because quite obviously, without a Government Department behind me, I could not have done by myself all the work necessary on all the Amendments) were left with only three or four days in which to draft. Your Lordships will notice that no attempt has presently been made to import any part of these new Amendments into the Scottish portions of the Bill. I am sure the Minister will have noted that. If we agree, as I hope we shall, that the "true measure of damage" principle is the correct one, then obviously there will be time enough for those far better qualified than I am to make the consequential Amendments needed.
§ There are many matters of hire-purchase that are controversial. I think there are many matters on which persons of good will, well qualified to judge, may hold different views, and on which traders, finance houses and consumers may feel their interests to be widely opposed. Yet in respect of arriving at the true measure of damage I venture to suggest that I have rarely found so important a matter of principle on which such unanimity of view exists; and I am hoping very much that in your Lordships' Committee to-day that will be borne out.
§ The basic difficulty which my Amendment aims at overcoming is shortly stated. As the Bill stands, a hirer who terminates his contract will always have to pay at least one-half of the hire-purchase price of the goods, quite irrespective of the value of those goods in the hands of the owner. The goods may have depreciated very little or they may have depreciated a great deal, but it makes no difference. As the Minister will know—
§ LORD SHEPHERD
Does my noble friend mean depreciated in the quality sense, or depreciated in the market value?
§ BARONESS BURTON OF COVENTRY
I mean depreciated in the market value. That is the point I was making. As the Minister will know, in paragraph 13 of their memorandum to the Board of Trade, the Council of the Law Society felt that the position I have just outlined was highly unsatisfactory. That memorandum went on to say:Amounts payable under minimum payment clauses seldom represent the owners true loss; in cases where they do it can only be pure coincidence. Frequently the amounts made payable under such clauses are excessive and the court may have no power to grant relief. Even where the Act applies, hardship can result if the hirer exercises his right to determine at an early stage of the transaction. The one half fraction is quite arbitrary; it was imposed at a time when the financial limits were much lower and the margin for injustice was therefore much narrow.On December 10 (col. 1173) I quoted the Council of the Law Society as saying:that in all cases where the owner seeks damages against the hirer after the agreement has been terminated, the damages should be confined to his true loss in accordance with the Common Law principle. …The statement went on to say, as the Minister will know, that,if this proposal were adopted the hardship which now arises out of minimum payment clauses … would disappear".The Council had previously set out the Common Law position, and they included this among their recommendations. Their proposal was simply this: that if the contract is determined, the true measure of damage is to be arrived at by taking the unpaid balance of the hire-purchase price and deducting from it: (1) the value of the goods repossessed; (2) any fee payable for the option to purchase; (3) a discount for any acceleration of payment. The Amendment that I am now putting forward goes further than this, however, for, in addition to confining the owner's damages to the actual loss which he suffers, it also provides that any surplus is to be repaid to the hirer, and it provides penalties for failure to do so. So far as I am concerned, I regard that as a most important detail.
Another important difference between the general recommendation of the Law Society (who, I think, felt that the "true measure" provision should be employed in all cases) and the Amendment I now propose is that the proposed new clause 733 restricts it to motor vehicles. I restricted it to motor vehicles in the belief that, since the overwhelming bulk of the business above £300 represents vehicle business, the position in regard to furniture, radio and television can be left as it is, because, as the Law Society put it, when the amounts involved are small the margin for injustice is narrow; and, as I said on December 10, the undoubted simplification of the fixed payment clause makes its adoption worth while.
Here I should like to mention one other provision which, though omitted, I think might have been included in this Amendment. As drafted, the clause makes no provision for a rebate for accelerated repayment. This was omitted, first, owing to the shortness of the time for drafting; and, secondly, due to the length of the additional Amendment that would have been involved, including a further Schedule. But it seems to me that it is important to have that included if we get acceptance of the principle. A rebate provision can be comparatively simply provided, and it should be at a later stage.
I think that, from what I have said up to now, it can be seen that the legal profession believe that the "true measure" principle should be adopted, and I come now to the trade. By "the trade" I mean the Hire-Purchase Trade Association, the Finance Houses' Association and the Industrial Bankers' Association. Each of these has gone on record as supporting the "true measure of damage" principle. The Hire-Purchase Trade Association, in the winter, 1963, issue of its journal, said:With small sums the disadvantages of small inequities are accepted in favour of simplicity, but with large sums a much more accurate system is needed or grave injustice will result".Indeed, they summarised their findings by saying that the short argument was a simple one, and adding:In vehicle transactions, where we are dealing with considerable sums, let the hirer, on the one hand, be bound to pay no more than the actual measure of the owner's loss, and let the owner, on the other hand, be bound to pay to the hirer any monies which he may receive over and above his proper price".I submit that the lawyers approve and the industry approves. What of the consumer? As the Commit- 734 tee knows, this is my overriding concern, and was my overriding concern all the years I was in another place. The National Citizens' Advice Bureaux Committee, while feeling that they had too little experience to assess fully the benefits, commended proposals on these lines to the Board of Trade as being worthy of consideration. The Consumer Council, however—and I am hoping that the noble Baroness, Lady Elliot of Harwood, will say more about this—in the first number of its new publication, Consumer Context, were in no doubt at all on this matter. They stated that the Council agreed with the "true measure of damage" principle, and added—and I quote:It"—that is, the Council—realises that there may be difficulties about putting this into practice without burdening the courts with disputes, but it does not believe that these would be insurmountable".I am sure they are right, and I need hardly say how glad I am to have their support.
As I said at the beginning, a number of quite independent people have expressed similar views, and whilst obviously I could quote from a number of these I will content myself with two. The first I have mentioned already. As recently as January 3, "Lombard", writing in the Financial Times under the heading, "How to Reform the Hire-Purchase Reform Bill", said:If the Government has the true interests of the consumer truly at heart, it would listen most attentively to the case for this modification"—"this modification" being (and I quote "Lombard")a true measure of damages machinery for use in terminated motor vehicle transactions"."Lombard" went on to refer to the Molony Committee, which had thrown cold water on the idea; but that, I think, was not quite right. As the Minister will recollect, Molony described this "true measure of damage" as providing, in theory, a more equitable result, although fearing that it would lead to disputes as to whether the true value had been obtained.
"Lombard's" view of this, which happens to be mine—I hope it is also the Minister's—was that, since two wrongs do not make a right, it might be 735 better to run the risk of this happening than to deprive ourselves of the great advantage of getting this sensible arrangement operating; and pointed out that, in reality, there would be no great difficulty in removing scope for disputes. My noble friend Lord Chorley, in his speech on Second Reading, made very much the same comment [OFFICIAL REPORT, Vol. 253 (No. 15), cols. 1182 and 1183] when he said he felt he must say that the Molony Committee's remarks on this point were rather superficial—and I see the Minister remembers that. My noble friend Lord Chorley also said that he found himself in entire agreement with what I myself had said about the need for a "true measure of damage" clause.
Finally, I would refer to the view of the learned author of an article entitled, "Hire-Purchase, Hardships and Hopes", in the Cambridge Law Journal for April, 1962, when Mr. J. W. A. Thornley, at page 57, said that he felt that if the Act were to be extended, as is now the case,the restriction of minimum payments to half the hire-purchase price, whilst it will apply to most of the vehicle transactions on which disputes have arisen in the courts, would still be arbitrary and would often cause hardships to one party or the other".Mr. Thornley felt that a long-term solution would be to follow the pattern of the Australian legislation, with which noble Lords will be more familiar, I am sure, than I am. But apparently this legislation in Australia largely equates the hirer's position with that of a mortgagor, and he went on to say:… on premature determination … by either party the owner should never be entitled to recover or retain more than the full hire-purchase price plus the costs of retaking, repairing and reselling the goods less their resale value, all sums already paid and an appropriate rebate calculated on a fixed statutory basis.I have given the opinion of a learned author like that because it carries far more weight than mine.
Australia, at least, has been able to provide a true measure of damage and has not considered, simply because some difficulties might arise in providing this, that justice should not be done. I think I am correct in saying that on the Second Reading debate in your Lordships' House all Members present who referred to a "true measure of damage" clause were in favour of importing one. 736 I have tried hard to find some contrary expression of view in this matter of a true measure of damage, but I have not been able to find any individuals or groups who disagree with the need for a true measure of damage. All I could find was the comments of the Council on Consumer Protection, with which I have already dealt; but even they feel that justice is on the side of the true measure of damage. The point about the Molonoy Committee finding which I regretted was their statement that justice was to be denied because it might lead to disputes. I do not think this is a very good reason, and in any case I would point out—unnecessarily, I know, to the Minister—that Molony was considering only half the clause, since he made no mention of the need of the return of monies to a hirer, which is an essential element of the clause now proposed.
The Committee have been most patient, and it is not my intention to weary your Lordships unduly. I think we all feel that this is an important matter. I have here the details of the actual Amendment that I am moving; but I think that all noble Lords will understand (I hope that I have made it quite clear) that what I am striving to secure the approval of the Committee for in this case is a matter of principle and not actual wording. It is always difficult for us non-legal persons to speak on legal matters, and I am quite sure that I could be faulted on many of these. I am well aware and conscious of these defects, and I know that I speak as a layman; but I have worked very hard on it and I am sure the Committee will overlook these faults of wording. I ask the Committee to accept the principle commended by the Law Society: that the imposition of a fixed-depreciation clause is highly unsatisfactory and, furthermore, as emphasised by the Hire-Purchase Trade Association, its retention in the case of motor vehicles will lead to grave injustice both to the owner and to the consumer. I hope that the Minister will agree with what Lombard said:If the Government have the interests of consumers truly at heart they too will accept the need for giving effect to it.I beg to move.
After Clause 2, insert the said new clause.—(Baroness Burton of Coventry.)
§ 4.45 p.m.
§ BARONESS ELLIOT OF HARWOOD
I think we have listened with great interest to the noble Baroness's brilliant exposition of the extremely difficult matter, and I rise to support the principle of the "true measure of damage" clause in place of the 50 per cent. rule which is in the principal Act. I do so for various reasons. With many of the reasons given by the noble Baroness I would agree; but I have one or two others. When the 50 per cent. rule was introduced, it applied only to vehicles not exceeding £50 in value. Its purpose was suited to conditions existing a quarter of a century ago, but now that under this Bill the ceiling for vehicles is raised to £2,000 the inequity in such a rigid measure will be greatly amplified. I support the principle of this measure although I realise, as does the noble Baroness who moved the Amendment, that the application will need to be very carefully scrutinised to make sure that the customer's rights are not jeopardised.
First, where an agreement is terminated the method of calculating the settlement figure between the owner and the customer does not, under her new Clause 4A(1)(b), allow for a rebate due to the customer. He should not be liable for the full hire-purchase price, which is due only at the end of the period of hire, if the agreement is terminated before that time. This is recognised by the courts when an allowance is made for acceleration of payment. Many members of the trade do make such an allowance but there are cases where it has not been done, and for this reason it should be given statutory force. This is well known to any court and I am sure the customer's right is recognised.
Secondly, there is the vexed question of fairly estimating the true value of a secondhand vehicle which is an assumption upon which the "true estimate" formula rests. It has been said that this can be ascertained from the published guide to secondhand prices; but this is not, of course, available to the customer. We are in a position where one member of the trade sells to another member of the trade and the customer is asked to accept those terms. The danger, I believe, is that the customer may feel hardship, yet will accept settlement on 738 these lines because he does not wish to incur the expense of going to court. He may be induced to believe that as a true measure has been applied he has no further remedy. It is true that the new Clause 4C of the Amendment gives the customer the option to sell privately if he can get a price equal to the total debt. There is no reason why the hirer should not retain the right to sell privately at a price equal to or exceeding the price at which the dealer proposes to sell it. At present one cannot resist the conclusion that some sections of the trade—I think a very small part—are willing to accept a very low figure for the sale of repossessed vehicles and the unpaid balance is passed on to the customer. I have two cases which came into my office, and I should like to mention them.
First, a motor-cycle taken on hire purchase at a cash price of £275 was re-tendered to the dealer three days later without being used. It was legally repossessed five months later, when the resale price, obtained by the owner was £80. The customer had also paid a total of £55. That is a very formidable figure. The second case relates to a motor car that was taken on hire-purchase at a cash price of £562 and was repossessed three years later, when the owner quoted a resale price of £69 13s. The customer had paid a total of £561. These may be exceptional cases, but they are unhappy exceptions and underline the difficulties of settling a fair value on secondhand vehicles at the time of their surrender. Resale by the owner may take place later, after the vehicle has been stored in conditions over which the customer has no control. Examination by a valuer at the time of the surrender is perhaps the only sure method. Without this a court may be at a loss for evidence of the vehicle's condition at the time of surrender. If the customer were free to compete with the owner, any doubts that he might have about the genuineness of the owner's resale figure would be overcome. I therefore urge, in supporting the Amendment of the noble Baroness, that it is very necessary to examine carefully the practical application of the true measure of damage. But that it would be in the interests not only of the hirer but also of the consumer is, I believe, true.
§ LORD MERRIVALE
I would add a few words in support of the Amendment moved by the noble Baroness, Lady Burton of Coventry, on this true measure of damage. I also feel that, as the law stands at the moment under the 1938 Act, a situation can well arise which is unfair either to the hirer or to the owner. For instance, if the hirer has returned the goods after a very few payments, the depreciation on them may be less than the 50 per cent. he has to pay. If the hirer has to return goods when the payments are almost completed, then the goods may well be worth more than the amount outstanding. On the other hand, if half the payments have been made, it is quite likely that the goods will be worth less than half their price when new; so that in this case it is the owner who loses, whilst in the two previous cases it would be the hirer.
It seems to me that the principle underlying the noble Lady's Amendment is exceedingly sound, ending, as it would, the present unsatisfactory situation, at least so far as motor vehicles are concerned. That is why I regret that her Amendment does not go beyond the scope of motor vehicles to include industrial plant and machinery. I believe that the noble Baroness, if this Amendment were accepted, as we all trust it will be, would not be averse at a later stage to amending it to include industrial plant and machinery. Not only do I hope that my noble friend will be willing to accept the principle of this Amendment, but I also hope that, between now and Report stage, he will be willing to consider favourably an enlargement of its scope. It seems to me that it would only be fair to include industrial plant and machinery, much of which to-day is bought under hire-purchase.
This Amendment is very fair to both parties, the hirer's liability on returning the goods being the difference between the purchase price and the amount paid to date, plus the amount recovered on re-sale. If there is any excess, the hirer gets it. If there is any loss, the hirer has to make good that loss. That seems to me to be fair to all parties. One of the objections of my noble friend Lord Drumalbyn (if I read his remarks on Second Reading aright) would be overcome. The noble Baroness, Lady Elliot 740 of Harwood, referred to the point in the new Clause 4c; that if a hirer thought he could sell goods for more than the owner could, he would now be at liberty to do so. I sincerely hope that my noble friend will accept the principle of this Amendment and also be willing to give careful consideration to the question of incorporating provisions to cover industrial plant and machinery, which would be of great benefit to industry in general.
§ 4.53 p.m.
§ LORD SHEPHERD
I should like to say one or two words to make clear the position of the Opposition on this matter, and I feel that this may be of benefit to the Committee. I congratulate my noble friend Lady Burton of Coventry upon the strength of her case and upon the lucidity with which she explained it. I find it extremely difficult to argue, particularly against one of my noble friends, against the claims of justice and equity; but we are considering legislation which is trying to effect a balance between the hire-purchase companies and the man and woman in the street. If it were possible to devise legislation whereby hire-purchase companies could savagely (I use the word deliberately) go for an individual who takes a car or motor cycle on hire-purchase, with no intention of using the option at the end of the agreement to acquire the vehicle, but only for a matter of a few days or weeks, and then leaves it, with the consequent loss to the hire-purchase company, such legislation would have my full support. But I would remind the Committee that the legislation which we are considering has been devised to protect the person who, through no evil action of his, has run into difficulties with the hire-purchase company.
A hire-purchase company is a business organisation, free to enter into contracts with an individual, just like any other company. I am not aware of any legislation that provides a statutory basis as to what the loss shall be as between one party and another in a commercial operation. Even though our present legislation has this statutory amount of 50 per cent., I question whether we should be right in proceeding to give what hire-purchase companies would perhaps consider more justice to them. In spite of what has been said opposite, I believe that the consequence of what is described as the "true value" would 741 be to place a great imposition upon an individual who has entered into a hire-purchase agreement with the best will and intention to carry out that agreement but, owing to force of circumstances, ill health or something of that kind, becomes in default.
I would go so far as to say that in much of our legislation, particularly that dealing with the recovery by a hire-purchase company of goods where there has been default, assessment by true value would be a direct incitement to a hire-purchase company to recover all types of goods when the hirer was in default, perhaps by only one day. For the first time we should be saying to the hire-purchase company that if they proceeded against a person because he had defaulted before paying one-third, they were guaranteed the true value. At the present moment, even where less than one-third is paid and the hire-purchase company have every right to recover goods, they refrain from doing so because they appreciate what the loss will be to them. They recognise that the individual from whom they may recover the goods is quite unable to make good the damages or even to pay instalments.
I would ask the Committee to consider that what is being defined as justice might well prejudice many people in this country who have undertaken hire-purchase agreements, and particularly those who have paid less than one-third, who have genuinely intended to exercise their option. Because of default by one day—that is all that is needed—the hire-purchase company could exercise their right to recover. I am sure that is not the intention of even my noble friend behind me.
The noble Baroness, Lady Elliot of Harwood, drew our attention, quite rightly, to the problem of finding what is the true value of a vehicle. These vehicles that are sold by hire-purchase companies are not sold on the basis of one vehicle at a time, the best price trying to be obtained either for the company or for the individual involved. They are put into auction, and everyone who is taking part in the auction knows that these are distressed goods. They know that the hire-purchase company has not perhaps even set the price at which they would not be prepared to allow the goods to 742 be sold. I think that in consequence it is found that the whole secondhand value of cars, particularly those in auctions, is depressed. I do not think you would get a true value for that vehicle to the hire-purchase company or to the hirer if you were to adopt the suggestion in the Amendment.
I can see the points put by my noble friend. As I have said, if this could be specifically aimed at those persons who have deliberately set out to defraud a hire-purchase company, it would have my full support. But if you are going to widen and increase the burdens that may fall upon people who have genuinely undertaken a hire-purchase agreement with the intention to take up the option, but because of the force of circumstances have not only had to return the goods but, at the present moment, may have to pay a hit more, then I could not support that. I think if this Amendment were accepted we should impose a greater burden than at present exists.
I would ask my noble friend not to press the Amendment this evening, and this may give us time to think of some way to get at those people who commit what might be called fraud upon hire-purchase companies. I should not like to support an Amendment which would impose a special burden on people who have tried to carry out a hire-purchase agreement but, due to force of circumstances, have failed to do so.
§ 5.4 p.m.
§ LORD CHELMER
I should like to deal with some of the points made by the noble Lord, Lord Shepherd. I think your Lordships would all agree that, although there may be unreasonable hire-purchase companies and unscrupulous hirers, in approaching legislation of this kind one should endeavour to swing the balance a little in favour of the hirer, because he is less well armed to deal with the intricacies of the law. But at that point I think one must depart from the proposition put forward by the noble Lord, Lord Shepherd, because, although the Molony Committee described the £300 limit under the principal Act as working rough justice, it seems to me that once you raise the limit beyond £2,000, then the rough calculation cannot really be just.
Before one approaches this on the limited scale on which we have been 743 dealing with it so far, I think that, at the risk of taking your Lordships down a lawyer's path, we should take some account of the fact that when one is imposing on any form of commercial activity a statutory restriction it should, so far as possible, follow the Common Law. In this particular case, the imposition by Section 4 of the principal Act of a minimum sum recoverable by way of damage for the breach of contract is quite contrary to the Common Law, which provides in the case of other contracts that the expression of a fixed sum of damages which is payable on the breach of a contract is unenforceable as a penalty. Indeed, in the case mentioned by the noble Lord, Lord Chorley, in the Second Reading debate, of Bridge v. Campbell Discount Company, the learned Law Lords there laid down, in an action upon a hire-purchase contract which was outside the Act, being over £300, that a provision in that hire-purchase agreement that the hirer on handing back the motor vehicle should pay two-thirds of the hire-purchase price was unenforceable as a penalty.
So, although the noble Lord, Lord Shepherd, has suggested that this might lead to considerable abuse, in fact for some time since the war, when the upper limit prescribed by the principal Act has really ceased to apply to most motor vehicle transactions, the principles which we are now advancing have been applied by the courts as a matter of Common Law. Indeed, I think it is even more compelling when one understands from the Second Reading debate that there might possibly be, after this Bill became an Act, a review of the whole question of the hypothecation of goods, which the noble Lady mentioned earlier in connection with Australia and credit sales. If we are going to review the whole law in relation to this subject, it seems to me undesirable that we should depart too far from the existing Common Law principles which have been applied in most of these transactions in latter years.
Then, it has been said by noble Lords this afternoon that the 1938 Act has worked well enough. But I think one must bear in mind that when you raise the limit to £2,000 in relation to motor vehicles, which in effect covers virtually all hire-purchase transactions relating to 744 motor vehicles, this is a type of goods which is more susceptible both to depreciation and, as one recently experienced, to changes in Purchase Tax rates, affecting second-hand values of motor vehicles. Whereas in the old days there was a £300 limit, there was probably very little lost or gained by the imposition of this minimum rule. Clearly there will be much greater fluctuations which will cause greater hardship. I think we must also look at the point that the hirer will not return his motor vehicle as a matter of ordinary course.
§ LORD SHEPHERD
Except in the case where the hire-purchase company recovers possession merely because of the default, as I suggested, of one day, where there is less than one-third paid.
§ LORD CHELMER
But I think your Lordships will appreciate that, in practice, this is clearly unlikely to happen. I am endeavouring to speak to your Lordships on the basis of my experience in practising in the law on behalf of both hirers and those who hire out—indeed, in the Bridge case I happened to represent the hirer. One's experience is that clearly the hire-purchase company's interest is to maintain a number of satisfied hirers. The circumstances in which the motor vehicle is returned normally only arise where because of changes in financial circumstances the hirer is unable to maintain his payments—I think that is the greater number—or where he is dissatisfied with the condition or quality of the vehicle he has hired. In both those cases there is obviously the germ of friction. It seems to me, therefore, that if you are facing what is potential litigation between the parties, it is most desirable that the basis upon which that should be decided should be one that is fair and equitable.
The noble Baroness, in moving this Amendment, clearly set out the method which she proposes should be adopted in ascertaining the true measure of damage. It seemed to me that that had a great deal to commend it. The county courts, who would be normally the tribunal to deal with such matters, are well accustomed to assessing values by relation to the information which the noble Baroness, Lady Elliot of Harwood, mentioned. I emphasise the feature which has been introduced of 745 offering the hirer the right of sale, because this seems to me to overcome the undoubted defect—and I note the point made by the noble Lord, Lord Shepherd—in the present system whereby motor vehicles have been sold at prices which possibly did not reflect what one might call the ordinary market value, but represented a value achieved by auction sale.
Finally, I would commend strongly to your Lordships this addition which does not appear in the Amendment, but which was referred to by the noble Baroness when she moved it: that there should be allowance made for those charges which would normally have been received by the hire-purchase company had the agreement run its full course, to which clearly they should not be entitled by reason of the acceleration of repayment. It seems to me that in approaching a Bill of this kind one should seek to hold such a balance between the parties to the transaction that they will both be determined to make it work satisfactorily and fairly. I would therefore have commended the equity of the proposals in this Amendment as being the best means of achieving that end.
I am sorry the noble Lord, Lord Shepherd, has left your Lordships' House, because I was going to point out that he appears to have forgotten what is known as the one-third rule: that is to say, that after one-third of the purchase price has been paid by the hirer the owner cannot take possession except by an action in court.
§ LORD PEDDIE
My noble friend was making reference to circumstances where repossession was made before one-third was paid.
In those circumstances, if a person enters into a hire-purchase contract and throws it up after one month, I cannot understand why he entered into the contract at all.
§ VISCOUNT AMORY
It occurs to me, in commenting momentarily on this Amendment, that I should declare an interest, because I am a director of a company which has a substantial interest in a hire-purchase finance company. I should only like to say that I find myself in agreement with what my noble friend 746 has just said from this side of the Committee. Also, it seems to me that there is great substance in the case which the noble Baroness, Lady Burton of Coventry, put forward with great lucidity and moderation. It seems to me that the provisions in the Bill as they stand in this respect are arbitrary and rough and ready—and, I think, too rough and ready. It must be right that we should seek the true measure of damage, and in assessing and estimating that true measure of damage it seems to me that the proposals put forward by the noble Baroness are right in principle and, I should have thought, fair in practice.
We must, of course, see that the fullest possible justice is done to the hirer, the consumer, and I am rather impressed there in my recollection that in another place the noble Lady was one of the most formidable protagonists in defence of the consumer. When I was Minister of Food the noble Lady was one of the banes—a very friendly bane—of my Parliamentary life in that respect. I am quite sure that before making this case she has taken that thoroughly into consideration; also, I am greatly influenced in feeling that the case put forward by the noble Lady is a sound one. In this respect I am influenced again by the support in principle which my noble friend Lady Elliot of Harwood has given, than whom there is no stauncher champion of the consumer. I hope my noble friend the Minister will, on reflection, find that he can support, in principle, at any rate, the Amendment that has been put forward; and if the Amendment is not quite right as it stands, that he will be able to devise a clause on the Report stage which will reflect the principle which is contained in this Amendment.
§ 5.15 p.m.
§ LORD DRUMALBYN
I find myself in a somewhat unusual position, because in the course of this debate we almost seem to have had the position that it is the Front Benches against the rest of the Committee. I find myself in far more agreement with the noble Lord, Lord Shepherd, than with what has been said in most other parts of the Committee. I agree absolutely that in the first place we have to look at this as a matter of principle. But is not principle of value mainly in so far as it results in justice in practice, and not just equity in 747 theory? I think we are bound to consider, as the noble Lord, Lord Shepherd, has said, what is the main object of hire-purchase legislation at all. I agree with him that it is to redress the balance between financial institutions, some of whom have vast resources, and the individual hirer, particularly at the moment when he is weakest—when, through financial stringency, he is unable to maintain the payments he has contracted to make.
One way of giving him protection is to allow the court to intervene. Another is to ensure that so far as possible he will know from the start exactly what his rights and liabilities are—in other words, as far as possible to remove uncertainty and causes of dispute, because in a dispute the individual hirer, being far weaker in resources than the owner, is likely to get the worst of it, and because he is in no position, particularly in the circumstances we have in mind, to take the risk of having to pay more at a time when he is unable to meet his instalments. This, I think, is the situation that one is in, and I quite recognise that the circumstances I have described do not apply in every case. For example, a man may have to "turn in" the car or washing machine he is buying on hire-purchase because he is incapacitated by an accident or by disease. In a great number of cases, at any rate, the hirer terminates his hire-purchase contract under force of circumstances at a time when he is weak and relatively defenceless, and it is for that reason that he needs to know where he stands and needs the defence of the law.
It is in that context that we have to consider this Amendment. Does it provide greater certainty? If so, to whom? Is the balance of advantage it provides to each side really fair, having in mind their probable situations and the difference in those situations? I think it is worth recalling that, as the noble Baroness, Lady Burton of Coventry, said, the Molony Committee conceded that the "true measure of damage" arrangement would, in theory—these were their words—achieve a more equitable result. But they pointed out that the "true measure of damage" principle would inevitably lead to disputes. It has been suggested that those disputes might not 748 be insurmountable. I think my noble friend Lady Elliot of Harwood said that there would undoubtedly be difficulties, but that there was no reason to suppose that they would be insurmountable.
Let us look at this. On Second Reading I commended the existing provision because under it both parties know, or can readily establish, from the terms of the agreement what the hirer's maximum liability is at any time during the life of the agreement. I think I am bound to point this out to your Lordships. Clause 1 of this Bill in effect raises the limit of the value of goods subject to protection under the 1938 Act from £300 to £2,000. There was no Amendment suggested to that Clause. It was passed nemine contradicente, and, indeed nemine dissentiente. It is now argued that because we have raised the limit we should now change the protection the 1938 Act gives in its most fundamental provision, namely, the safeguards for repossession and the right of the hirer to surrender the vehicle provided he pays the outstanding instalments or half the hire-purchase price, or, indeed, such less amount as may be specified in the agreement. The hire-purchase firm, if it so wishes, could quite easily specify lower amounts in the agreement in order to be fairer to the hire-purchaser. But I feel that the noble Baroness's new clauses open up a prospect of uncertainty and dispute. Uncertainty resulting in dispute is all too common—as I think the noble Lord, Lord Chorley, said on Second Reading—in relation to hire-purchase agreements at present outside the Hire-Purchase Acts; but it is the opposite of what we want in relation to agreements which we are bringing within the scope of the Acts.
Under the proposed new clauses replacing Section 4 of the 1938 Act, when the agreement is terminated the vehicle has to be sold. Leaving aside, for the moment, the new Clause 4C, Clause 4A would allow the owner three months to sell the vehicle and Clause 4B would allow him another month to render an account to the hirer. So for as much as four months the hirer may not know where he stands or how much he has to pay. That is prolonged uncertainty; one of the things we are really out to remove.
Next, the hirer's liability turns on the "net proceeds of sale"; that is to say (and this is under the proposed clauses) 749 the gross proceeds less any commission or other expenses reasonably paid by the owner and less any sums reasonably expended by the owner in repossessing the vehicle and repairing it before sale. Here I would merely draw the attention of your Lordships to the number of things that have to be "reasonable", and how much room for disagreement there is in each as to what is reasonable.
A factor which the noble Baroness mentioned was the question of rebates. She said that she did not have time before drawing up her Amendment to bring in some provision for rebates but she thought that this ought to be done. I would, in passing, at any rate say that we were extremely grateful to the noble Baroness for having put her Amendment down so promptly after the Second Reading, which, I think, has given it the opportunity for being further discussed in the Press.
Perhaps, though, the most important argument is about the "gross proceeds of sale". This is obviously a matter for infinite dispute. The clause would, in effect, entitle the finance houses to sell the car for whatever price was acceptable to them. It would be very difficult ever to prove that they had sold for too little. True, there are published guides to prices of particular models of cars, but they give only a general indication and they are not available to the public. The fact is that every car has its own price, dependent on its age, condition, the state of the local market, and so on; and the price at which you can sell in the long run is the price at which you can find a buyer. My noble friend Lady Elliot of Harwood suggested examination by an expert valuer, but that is not necessarily the price that would be obtained, and it seems to me that that would get the worst of both worlds.
I do not believe that these Amendments provide a workable arrangement. I do not mean to imply that if these clauses were enacted, finance houses would deliberately let cars go cheaply, but under these Amendments the finance house would have a far greater incentive to get the car sold than to hold out for the best Possible price. After all, finance houses do not deal in cars; they do not hold stocks of them; yet, pre- 750 sumably, though the proposed clause does not say so, they would be responsible for preventing the cars from deteriorating before they are sold. Obviously, they would want to sell quickly. And if a car was still unsold towards the end of the three months and the provision of subsection (1)(c) of Clause 4A were about to operate, it might be in the finance house's interest to let it go at almost any price.
The new Clause 4C would give the hirer the right to require a sale. What would be the value of this? It seems to me that it would have a very limited value in practice, for the clause says that if the hirer can find a man who will buy the car for not less than the hirer owes the finance house, then the finance house must sell to that man. But why should they not sell in such circumstances? They would be getting their money in full before it was due under the agreement. Indeed, the noble Lady's Amendment actually goes the other way and allows the finance house to deduct reasonable expenses of sale from the proceeds, in spite of the fact that the hirer has brought them a buyer prepared to discharge his obligations immediately.
Looking at Clause 4C a little more closely—and I think one must take the whole of the Amendments as a scheme proposed and fitting together—I must say that if it is intended to safeguard the hirer against the finance house selling a car for less than it is worth, here again, I do not think it is very much use, because the cases which would be likely to give difficulty are the very ones where, after the car has been sold, there remains something for the hirer to pay, and the arguments would be about how much. In fact, Clause 4C would really introduce yet another uncertainty. It would seem that after the agreement had been terminated there could be a period of up to 28 days during which the finance house could be barred from selling the car; the first fourteen days during which the hirer could bring along a prospective purchaser, and a further fourteen days in which the deal was to be closed.
I have mentioned only the more obvious practical difficulties arising from these clauses. Normally one can presume good faith on the part of the finance houses and of dealers selling and buying cars for them. But, unfortunately, 751 as experience has demonstrated, that presumption does not hold good for all finance houses and all motor dealers. It is not unknown for hirers to be treated inhumanly and to suffer real hardship. I feel bound to point out that under the system for which this Amendment provides, the opportunities for chicanery at the expense of the customer would be more.
In theory, of course, the customer can look to the courts for protection. Finance houses are equipped to initiate legal proceedings, but ordinary people are reluctant to go to law against powerful interests, and, in this instance, they would, by definition, be people who were hard up and had to give up their car. Even if a hirer did go to law, it is almost impossible to see how he could success-fully challenge statements as to the price the car had fetched and the amount spent on repairs.
The truth is that this "true measure of damage" system is very attractive for the finance houses, and they would naturally like to get it into this Bill. They would be able to sell the repossessed car for what it would fetch and to come down on the hirer for any balance. What is more, the Amendments apply equally to cases in which the agreement is terminated by the owner; so, in the early part of the agreement's life the finance house could invoke these provisions, for the most trivial breach, as the noble Lord, Lord Shepherd, said, and recover a great deal more than it could get at present under the general law for a similar breach of an agreement now outside the Hire-Purchase Acts. I think one must face the fact that this could be almost a new form of snatch-back.
I have seen it suggested that the "true measure of damage" concept is only reasonable, in that, as with a loan of money, it simply enables the finance house to recover the amount it expected, the hirer, as has been said I think by the noble Lord, Lord Merrivale, getting any surplus or paying any deficit. This has admittedly the appearance of fairness. After all, it is the hirer who is terminating or causing the termination of the agreement.
But is it really in keeping with the spirit of hire-purchase legislation? It 752 takes no account of the customer and his need, as the weaker party, to know where he stands and to be protected from oppression. If finance houses want to do business on terms which will entitle them to get their money in full, they can confine themselves to credit-sale. In the hire-purchase field, I think they exaggerate the difficulties which will flow for them from the application of Section 4 of the 1938 Act to agreements covering motor vehicles. The provision under which the hirer can terminate the agreement and pay whatever is necessary to brine what he has paid up to half the hire-purchase price or the total due to date, if that is more than half the hire-purchase price, is a simple, clear-cut and practical arrangement. That is the foundation of the terms given in the 1938 Act, and it is the maximum payment, as I have already said.
I have seen it suggested on behalf of finance houses that hirers will so time the termination of the agreement that the finance houses will always lose. That might happen once in a while, but I doubt whether it is a serious risk, particularly if finance houses tighten up on the way they do business, do not accept hirers without proper scrutiny and do not take business from dealers who make cars out to be worth more than they really are worth. I do not think we need be seriously worried, either, by another possibility that has been raised, that hirers who for genuine reasons find soon after the agreement is made that they cannot go through with it, will lose heavily. I do not think that such cases causing hardship would occur often. In practice, advance payments, part-exchange allowances and instalments soon build up to quite a considerable total.
In the end, in framing legislation of this kind a balance has to be struck between the various parties, the consumer, the dealer and the finance house, and I agree entirely that it is not an easy balance to strike, and this is one of the things we are bound to discuss in this House—where should the balance be struck? But I think we must remember that the parties are not of equal strength. The consumer has in the past all too often been imposed upon because of his lack of expertise; and this of course goes for the contracts above £300 in the 753 past. Dealers and finance houses handle this type of business every day and in the nature of things they are as well equipped as anyone to guard against being exploited by their customers. It is of course not easy to decide just how to achieve the right balance between the parties. That is what Parliament has to do in framing legislation of this kind.
I can only assure your Lordships that our decision to draft the Bill in such a way as to apply the provisions of the 1938 Act—and in particular of Section 4—to the generality of hire-purchase agreements for motor cars (almost all of this has been said; I think it was said by the noble Lord, Lord Chelmer) was taken after the fullest consideration of all the factors and all the arguments, including the very valuable Report on Consumer Protection. So I must ask your Lordships to reject these Amendments because they would tilt the balance heavily against the man who acquires a car by hire-purchase and in favour of the finance house. I hope the arguments I have put forward show this is the case, and I trust the noble Baroness will agree to withdraw her Amendment.
§ 5.35 p.m.
§ LORD CHORLEY
I do not think I have ever heard a less constructive contribution to an Amendment which was obviously very soundly based and very cogently argued. It smacked of the stonewalling which is characteristic of Government Departments providing briefs for Ministers in cases like this. It did not show any real realisation of what in fact happens in connection with this sort of business. The practical side of it, which was put forward not only by the noble Baroness who moved this Amendment but by the Chairman of the Consumer Council herself, obviously shows that the present situation, even with the present minimum price, is not working at all well. I think it is pretty well the unanimous opinion of all lawyers who work in the county courts in the sort of case indicated by the noble Lord, that this is a thoroughly unsatisfactory situation, and yet the Minister comes here without any constructive proposal at all for dealing with it.
It may well be that these rather complicated proposals could be simplified and put before us by Parliamentary draftsmen in a more satisfactory way, but the 754 Minister did not indicate that he really understood that there is here a very real difficulty, that injustice is being done all the time and that with this new ceiling on hire-purchase there is literally an enormous amount of injustice which is going to take place all the time. There may be a few odd cases that come within the strictures of the noble Lord, Lord Shepherd, but I do not think the noble Lord the Minister really appreciates what goes on in connection with work of this sort. It is unfortunate, I think, that the Minister has taken up this very unconstructive attitude in regard to this important Amendment. I hope the noble Baroness insists on a Division, and if so, I will support her.
§ LORD PEDDIE
I think there is a clear indication that there is no political motivation behind the comments made from both sides of the Committee. I thought I should be called upon to marshal some arguments against the Amendment proposed by my noble friend. I feel that such would now be quite unnecessary, and I would congratulate the noble Lord opposite upon the remarkable logic and excellent case that he presented. The devastating logic of his case makes any further comment by me quite unnecessary. I think he has proved beyond doubt to this Committee that this Amendment could do nothing other than merely strengthen the position of the hire-purchase traders and would do little if anything to support the main purpose of this Bill, which is to protect the interests of the consumer. As an indication of how much I appreciate that devastating logic, I will make no further comments of opposition to this Amendment.
I should like to say that my noble friend the Minister has not deserved any of the strictures passed from the Opposition Back Bench. I really do believe that, coming with an open mind to this, anybody who reads 4B must realise it is open to the widest sort of abuse.
§ BARONESS BURTON OF COVENTRY
I never thought I should live to see the day when a spokesman from the Board of Trade would come and tell me that the consumer has in the past been imposed upon and what I am suggesting would be of great harm to the consumer and to the benefit of finance houses. To 755 those of us who were together in another place, that really does seem—I do not know what I would say—ludicrous; that will do. It is absolutely incredible.
What has shaken me very much about the reply of the Minister to-day is this. It is quite obvious that the Board of Trade came here to-day, in the person of the Minister, with its mind made up. This really does shatter me, and I will tell the Minister why. We have had three Amendments before this one, on which, if I recollect rightly, we had mostly the Minister and one other person speaking, and in those cases, although neither agreed with the other, the Minister said he would reconsider the question. In this particular Amendment, which is one of considerable substance—
As the noble Baroness has given my noble friend three pages of close print on which he can make up his mind, surely he is entitled to make up his mind after reading them?
§ BARONESS BURTON OF COVENTRY
Perhaps I might also make up my mind in commenting upon what he has said. I was in the middle of a sentence, and the noble Lord has taken my mind off the point that I was speaking to. On this particular Amendment that we have been discussing until, I regret to say, my noble friends on this side of the House spoke in opposition (and I did not think my noble friend Lord Shepherd really addressed himself to what I was saying) every single speaker in the debate had spoken in favour of the Amendments. I should have thought that, had the noble Lord the Minister come with an open mind, as I thought he would, such statements would at least have brought from him a promise to reconsider the matter in principle. I never suggested that the wording here was necessarily the correct wording; neither did I ask the Minister or the Committee—and I specifically referred to it—to consider every point that was set down; merely the principle.
Although many noble Lords here may disagree, I do not think there is anybody in this House or in another place who would deny that, so far as I can, I speak for the consumer. I am completely amazed at the remarks that have 756 been made, because the Consumer Council supports this Amendment, the Citizens' Advice Bureaux support this, the trade supports it and the law supports it. In view of that, I should have thought that the least the Minister could do would be to say that he would consider the principle of this particular matter. I greatly regret that he has not done this. It seems to me that if the Board of Trade are coming along, with their minds made up, without listening to what the Committee have to say, really and truly we are not going to make much progress. In conclusion, I would also say that if we have a Hire-Purchase Bill which does not include a "true measure of damage" clause, we are not going to get an equitable Bill. Before sitting down, I would only ask the Minister whether, in view of everything which has been said here to-day, from varied interests, he feels able to consider the principle of this matter rather than the wording.
§ LORD DRUMALBYN
I am bound to reply to the noble Baroness that one cannot consider a principle without considering its application in practice. She has set forth clearly, I think, in her Amendments the way in which she thinks this principle should be applied. I thanked her earlier for giving us so much time to consider this—she put it down early, and we have had quite a lot of time to think over the matter. I am bound to say to your Lordships that no argument has been put forward today in favour of the clauses that we have not already considered. If there had been, and had it been possible for such strong arguments to be put forward earlier, they would have been considered, and I should have been enabled to say that my conviction that it was right to retain the 1938 Act in this respect in regard to safeguards, and to improve on them as they are, had been shaken. But I am bound to say that no such arguments have been put forward in this debate.
I endeavoured in my reply to set forth for the Committee, and to marshal, as the noble Lord, Lord Peddie, put it, the arguments against the Amendment. I have put them forward to the Committee. My own belief is they are convincing as against the arguments that have been put up. If any fresh arguments come along that we have not considered, 757 then of course we shall be willing to consider them. I can only tell your Lordships that the arguments which were put up in the course of this debate were arguments that we did consider in considering the Amendments of the noble Baroness. I would also add, in reply to what Lord Chorley said, that I feel that the difficulties and doubts that he feels in his own mind come largely from the experience of those hire-purchase contracts that have been outside the Act so far. This is where the main difficulties arise, and this is one of the reasons why we feel justified in putting forward Clause 1 and raising the limit of the value of goods covered by the Hire-Purchase Acts to £2,000. If we feel justified in doing that, then it does not seem unreasonable that the present protection which is afforded—and it has not done badly—should give as much certainty as one can devise, with the additions that we ourselves are putting forward. We should also be willing to consider further additions.
To change to an entirely new system of safeguards is something that would obviously require much greater consideration. It would bring us back to the point made by the noble Baroness on Second Reading, when she asked whether we should be able to revise the whole concept of hire-purchase legislation by the time this Bill had gone through all its stages. I was not able to say that we could. Within the framework of this Bill I believe that we should adhere to the safeguards contained in the 1938 Act, and, with all respect, I do not believe that sufficiently strong arguments have been put forward in the course of this debate to cause us to change our view.
§ BARONESS BURTON OF COVENTRY
If I am in order in replying to that speech, I have listened carefully to what the Minister has said, and I feel that to-day the balance of argument has been—perhaps I am biased—on the side of the Amendments. I feel that the Minister came determined to turn them down. But in view of what he has said, with your Lordships' permission I will not divide the Committee to-day, but I shall hope that other reasons will be adduced elsewhere which will perhaps persuade the Minister to change his mind.
§ Amendment, by leave, withdrawn.758
§ 5.48 p.m.
LORD SHEPHERD moved, after Clause 2 to insert the following new clause:
. For the purposes of this Act no contract or agreement for the sale of goods to which a hire-purchase or credit-sale agreement may be related shall be held to be binding on the buyer until the proper completion of the hire-purchase or credit-sale agreement.
§ The noble Lord said: The purpose of Amendment No. 6 is, I hope, clear to the Committee. It seeks to provide that no contract for the purchase of goods shall be binding upon the buyer until the completion of a hire-purchase agreement related to it. I believe it is quite usual in the motor trade that when a person wishes to buy a motor car, and is prepared to do it on a hire-purchase agreement, the dealer presses, and sometimes requires, the prospective hirer to sign what is, in fact, an order for that motor car. In the event of the hire-purchase agreement going through, naturally the hire-purchase company takes over the particular car that has been ordered by the hirer. But in the event of a hire-purchase agreement not being concluded by the hire-purchase company, or perhaps, on second thoughts, by the potential hirer, it is possible, I believe—indeed, I think this has happened—for the potential hirer to be held liable for the car for which he has placed an order, on the basis that he thought the documents were part and parcel of the same contract or the same negotiations.
§ The reason I am moving this Amendment is to draw attention to this fact, particularly in view of Clause 3, which now makes it possible, in my view, for the buyer unilaterally to break a contract during the cooling-off period. I should expect that the high-pressure salesman, realising that what he had thought was a contract could be broken after he had departed, might feel that in order to solidify and strengthen his negotiation with the customer he should, at the same time as filling in the hire-purchase agreement, require the person to sign an order. In other words, he would then be able to say to the customer, "You have cancelled your hire-purchase contract, but you have placed an order for cash"—or whatever terms could be negotiated. This would be quite wrong. I do not believe the Government would entertain the thought that, after they 759 have provided the cooling-off period, its purpose as set out in this clause should be circumvented by the actions of salesmen in carrying on the type of practice that exists in the motor trade. I hope the Government will accept this Amendment, or at least its principle, so that the cooling-off period shall not be circumvented by any means particularly by requiring a consumer to place an order and the holding of the consumer to such an order.
After Clause 2, insert the said new clause.—(Lord Shepherd.)
§ LORD DRUMALBYN
This is another of the Amendments the noble Lord and I discussed informally. I think I now have clearly in mind the evil, as he sees it, which he seeks to avoid. I would invite his attention first to Clause 18(3) of the Bill, which says that:Any contract, whether oral or in writing, which apart from this subsection would have effect as a contract to enter into an agreement to which this subsection applies (as distinct from a contract constituting such an agreement) shall be void.I am advised that, because of these words, the difficulty the noble Lord foresees cannot arise. Let us take the case which he has in mind of a prospective buyer or hirer who goes along to a dealer to get a motor car. The dealer says "First we must order the car", and makes him sign a document ordering the car. Then the dealer says, "Do you want to buy it for cash or on hirepurchase?"—I think that is a fairly common occurrence; it has happened to me. If the reply is, "On hire-purchase", then the whole of the transactions are related to that hire-purchase transaction. If, in the end, the finance house were to refuse to ratify or to make the agreement, there would not have been any contract of any kind at any stage; it would all be nullified.
The contract which the noble Lord is afraid would subsist would be one between the hirer and the dealer—a sort of antecedent contract before consideration of hire-purchase arose at all. But I am advised that the question of the method of payment is all-material to the contract, and that until the question of payment is settled there is no contract. In this case, the offer on the part of the hirer to hire through hire-purchase is the 760 substantive offer; there is nothing before that because this is the way in which the goods were to be paid for. That is what I am advised is the legal situation in this case, and that, combined with Clause 18, should, I think, dispose—and I hope it will—of the difficulties felt by the noble Lord in this matter. I am sure he need feel no difficulties on this particular score.
§ LORD SHEPHERD
I thank the noble Lord. I am very pleased that that is the answer. I quite appreciate that there is no need for my particular Amendment, and I beg leave to withdraw it.
§ Amendment, by leave, withdrawn.
§ 5.57 p.m.
§ LORD MESTON moved, after Clause 2, to insert the following new clause:
§ Amendment of section 4 of the principal Act
". Section 4 of the principal Act (which relates to the right of a hirer to determine a hire-purchase agreement) shall have effect as if there were inserted after subsection (4) the following:
'(5) Where an owner has lawfully determined a hire-purchase agreement by sending notice of termination in writing by post to the hirer, then the hirer shall be liable, without prejudice to any liability which has accrued before the termination, to pay the same amounts, if any, as those which he would have been liable to pay if he had himself terminated the agreement under the foregoing provisions of this section:
Provided that, where a hire-purchase agreement provides for the owner to determine the agreement on terms more favourable to the hirer than those just mentioned, the hirer's liability on termination of the agreement by the owner shall not exceed that provided for in the agreement'.
§ The noble Lord said: Most of the ground of this Amendment has been covered on previous occasions, and particularly by the noble Lord, Lord Chorley, who pointed out that it may happen that a hirer who voluntarily terminates his agreement is in a worse position than a hirer who defaults in the early stages. To explain the position by an actual example, suppose that there is a contract for the hire-purchase of a motor car payable by twelve equal instalments, and after paying one instalment the hirer voluntarily decides to bring the contract to an end and return the car. He must then pay six of the twelve instalments. On the other hand, after having paid one instalment, he may disappear and when he is eventually found 761 proceedings are brought against him, by which time he owes, shall we say, three instalments. Judgment will be given against him for those three instalments and no more—and he will also be liable to an action for damages for breach of contract, which means any injury done to the car over and above the injury arising in the ordinary way from fair wear and tear. It is a very extraordinary situation that a man who acts honestly should sometimes be in a worse position than a man who acts not so honestly.
§ As your Lordships will know, there is a distinction between a penalty, on the one hand, and a genuine pre-estimate of damage, on the other hand. That distinction has been emphasised by courts of law in many cases. If I may say so with the greatest possible respect, emphasising that distinction has only made the position more complicated than ever, and I will tell your Lordships why. There is no precise point at which a clause known as a minimum payment clause ceases to be a genuine pre-estimate of damage and becomes a penalty. One has to go to law in order to ascertain for certain whether a certain minimum payment clause is a penalty or a pre-estimate of damage. (I personally do not mind people going to law, but other people object to it very much, and I quite understand the grounds of their objection.) This leaves a most extraordinary and unsatisfactory situation.
§ I myself feel that precision is more important than anything else, even though in a few cases there may be a little hardship involved. Precision is one of the most important things of all. Apart from any legal aspect on the question of depreciation, I do not think that having to pay half the hire-purchase instalments is altogether unfair. Let me take a homely case. Suppose you go to buy a motor car. It is always said that when you have taken a new motor car from one side of the street to the other it has lost £100 in value. If one of your Lordships were to go and buy a nice expensive carpet to-day for a certain sum of money, and were to sell it in three months' time, I think you would be most alarmed at the depreciation in the market value of that carpet. I do say that this attempt to distinguish between a penalty, on the one hand, and a genuine pre-estimate of damage, on the other, only creates further confusion.762
§ I should like to see something definite and clear in every case, and if any lawyers oppose me I shall not care tuppence, because I think myself that common sense should overcome the law. I hope some people will take that to heart, but that is exactly what I mean. Therefore, if we make the position exactly the same whether it is the hirer who determines the agreement voluntarily, or whether it is the owner who determines the agreement because the hirer has acted in a dishonest way, we should have the same measure of damage, which in nine cases out of ten will be perfectly straightforward. I beg to move.
§ Amendment moved—
After Clause 2, insert the said new clause—(Lord Meston.)
§ LORD DRUMALBYN
I realise that behind this Amendment lies the feeling which the noble Lord has expressed with great clarity: that it is inequitable that a man who finds that he cannot go through with a commitment which has been assumed and therefore takes proper steps to terminate it, may find that in the end his liability is greater than it would have been had he fallen down on his obligations, but left it to the other party to terminate the agreement. In practice, though, and in terms of the need to protect the consumer in certain circumstances, I would ask the noble Lord whether he would not agree that the arrangements for which the 1938 Act provides are defensible. I suggest to him that the danger in this Amendment is that it could be used by an unscrupulous finance house in a way that I am sure he would not wish. The finance house would be free to exercise its right in the initial stages of the agreement, on the grounds of the most trivial breach by the hirer: it could repossess the car and get half the purchase price. This, I suggest, is not something which we should be assisting.
It may be suggested that any defects in the Amendment could be remedied by writing further safeguards into it; but I doubt it. I am inclined to think that any such safeguards would be very complicated, and would be dealing with a case which in practice does not often arise where the Acts apply. If an owner does demand a half of the total 763 hire-purchase price—which, as I think the noble Lord realises, includes any deposit, and not necessarily just half the instalments—the court could quite easily, as the law stands, regard that in itself as a penalty, and I see no reason why we should step in. In effect, we should be legalising that penalty and I cannot advise the Committee to accept this Amendment.
I am much obliged to the noble Lord for his reply, and I must confess that it is what I expected. I am a little exercised in my mind about Section 11(1) of the principal Act, which provides that,Where goods have been let under a hire-purchase agreement and one-third of the hire-purchase price has been paid, whether in pursuance of a judgment or otherwise, or tendered by or on behalf of the hirer or any guarantor, the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than by action.It is just conceivable, of course, that if there were, let us say, a 50 per cent. rule in all cases—that is to say, whether the owner terminated the agreement or whether the hirer terminated the agreement, voluntarily or otherwise—it might be possible to amend my Amendment so that in all those cases it would be necessary to obtain an order of the court which, with due respect to the court, would be automatic, unless of course there was some very low conduct on the part of the owner. But as I do not expect the noble Lord is willing, on behalf of the Government, to consider the matter, I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
May I make one application?—it is quite out of order; I am always out of order. But I was wondering how long your Lordships were going to sit. Can I be told what Amendment we shall go up to tonight?
§ LORD SHEPHERD
If I can help, I believe it has been agreed through the usual channels that we shall sit until 7.30 this evening.
§ 6.7 p.m.
§ LORD SHEPHERD moved, after Clause 2, to insert the following new clause:764
§ Amendment of section 2 of the principal Act.
". Section 2 of the principal Act (which relates to hire-purchase agreements) shall have effect as if there were inserted after 'price' in line 2 of subsection (2)(b) the following:—
'of the amount of the hire-purchase price which represents those finance charges which are payable to the dealer.'
The noble Lord said: I wonder how many customers entering a shop and undertaking a hire-purchase agreement appreciate that the dealer not only makes a profit upon the article that he sells, but also upon the hire-purchase agreement. I also wonder whether the customer is aware that the margin of profit the dealer will make on a hire-purchase agreement depends upon the length of time he persuades the hirer to take in his agreement; for the commission paid to the dealer is based upon the total charge of the hire-purchase agreement. The Molony Committee were extremely forceful on this position of dealers' commission. They wrote, in paragraph 562 of their Report:
The consumer usually relies on the dealer to nominate a suitable finance house and would be surprised to learn that the choice may be determined by the amount of commission allowed".
So far as the prospective hirer or buyer is concerned, the type of hire-purchase company that will be offered by the dealer will obviously depend on the rate of commission the hire-purchase company has agreed to pay the dealer. This obviously restricts the freedom of the buyer or hirer in deciding with whom he will negotiate the hire-purchase agreement. Molony also go on to say,
—at the ultimate cost of the hirer".
I understand that the Hire Purchase Companies' Association have agreed to pay 15 per cent. to their dealers. In practice, this means that on a motor car priced at £1,000, repayable over 24 months, the total charge would be £150. The Hire Purchase Companies' Association will pay their dealer £22 10s. for negotiating the agreement on their behalf. But there are a good number of companies who are outside that Association who are paying as much as 25 per cent; in other words, for the same car over the same period the dealer receives £37-odd. There have been some companies—whether they exist to-day I am not sure, but there were undoubtedly some a few years ago—where the amount has been as much
as 40 per cent. In that case, therefore, when the dealer concluded the contract, apart from the profit he made upon the car, he received a commission of £60.
§ Whether it is right or wrong for us to intervene between the dealer and the hire-purchase company—my noble friend Lord Shackleton takes the view that we should, and I would not dissent—I think it is perfectly clear, and I think it is equitable to the prospective hirer, that, considering the effect that these commissions which are being paid to the dealers have, not only upon the charge but perhaps on the approach to the length of an agreement, the amount that is payable to the dealer by way of commission should appear in the agreement. I am suggesting in my Amendment that as, by Statute, the agreement has now to indicate the cost price and the hire-purchase price, with details of what are the charges in order to balance the two figures, this particular figure of charge should be so sub-divided that the hirer or buyer will see the amount that is apportioned to the hire-purchase company for the servicing and financing of the agreement and also the amount that is being paid by way of commission to the dealer for having negotiated the contract.
§ Whether it is right that we should intervene between the hire-purchase company and the dealer is open to argument, and we shall hear it in a few moments, but I do not think there is any doubt—I hope there is no doubt in anyone's mind—that the customer, for his own protection, should have some knowledge of how these charges are apportioned, because the amount of commission may well depend upon the length of the time he has been persuaded to undertake in his agreement, and perhaps the type, class and particular name of the hire-purchase company.
§ I hope that the Government will see fit to meet this particular point. I think it is very necessary, particularly (if I may just go back) if you consider that in the case of those who are being paid 25 per cent., out of the total charge of £150 for 24 months' service, the dealer is receiving £37. I would suggest that while this high figure is there it will make it extremely difficult for a hire-purchase company to operate a fair rebate scheme, about which I should 766 like to speak in a few moments, because this commission is paid, not at the satisfactory conclusion of the agreement but at the time that the hire-purchase company pays for the goods—that is, at the very beginning. Therefore, there is no question of the dealer sharing in the rebate. But I do not wish to go further on that at the moment. I believe that the customer, the hirer, is entitled to know the amount that the hire-purchase company require to service their contract, and what is being paid to the dealer for the negotiation. I beg to move.
§ THE DEPUTY CHAIRMAN OF COMMITTEES (LORD AILWYN)
The Amendment proposed is, after Clause 2, to insert the new clause as printed in Amendment No. 8, with one small amendment. It should read:. Section 2 of the principal Act (which relates to hire-purchase agreements) shall have effect as if there were inserted after the first word 'price' in line 2 of subsection (2)(b) the following:—'of the amount of the hire-purchase price which represents those finance charges which are payable to the dealer.'
After Clause 2, insert the following new clause:
§ "(Amendment of section 2 of the principal Act
. Section 2 of the principal Act (which relates to hire-purchase agreements) shall have effect as if there were inserted after the first word 'price' in line 2 of subsection (2)(b) the following:—
'of the amount of the hire-purchase price which represents those finance charges which are payable to the dealer'.").—(Lord Shepherd.)
§ BARONESS ELLIOT OF HARWOOD
I should like to rise for one moment to support the noble Lord, Lord Shepherd, in what he is saying, because here again the great merit of this new Bill is the fact that it will be very difficult, or should be very difficult, to hide from the hirer or the buyer any cost which comes into the transaction, whatever it is. I think it is just as important that the amount of commission should be disclosed as that any other part of the transaction should be disclosed, and I hope very much that the Government will see their way to accept this Amendment.
§ LORD AIREDALE
I, too, should like to support this Amendment very heartily. Personally, I do not like dealers' commissions at all. It seems to me that hire-purchase companies confer a great benefit upon dealers without any question of the payment of a commission. The hire-purchase company enables the dealer to make a sale which he would not otherwise have been able to make, and the dealer gets his profit from the ordinary transaction of selling the goods. I am quite appalled at the thought of dealers being tempted to saddle, or to try to saddle, their customers with the most expensive type of hire-purchase contract which is available—because, of course, it is likely to be the most expensive type of hire-purchase contract that carries the largest amount of commission to the dealer from the finance company. For we must not delude ourselves into thinking that the commission payable to the dealer is going to come out of the pocket of anybody but the customer.
§ LORD DRUMALBYN
I suggest that the way we have to look at this matter is: what advantage will it give the hirer to know the amount of commission that is being paid over by the owner, the finance house, to the dealer? I am bound to say that, while I listened with great attention to what the noble Lord, Lord Shepherd, said, I did not feel that he made a very good case. I am not talking about the desirability of commissions, because, of course, the Amendment is not dealing with that question: it is merely whether or not the amount of the commission, as well as the hire-purchase price, should be shown in the contract. The hire-purchase price, of course, will include, as the noble Lord said, the charges; and so far as the hirer is concerned the charges include the commission; so that all that would be shown here for the hirer would be the actual commission paid to the dealer.
I suppose that, in the case of a cooling-off arrangement, this might deter the hirer from going through with the contract, saying "This looks much too great". But in the case of the ordinary form of hire-purchase contract one difficulty would be that, at the time when the hirer signed, the amount of commission payable might not even be known, 768 because at that time the dealer may not have decided with which finance house to place the business. They are not all as closely tied up as that.
§ LORD SHEPHERD
Is the noble Lord suggesting that the dealer will get the customer, the prospective hirer, to sign a document without the name of the hire-purchase company on it? Surely every hire-purchase company has it own order sheets, which it supplies to the dealer; and the dealer, when he makes his decision, on behalf of the hire-purchase company, whether the agreement should go through, has one particular hire-purchase company in mind.
§ LORD DRUMALBYN
I am sure that is so in the generality of cases: I am saying only that cases may arise of the kind that I have indicated. At any rate, I think it is the fact that very often the figures are not filled in until the finance house completes the agreement. It is not necessarily the case that all figures are filled in at the time, because it is an offer to enter into an agreement.
This is really a question of judgment. I think the Committee would probably agree that the simpler we can keep agreements the better. What the noble Lord is suggesting, it seems to me, is the fullest possible disclosure by the dealer of the amount the hirer will have to pay and of how that amount would be made up. I should not like to rule out this Amendment; I am saying that it does not seem to me to be a particularly germane figure to appear in the contract or agreement itself. But I am quite prepared to consider this matter further if the noble Lord desires to press it.
§ LORD SHEPHERD
Might I suggest, first of all, that there is one particular advantage? If the customer saw that a very high rate of commission was being paid by the hire-purchase company to the dealer, he could assume that the company was particularly anxious for business and therefore, I should have thought, did not come within the category of the more responsible hire-purchase companies. So that would at least give an indication of the standing of the hire-purchase company. The noble Lord raised the point that when the agreement or proposal is being signed 769 in the home or at the shop the dealer may have no knowledge of what his rate of commission is. I have never been a dealer operating hire-purchase agreements; but I have been a manufacturer's agent, and I can tell the Minister that I do not think there are many manufacturers' agents who would sell anything before knowing what their "cut" was going to be.
I am sure the dealer, when deciding which hire-purchase company he is to deal with, will know what will be his share of the charges. I believe that on a fairly rough basis these charges are 7½ per cent. per annum. Is it not a fact that the details in the schedule of an agreement have to be completed? The dealer knows what the charges are going to be, because he has to stipulate the hire-purchase price. Dealers know their rate of commission and they themselves could fill it in. I believe that this could be quite a curb on these high rates of commission and that it would indirectly lead to a reduction of hire-purchase costs. But since the Minister has said he will consider the matter further, I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ 6.24 p.m.
§ LORD SHEPHERD moved, after Clause 2, to insert the following new clause:
§ Amendment of section 6 of the principal Act
. Section 6 of the principal Act (which relates to the duty of owners and sellers to supply documents and information) shall have effect as if there were inserted at the end of subsection (1) the following:—
'(d) the amount or amounts which become payable by virtue of a rebate scheme that may be offered by the owner or seller to the hirer or buyer.'
§ The noble Lord said: When I was speaking on the previous Amendment I made a few comments in regard to the rebate scheme. For any person who has not entered into a hire-purchase agreement I will explain that this is a system by which, if the hirer or buyer were to pay up the total amount before the agreed period had elapsed the hire-purchase company would give a discount, or rebate, on the charges which the agreement would have carried if it had gone to its full time. A number of companies operate a rebate scheme; but I have no knowledge that any of them have a scheme entered into the agree- 770 ment, thereby giving a right to the hirer or purchaser; though, no doubt, they use the attractiveness of their hire-purchase schemes as inducements for customers to support their company.
§ I believe it is relatively simple to deal with the rebate scheme, even to be able to give details, either in the hire-purchase agreement or in a supporting copy, so as to make it clear not only that a rebate scheme is being offered but what its terms are. I understand from companies operating rebate schemes that the system adopted is not clearly understood; and, having had it explained to me recently, I appreciate the difficulties. But if the scheme were clearly laid out in the form of a table I am quite sure that the hire-purchase companies would receive a good deal more support for it than they get at present. I suggest that if such a scheme is being used the hirer should know by right what his privileges are under it.
§ I wonder whether the Government would consider having these rebate schemes by Statute. That citadel of free enterprise, the United States of America, requires that in hire-purchase agreements a rebate scheme should be compulsory; and they have even gone to the extent of laying down what the terms of rebate should be; and there are many countries more enlightened than ours in hire-purchase that have similar schemes. I have in front of me a document which clearly defines the terms and conditions of a hire-purchase agreement; and these include the system by which the hirer obtains this rebate. There is also included a table by which one can calculate very quickly the rebate obtainable if one were to pay off in nine months an agreement for, say, twenty-four months. I suggest that there is a considerable saving to be made by these rebate schemes. For example, if you take a motor car of a cash price of £1,000 the amount to be paid off over twenty-four months would be £1,150. If this were paid off in nine months the amount would be only £1,090. In fact, there would be a rebate of £60. It is interesting to note that this is a scheme by which, under the agreement, the customer at present has no rights whatsoever; it is not within the terms of the agreement. I believe that those firms 771 which voluntarily give a rebate scheme should write the conditions into the agreement.
§ But I think the issue is a good deal simpler than that. Now is obviously the time, when we have this Bill before us, for the Government seriously to consider whether a rebate scheme should be part and parcel of our hire-purchase legislation. I believe that the idea is worth considering, and I hope that the noble Lord will respond.
§ I beg to move.
After Clause 2, insert said new Clause.—(Lord Shepherd.)
§ LORD DRUMALBYN
I have a good deal of sympathy with the purpose of this Amendment, but perhaps I might just clarify what the Amendment does, because I think we have been discussing two separate things: first, whether the Amendment is desirable; and, secondly, whether it would be a good thing to make rebate compulsory by law. The terms of the Amendment add a new clause to the end of Section 6(1), which provides that an owner or seller shall supply to a hirer or buyer, on request in writing and on payment of a fee, a copy of the agreement and a statement showing the amount paid, any payment of arrears and the amount which has become due, andthe amount or amounts which become payable by virtue of a rebate scheme that may be offered by the owner or seller to the hirer or buyer.I think that what the noble Lord means is that details of the current rebate scheme available at the time should be supplied, if requested. In point of fact, some finance houses do make voluntary rebates, if a hirer completes payments in advance of the agreed period of time. So I take it that what the noble Lord has in mind is to provide for a person who wishes to know what the result for him would be if he completed his payment without waiting for maturity, so to speak.
I think it is rather doubtful whether it is worth while making this the subject of a statutory requirement. After all, if a hirer writes in and says that he wants to complete his payments right away, in advance of maturity, and the finance house have a rebate scheme, then surely 772 they will respond and tell him what the rebate scheme is and how much he is entitled to. There does not seem to be a great deal of point in adding this item to the three others, which are really different in character. Perhaps this is matching unlike with like, and I do not think the Amendment in itself would be very desirable.
On the more substantive point, I suggest that this really would be a matter in the first place for discussion with the finance houses, to see whether some arrangements can be made similar to those to which the noble Lord referred. I should not like to commit myself before any such discussions took place, but I am certain that the finance houses will take note of what the noble Lord has said. I think it is true to say that a considerable body of opinion in this country would be favourably disposed to rebate schemes. They are not entirely without difficulty, particularly because the price of money at any given time enters into the rebate schemes, and they will vary from time to time. I myself should not have thought that this was a matter of great importance, and as it is really outside the scope of the Amendment I should not be disposed to commit myself in any way on the subject.
Could I ask my noble friend a question which arises out of something which the noble Lord, Lord Shepherd, said and which may betray my ignorance? Is there nothing in this Bill or in the main Act which provides that the seller has to state the rate of usury of the contract? When I heard the noble Lord read out from his list, I was appalled at the terribly high rate of interest which it showed, something like 12 per cent. on a shrinking balance. I cannot do the arithmetic, but it must mean that the unfortunate customer is paying an amount into double figures of interest, and I feel that somewhere he should be told precisely what rate of interest he is paying, apart from the information about the amount of instalments and any rebates on the instalments he can get.
§ LORD SHEPHERD
Perhaps I can help the noble Lord. I was careful not to use the word "interest." I said that the 7½ per cent. were charges. These include the handling charges and many other items, as well as interest, and of course, the dealer's commission.
773 I apologise if I have mystified the noble Lord, Lord Drumalbyn, because obviously I hung my Amendment on to the wrong clause, but since I have no intention of pressing it this evening, nothing is lost. I hope that the noble Lord will consider the points I have made—first, that if a rebate scheme is offered as part of general business and is available at the time of the signing of a contract, this benefit should appear as well as the penalties. The more I consider the question of rebate schemes, the more I feel that this should become statutory. I wonder whether it is possible to get the hire-purchase companies interested, in the short time available before the Bill becomes an Act, and whether the Minister himself would be willing to see members of the hire-purchase companies to sound out their views on the subject.
I wonder whether the figure of 7½ per cent. is the true rate of the money or the apparent rate, because it is a shrinking capital balance all the time.
§ LORD SHEPHERD
It is not a rate on the money that is at risk. It is a figure arrived at of charges and interest, but the charges play the important part.
It is the same rate throughout every instalment and is reckoned at 7½ per cent., but the true interest on the money probably runs at double figures.
§ LORD SHEPHERD
If we take a car costing £1,000 bought over twenty-four months, one pays 15 per cent.—7½ per cent. for each year. You get no benefit for the second year, because it has been averaged out.
§ LORD DRUMALBYN
The noble Lord, Lord Shepherd, has asked me whether I am willing to see the finance houses on this issue. Of course, I shall be very willing to see them on any point arising out of the Bill, including this one.
§ Amendment, by leave, withdrawn.
§ 6.38 p.m.
§ LORD SHACKLETON moved, after Clause 2, to insert the following new clause:774
§ ".—(1) No person shall, in connection with a hire-purchase or credit-sale agreement offer, promise or give to any other person (in this section referred to as a 'dealer') or to the servant or agent of a dealer, nor shall a dealer or the servant or agent of a dealer seek or accept, a commission exceeding one-tenth of the difference between the price at which the goods (in this section referred to as 'the relative goods') comprised in or to be comprised in the hire-purchase or credit-sale agreement could be bought for cash from the dealer, and the hire-purchase or credit-sale price of the relative goods as the case may be nor a benefit of any other nature if:—
- (a) Such commission or benefit is in any way attributable to the introduction or acceptance of a hire-purchase or credit-sale agreement, and
- (b) All or any of the relative goods have been or are to be supplied by the dealer to the person by whom the commission or benefit is to be paid or given.
§ (2) Any person who contravenes the provisions of this section shall be guilty of an offence and liable on summary conviction:—
- (a) If it is his first conviction of an offence under this section, to a fine not exceeding fifty pounds.
- (b) In any other case, to a fine not exceeding one hundred pounds.
§ (3) Proceedings for any offence under this section may (without prejudice to any jurisdiction exercisable apart from this sub-section) be taken against a person at any place at which he is for the time being.
§ (4) Where an offence under this section committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly."
§ The noble Lord said: The object of this Amendment is to place a limit on the amount of commission paid to a dealer. I appreciate that in proposing this Amendment I am moving into a field in which it would normally be unusual for a Government to legislate, that of the relations between two businesses in the charges they make to one another. But I would suggest that in regard to hire-purchase there are special reasons, which are confined particularly to the subject of hire-purchase.
§ A practice has built up, particularly where motor vehicles are concerned, whereby the dealer automatically receives a percentage of the finance company's charges. In the long run, of course, this must add to the amount of money that the hirer has to pay. If 775 this commission were smaller, he could reasonably expect a lower rate of charge. Even if it were argued that the average rate of charges is only 7 or 7½ per cent., and that this commission could not be very large, none the less it is important. The noble Lord, Lord Hawke, has now learned what is still not generally appreciated—the enormous cost to the individual, who in fact is paying the equivalent of 14 to 15 per cent. This does suggest that it is adding to the total cost of hire-purchase.
§ If the Government are not disposed to accept the request of my noble friend Lord Shepherd in regard to the amount of charges, and the disclosure under Amendment No. 8 of the amount of the hire-purchase price which represents the finance charges payable to the dealer, the hirer is in a weak position, and it really will not be possible for the hirer to distinguish between one type of finance company or another. It is the view of the most reputable finance houses that there ought to be a limit. In fact, the Finance Houses Association impose a limitation of 15 per cent. I believe, also, that there have been some talks with the Government on this subject. But, be that as it may, it would surely be in the interests both of the consumer and of the finance houses.
§ It is arguable that the dealer, and particularly the motor car dealer, will not like this limitation. But if he is to receive a secret incentive to persuade people to enter into hire-purchase agreements which they otherwise might not be particularly inclined to do, and, furthermore, to persuade them to enter into hire-purchase agreements which are as long as possible, then it would seem to me that there is much to be said for limiting the amount of this particular commission.
§ This clause might have been better drafted if we had related this proposal, not to the amount of the charges, but to the original purchase price. I had thought of putting down an Amendment which would suggest that the commission should not exceed one-hundredth of the difference between the price at which the goods to be comprised in the hire-purchase or credit-sale agreement could be bought for cash from the dealer and the amount of the initial payment or 776 deposit paid. I am not asking the noble Lord to consider that particular version, although the more I think about it, the more I think I prefer it to the Amendment I have put down on the Marshalled List.
§ I think it is a bad thing that there should be this further encouragement to people to enter into hire-purchase agreements without their knowing the full facts, as appears to be the wish of the Government. If the Government are not prepared to concede the Amendment of my noble friend Lord Shepherd, then I should hope that they would take steps to limit the amount of commission payable to the dealer. As I have said, many of the most reputable finance houses would not allow a figure like 25 per cent., but there are some, as my noble friend Lord Shepherd said, who are prepared to go out for the business in this sort of way. I should have thought there was a strong case for an intervention of the kind I have proposed. I beg to move.
After Clause 2, insert the said new clause.—(Lord Shackleton.)
§ LORD AIREDALE
I think it is up to those of us who feel so strongly about these secret commissions to dealers to go on hammering away and let the Minister know in no uncertain terms how strongly we feel about this. This Bill follows in many respects the recommendations of the Molony Committee. I do not suppose it is necessary for me to remind the Minister of what the Molony Committee said in paragraph 562 of their Report about secret commissions to dealers, but if the noble Lord is in any doubt about this, let him read that paragraph again, and let the Government think seriously about this and take action to put an end to these secret commissions, which really are rather a scandal.
§ BARONESS ELLIOT OF HARWOOD
May I also back up this Amendment? My noble friend Lord Airedale has pointed to what the Molony Committee said, but it is the general principle that in all these agreements we should try to make everything as simple and precise as possible for the people who are concerned. If there are secret agreements, or hidden commissions or such things involved in these transactions, in my opinion, they are wrong. They 777 should be all above board and everybody should know exactly how he stands, what the costs are, and so on. In that way we shall get in the hire-purchase business a far more honest approach from both sides. I strongly support this.
If the true rate of interest were known to the hirers, I wonder whether there would be any margin for secret commissions at all. There is some sort of psychological limit to the amount of usury that a person is prepared to pay. At the same time, there is also a lower limit to the price at which the hire-purchase companies can borrow the money. It is only because at the present moment there is far too wide a gap there that there is any room for these secret commissions. It is an extraordinary state of affairs that the secret commission should have sprung up; one would not have expected it to happen. One would have imagined there would be such competition between the various companies for business that they would have been competing with each other for higher rates of deposits and to give lower rates to the hirers.
It appears that there is a certain amount of competition in obtaining deposits from the public, but there is not that degree of competition for the hirer's custom, because the hirer does not know the true rate of interest. So the competition lies in these secret discounts to the trader, to try to persuade him to put business in the way of one company rather than another. If we get the true rate of interest written in the contract, we may find that these secret commissions disappear.
§ 6.48 p.m.
§ LORD DRUMALBYN
I have been interested in the way this proposal has been put before your Lordships. I think it is true to say that what has been said reflects the difference in points of view. The noble Lord, Lord Airedale, laid stress on the fact that the Molony Committee, in talking about commissions given by the finance house to the dealer, said—and incidentally I have underlined in red this passage in my copy:Like other secret commissions this is a bad practice which ought not to continue".That is one point of view, but it is not the point of view expressed in the 778 Amendment, although I have no doubt the noble Lord, Lord Shackleton, would like to see commissions done away with altogether. That is one point of view. But there is the other point of view: that these commissions in principle are really no different from any other commissions introduced in respect of any other type of business. After all, when we go to a shop in the ordinary way and buy something we do not necessarily inquire what are the commissions payable all the way along the line from the manufacturer to the retailer. It is open to some doubt whether the mere publication of the amount of the commission is necessary, as we were saying on an earlier Amendment.
I think perhaps the answer to my noble friend Lord Hawke, which I am sorry I did not give him before, is that the two things that have to be disclosed are, first of all, what the cash price would be if the goods were bought for cash; and, secondly, in the contract there must be the total hire-purchase price. That, together with the instalments, allows the hirer to make his own calculations. We shall be coming later to the question of advertisement and what happens if there is any suggestion of what the amount of deposit will be and so forth.
May I interrupt my noble friend, before he goes any further? I am fairly quick at arithmetic, but I am unable to do that calculation—the true rate of interest worked out from the instalments on the declining balance. I am unable to do it myself, and therefore I conclude that the vast majority of people who embark upon hire-purchase contracts are equally unable to do it. Therefore at the moment the true rate of interest is disguised from them. I merely ask my noble friend whether he will take this into earnest consideration and put somewhere in this Bill the necessity to disclose the true rate of interest on the declining balance. No harm can be done to anybody except the person who wishes to disguise the rate of usury.
Before the noble Lord replies, may I answer the noble Lord, Lord Hawke? Nobody knows the true rate of interest, not even the hire-purchase companies themselves—I speak as one who has signed many thousands of hire-purchase forms. The figure is 779 not an interest figure; it is a charges figure, and the hire-purchase house hopes that it will not be put to extra expenses of collection or postage. If there is no trouble at all, it is about 7½ per cent., which is admittedly nearer to 15 per cent. per annum. But it may be 1 per cent. or it may be one-half of 1 per cent. It is impossible to say what the true interest figure is. The figure referred to as "charges" is a "shot" to cover all contingencies, and what is left as profit becomes the interest figure.
§ LORD DRUMALBYN
The argument I was developing—and I had not come to the end of it—is that what the consumer is really interested in is the two figures: how much he has to pay if he buys the goods for cash, and what will be the total hire-purchase price if he buys by hire-purchase. Whatever commission is payable by the finance house to the dealer has to be reflected in the total price. Under ordinary competition, surely the hirer, or hire-purchaser, if you like to call him that, is able to compare the cash price and the total hire-purchase price as between one dealer and another. This is the way competition works. Of course finance companies are in business to lend money. They compete for clients, and their clients are the dealers who bring them the business and the hirers with whom they have these hire-purchase contracts.
I wonder whether this is not something that we ought to leave to the free play of competition. This is something which is not so different from any other kind of competition—people competing for business. Surely this is the essence of it, and I wonder whether it is good sense in this particular case to limit the amount of the charges. Generally speaking, any kind of price-fixing of this kind does not help competition. There will be a play both ways. I believe that there was at one time an attempt to ban these charges altogether; and some time later a particular level of maximum commission, as the noble Lord, Lord Shackleton, said, was being practised as an upper limit by agreement between, not all, but a large number of finance houses. I doubt whether it is right to intervene in this case to fix levels of commission of this kind. I should have thought that in the normal way the market and the competition between 780 finance houses to have as many hire-purchase contracts as possible, and as many customers as possible, will itself act as a limit on the amount of comission they are prepared to give to dealers.
I think I should add that of course one has to consider what happens to the commission which is paid. If somebody is buying a second-hand car on hire-purchase terms, or trading in a car in order to buy a new one, the commission paid to the dealer will undoubtedly enable him to offer better terms for the second-hand car traded in than he otherwise could do. It does not follow that in every case the cost of this will be paid for by the hirer. It may well be absorbed in the whole range of the transaction.
§ LORD SHACKLETON
May I interrupt the noble Lord? Why does he say, "will enable him to offer better terms"? Why does he not buy at the market price?
§ LORD DRUMALBYN
What is the market price if you are buying a secondhand car? What I am saying is that here is somebody who is either buying a second-hand car or trading one in. If he is buying a secondhand car, the fact that the dealer gets a commission from the finance house may enable the buyer to get that car more cheaply if he is paying for it through hire-purchase; or, alternatively, if he is trading in his secondhand car, that may enable him to get more for that secondhand car. I submit we ought not to tie things up too tightly in cases like this. I do not think it would be to the benefit either of this kind of transaction or the economy as a whole.
§ LORD AIREDALE
Leaving aside for the moment the question of trading in, which is a special case, I would point out that the Minister asked us to consider other forms of commission and invited us, when we go shopping, to inquire about the amount of the wholesaler's and the retailer's commission. Most of us do not doubt that the wholesaler and the retailer work hard and earn the commissions they receive. But what some of us are uneasy about in these hire-purchase cases is whether the dealer really earns or deserves any commission at all; because he gets from the existence of the hire-purchase company the benefit of being able to sell 781 the goods when he would not otherwise have been able to make the sale. Some of us wonder whether he ought also to be entitled to receive any commission.
§ LORD PEDDIE
I think the noble Lord opposite has confused the issue somewhat by his reference to secondhand vehicles. The point at issue in this Amendment is drawing attention to what has become in certain cases somewhat of an evil; that is, payment of excessive commissions to dealers to encourage hire-purchase transactions. This is merely an attempt to focus attention upon this important problem and to limit the amount of commission that should be paid to agents to encourage hire-purchase transactions.
§ LORD DRUMALBYN
I am bound to reply to that argument straight away. Inherent in what the noble Lord has just said is that hire-purchase is a bad thing, and ought not to be encouraged. If we believe that, then the right thing to do is to take steps to stop it. I thought the view of the Party opposite was that hire-purchase enabled many people of small means, when they required things, to buy in advance of their immediate capacity to buy. As to the actual amount of commission paid, I think we have fully explored this point, and I quite understand the point of view of the noble Lord, Lord Airedale. The fact is that, while it may enable a particular dealer to sell, he himself is selling in competition with other dealers. Some dealer will make the sale if someone wants to buy something on hire-purchase, and behind him stand the finance houses competing for business. This situation exists throughout the whole range. It represents a system through which people are competing for business, whether as dealers or owners or sellers operating through hire-purchase. I think that on the whole one can leave this to the ordinary haggle of the market and, indeed, I think there are positive dangers in restricting that process.
§ LORD SHACKLETON
I must reply to the noble Lord. No one, of course, wishes to deny hire-purchase—I think there are strong social arguments about its desirability, but we are not concerned with that to-day. It is clearly a necessary service. What we are suggesting is that additional incentive 782 should not be given to people to take goods on hire-purchase at a cost which they may not fully appreciate and on agreements which they do not need to enter into. I should have thought it would be common agreement among us all that if people could pay cash it is better that they should do so. If they cannot, then undoubtedly one wishes to provide reasonable facilities.
The charges in this particular field are a great deal higher than the charges that are made in the ordinary retail trade. There the figures for charges are a good deal lower, and the circumstances may well be different. My noble friend Lord Peddie would know from the Co-operative Movement side that this is the case. There are no secret additional commissions and there is a good deal of regulation, fortunately most of it done within a particular industry by agreement as to rates of commission. I will not go into this, but it is certainly true in certain fields and with certain commodities. It is undoubtedly the wish of the majority of people in the finance house business that there should be such a limit.
I would suggest that it is not general knowledge that a commission is paid to a dealer. Indeed, I would go so far as to say that probably a large number of Members of your Lordships' House would be unaware of this particular point. If it is kept secret, unless we can, in fact, give effect to Lord Shepherd's earlier Amendment, on which there has been support from all sides of the House, then, I should have thought, there is no alternative but to limit. We ought to use one or the other solution. I do not know whether the noble Lord, or any other of your Lordships wishes to reply again. I am obviously not going to press this Amendment, but I very much hope that the Government will give consideration to one or other of these solutions. I ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 3:
§ Right of cancellation of certain hire-purchase and credit-sale transactions
§ 3.—(1) The provisions of this section shall have effect where a person (in this section referred to as "the prospective hirer or buyer") signs a document (in this section referred to as "the relevant document") which—
- (a) constitutes a hire-purchase agreement to which the principal Act applies, or would
783 constitute such an agreement if executed by or on behalf of another person as owner of the goods to which it relates, or
- (b) constitutes a credit-sale agreement to which that Act applies under which the total purchase price exceeds £20, or would constitute such an agreement if executed by or on behalf of another person as seller of the goods to which it relates,
§ 7.3 p.m.
§ LORD PEDDIE moved, in subsection (1), after "person" to insert "not being a body corporate". The noble Lord said: This is quite a simple and straightforward Amendment and one which I hope will be accepted by the noble Lord opposite. It seeks to amend Clause 3, which deals with the right of cancellation of certain hire-purchase and credit-sale transactions. In this clause the reference to "person" obviously relates to an individual and, in consequence, strengthens the support for the Amendment that I put forward because I believe that my Amendment would make it more explicit.
§ Frequently we have had the expression of the viewpoint that this Bill is for the purpose of protecting the consumer, and this clause is concerned specifically with the protection of householders, consumers who are bulldozed into signing agreements on the doorstep. I suggest that it is neither desirable nor necessary to apply this to corporate bodies, and I think that without my Amendment it could have such an application. I think that in the absence of my Amendment difficulties could arise where an agreement is signed by a quite responsible firm at a place other than appropriate trade premises. Indeed, it could be signed in their own office, or signed in some local hostelry, and the corporate body and the H.P. organisation could be quite determined to proceed with the agreement and have no occasion to have any second thoughts, but the interpretation of the clause as it now stands could give to such a corporate body the right of cancellation which referred to individuals. Therefore, I move this Amendment, believing that its adoption would strengthen the clause. I beg to move.
Page 3, line 15, after ("person") insert ("not being a body corporate").—(Lord Peddie.)
§ LORD DRUMALBYN
I would confirm that as the clause now stands corporate bodies are persons within the meaning of the clause, and therefore, are entitled to the cooling-off provisions unless a contract is signed at trade premises. The question which I think one has to ask is what would be the practical effect of excluding the corporate bodies? One might start from the point of view that the protection is designed mainly, possibly wholly, for the individual; but, of course, the protection of the 1938 Act is extended by the present Bill to contracts of up to £2,000 in value, and no distinction is made as to the type of person or hirer with whom that contract is made. It would be a little odd, in this particular case, to make a distinction between one type of hirer and another, and I doubt very much whether it would have much effect. I would doubt whether corporate bodies who entered into a hire-purchase contract on their own premises would in fact avail themselves of the cooling-off provision. I think it is extremely unlikely. I think it would be looked at a little bit askance if they did. I should not have thought that this was a real problem in any way. I should be glad to consider it further.
A much more important problem, I think, is whether corporate bodies as a whole ought not to be taken out of the protection of the Act. That is something which has not been suggested in any Amendment, but when I saw this Amendment I felt that this was possibly what the noble Lord who put the Amendment down really had in mind. If that is not so we need not pursue it further. In this particular case I would put the argument that if corporate bodies are to have the protection of the Bill as a whole there is not really any reason why they should not have the protection of this particular part of it.
§ LORD PEDDIE
I think the noble Lord has gone more than half way to accepting this Amendment. I am rather surprised he does not give himself justification for a real pat on the back and accept it, because, while I have already expressed one very sincere compliment during the course of this Committee stage, I should feel far from complimentary when considering the reply he has given to me on this Amendment.
§ LORD PEDDIE
That is true. The noble Lord opposite argued that the Bill, by extending the limit to £2,000, effects no distinction as to the type of hirer. That is quite true, and I am not objecting to it. But that point has no regard at all to the Amendment I am putting before the House. Clause 3 deals with the right of cancellation in special circumstances, and the clause is framed specifically for the purpose of protecting a certain type of householder, the householder who is unduly persuaded on her doorstep into hire-purchase transactions. So the two points the noble Lord makes are not relevant.
I am concerned with this particular type of cancellation, and the noble Lord has accepted the argument, but goes on to say that surely corporate bodies would not avail themselves of this facility. It is more than likely they would not. But where is the justification for not making it quite clear in this clause that this right of cancellation does not apply to corporate bodies? Indeed, I would suggest that in the majority of cases where the hire-purchase agreements are signed they would be signed by corporate bodies not at what is described as "the premises"; in the majority of cases they would be signed, instead of at the "appropriate trade premises", in the office of the corporate body, and it would be open to such a body to avail themselves of the rights given to the householder under Clause 3. Frankly, I am surprised the noble Lord opposite does not accept this Amendment because he has indeed argued in support of it. It does nothing to restrict the strength of the Bill and certainly makes it far more explicit. It excludes in this particular field alone the right of cancellation in the circumstances I have mentioned. I think there is every justification for acceptance of this Amendment.
§ LORD DRUMALBYN
I resist it simply because I think we must all be reluctant to make exceptions in cases like these. We want to keep the thing as simple as possible. I would agree with the noble Lord that in this case it is really just a question of whether one thinks it is worth making an Amendment of this kind, when it is very unlikely 786 that the corporate bodies will avail themselves of this particular facility. I agree it is not really intended for them. If the noble Lord wishes to press it, I am perfectly willing to accept it.
§ On Question, Amendment agreed to.
§ 7.13 p.m.
§ BARONESS BURTON OF COVENTRY moved, in subsection (1), to omit all words after the end of paragraph (b). The noble Lady said: If the Committee are willing, I should like to speak to Amendments Nos. 11 and 14 because they are related. With regard to No. 11, as the Minister may remember, I have a personal interest that goes over some ten years into another place when I was trying to ensure, as this particular Amendment does, that the four-day pause shall apply to hire-purchase agreements signed at home and in the shop. I am well aware that what I am putting forward does not have the support of the retail trade or the Consumer Council or the Citizens' Advice Bureaux or the Hire-purchase Trade Association. But as the Committee will recall, a few moments ago I had the support of all those people and I obviously cannot do worse, because I cannot get anything worse than a refusal.
§ I still think, in spite of that formidable list, that what I am seeking to do is right. I am sorry that the noble Lord, Lord Conesford, is not in the House at the moment, because some years ago in another place he and I often used to cross swords on these matters. I can remember once saying to the noble Lord (he was not a noble Lord then; he was Parliamentary Secretary to the Board of Trade) that I was quite convinced I was right in this particular matter. The Minister could bear it no longer; he got up and said, "Of course I never knew the honourable Lady when she was not sure she was right". I have always remembered that. It seemed to me that he had a point. But of course if we do not believe we are right we are not going to get very far. On that matter of consumer protection I was proved right, although it took ten years to get anywhere. Why was I proved right? I think because there was a social need for that type of legislation. And I believe that 787 there is a social need for what I am advocating to-day.
I should like to say to my friends in the retail trade and the Consumer Council and the Citizens' Advice Bureaux and the Hire-Purchase Trade Association that although this is a case where the information they have, the facts they have, and the assumptions they draw from them, would seem to prove me wrong, I think there is one thing more important than all those put together. That is the human factor; and the people that I want to help here are those who are most in need. I think that everybody in the Chamber to-day—and, if I may say so, even the Minister—would accept the three points that I want to put now. The first is that in a matter of consumer protection (which is not a phrase I like, and I think not a phrase most of us like) you cannot cover everyone, so quite obviously the people you wish to cover are those most in need. Secondly, who are those most in need? Quite obviously those who allow themselves to be talked into buying something they cannot afford. The third point, how does this happen? To quote Molony's word's in paragraph 521, they referred to:
The hirer who is over-ready to commit himself as well as those whose weak sales resistance is overcome by practised artifice".
Or, as I would put it, more simply, by the unscrupulous salesman who will badger and badger and wheedle and wheedle until he has made a sale.
§ Now I come to the fourth point, and I imagine the bone of contention: where does this happen? I would ask the question of the Committee: is it only in the home? That is complete rubbish. These pests of salesmen are to be found anywhere. Thank goodness! they are in a small minority—I would make that quite clear but the damage they do is heartbreaking. In another place over ten years I had many hire-purchase cases brought to me which had arisen from these pests of salesmen in the type of shop that I would call a "cheap" shop—and I put "cheap" in quotes. We can all say, of course, "People should not be silly" and so on. I quite accept that. We know that. But we should not get very far with some of these people who come to us in real need, who cannot afford to lose 788 the money, if we took that attitude. I found in Coventry that this type of shop very quickly put the matter right when they received a letter on House of Commons paper; they are the sort of shop who would be frightened by something like that.
§ The Consumer Council—of whose support I was glad on the previous Amendment, although it did not get me very far—on this particular matter do not agree with me. I expect the Minister has seen their first issue of Consumer Context, and what they have to say on this particular Amendment is that the Council does not believe that this would lead to greater protection for the consumer. This provision in the Bill was aimed specifically at protecting the housewife from being bullied by the salesman on her doorstep. Someone going into a shop to buy anything on hire-purchase has taken the initiative in approaching the salesman and may be expected to know what he is in for.
§ I would add that the Council support the Government on this point. I wonder whether those who are opposing this Amendment—I want to put this to the noble Baroness, Lady Elliot of Harwood—have ever looked in the windows of the type of shop that I am talking about; because, quite honestly, just to look in the window of that type of shop is to be pounced upon by this particular type of salesman. It is not a case of taking the initiative. Really and truly, the people are inveigled into that shop by the salesman. I do not know what my noble friend on the Front Bench said, but I would repeat, that if you look in the windows of that type of shop in Oxford Street—it used to be so in Tottenham Court Road—you are pounced on by that type of salesman who unfortunately has to pounce to keep his job. I feel sorry for the salesman. But once he has got the window-gazer into the shop he does not "let up" until the contract is signed or until the window-gazer has got away.
§ If anybody were to say to me "Is it not easy to get away?" my answer would be: "No, it is not—not from this type of person". You or I might get away. We might not even be inveigled in; but not if you are the certain type of person such as I am thinking about, nervous and exhausted by a torrent of 789 words which goes on and on and on—I can assure the Committee, and I think everybody would agree with me here, that this type of salesman, whether on the doorstep or in the shop, does go on and on. I have seen the results of this, and I want to stop it, or to see that what protection can be afforded against this is made law. I maintain—and I do not think that anybody will dispute it—that this type of salesman is every bit as much a menace in the shop as on the doorstep. If people want safeguarding from him, as I think they do, then I maintain that it must be in both places. I would ask the Minister, why should it be only in one? He himself will know, I imagine, that the Scottish Retail Credit Association submitted a memorandum to the Board of Trade asking that any pause should extend to all transactions. I may add, in passing, that I was glad to think that I had that support, although I did not know of it at the time. I can assure the retail trade and the hire-purchase industry that this type of salesman does great harm.
§ The next point I want to put to the Minister is this: why protect him at the expense of the customer? If, when the Minister comes to reply, he accepts the Amendment, I shall be able to withdraw all this. But if he does not accept the Amendment, I am wondering whether one of the reasons he is going to give me is that this happens so seldom, or does not happen in reputable shops. Of course it does not. The shops would not be reputable if it happened in them. I want to know why, if it does not happen in reputable shops (and it does not) the reputable shops should object to its being stamped out in those where it does happen.
§ A further point I should like to mention, in case the Minister advances it, is this. I have been told that if this were done it would delay deliveries from shops to customers. I do not know much about the Provinces, as I live in London; but this is certainly not my experience. If I go into a shop and buy something of a considerable size and it has to be delivered to me, my problem is not that it will come next day, but when it will come. Sometimes the amount of time that I have to wait for something to be supplied from a shop may be up to three months because of supplies shortage. In regard to furniture or some other things 790 the time is quite incredible. If the Minister were going to advance that as a reason, I do not think it is a true one; and even if it were a true one I should not think it sufficient reason for not doing what I want.
The Molony Committee were reporting on consumer protection. At the beginning of their Report I was impressed by what was said in paragraph 15. I should like to quote this, briefly, because I think it is most relevant. They said:
We have not overlooked the consideration that it is the least intelligent and discerning shopper who is the one most likely to be victimised…We further recognised that the welfare impulse of modern society requires intervention in aid of those least able to protect themselves as soon as the threat of exploitation becomes active.
Moving on to the actual problem that I am raising to-day, we find that in paragraph 521 Molony had this to say about the cooling-off period:
We have given close thought to this idea of a 'cooling-off' period because of its obvious value as a check on the excesses of salesmanship. We are concerned, if it is possible, to safeguard the hirer who is over-ready to commit himself as well as those whose weak sales-resistance is overcome by practised artifice. It is not in the true interests of any party (save the disreputable) that hirers should undertake obligations which they cannot reasonably discharge.
I should not have thought that it was in the true interests of anyone at all, save the disreputable, that such obligations should be undertaken anywhere, in the home or in the shop.
I should like to ask the Minister: are we now being told that it does not matter if this happens in a shop? Is that the argument? Presumably we are, because Molony went on to say at paragraph 524:
The conclusions we draw from these perplexing and conflicting considerations is that it is not practicable to restrict hire-purchase business negotiated at retail establishments.
Why? What reasons make this decision? Looking at what Molony has to say, the only reason I can find is that of inconvenience to the shopkeeper. That is a reason that I certainly am not disposed to accept. I feel that it is another example of what I referred to as the "defeatism" of Molony when we discussed that Report in this House on November 14, 1962, The Minister of State was not then with us, but I wish he had been, because I am wondering whether he would agree with me that in
these cases of the pause in the shop, as in the case of guarantees, it is not the slightest use the Molony Committee's saying we cannot do anything about it. It does not seem to me to get us very far. Recently on television I had the opportunity of discussing this particular matter. On the next day somebody who is not at all of my political opinion—in fact most strongly of the opinion of the Party opposite—came up to me and said: "I agreed with what you said last night." It was a considerable surprise to me. The same person went on to say "This particular thing happened to me in a shop." It does happen, and I want to stamp it out. I do not think it is right if it happens in a shop, any more than if it happens at home.
I want to say to the Minister that I believe that if it is practicable to impose a pause on agreements signed at home it is practicable to impose it on agreements signed in the shop. Surely the aim of this pause in the home is to protect the customer. I see no reason why the customer should be protected in the home and not in the shop. I have already quoted part of paragraph 521 of the Molony Report, and I would conclude with one sentence that I requote—namely:
We are concerned, if it is possible, to safeguard the hirer who is over-ready to commit himself as well as those whose weak sales resistance is overcome by practised artifice
§ It is possible. I beg to move.
Page 3, line 27, leave out from beginning to end of line 29.—(Baroness Burton of Coventry.)
§ LORD SHEPHERD
I accept the look of reprimand of the noble Lady for speaking to my noble friend beside me while she was making, I think, a very strong case for this Amendment. What in fact I was saying to my noble friend was that the noble Lady was making a very good case. That does not, however, mean that I would go so far as to support this Amendment. There is a considerable difference between negotiations on a hire-purchase agreement taking place in the home as against their taking place in a shop. It is true that the high-pressure salesman is evident in both places, but in the case of the shop it is physically possible for the housewife 792 to walk out, whereas in the case of the home it may be extremely difficult to get the salesman out of the house. There is that considerable difference. However, I accept that this unpleasant approach and high-pressure salesmanship may exist in shops.
I understand that there is a period in any agreement, the period up to the time when the company in fact signs the contract, when it is open to the customer or hirer to cancel the agreement. Would the Government indicate whether they can accept the next Amendment, No. 12? This would entail a requirement that:A copy of the relevant document shall be retained by the prospective hirer or buyer and it shall contain particulars of the name and address of the person to whom cancellation may be delivered, and to whom goods may be returned.The methods adopted in negotiating a hire-purchase agreement involve two pieces of paper, the original and the duplicate. The original is signed by the hirer, and then the dealer who is negotiating the contract takes both copies away, the customer therefore having no knowledge of two things. She may have a rough knowledge of the name of the hire-purchase company, but she has no knowledge of the address of either the head office or the branch that may be responsible for the contract. Equally, she will have no knowledge, unless her memory is very remarkable, as to whom cancellation could be sent.
If the Government were able to accept Amendment No. 12—which I will speak to now in order to save my doing it later on—this would mean that the hirer would be given by right a copy of the agreement setting out in all detail what she was undertaking, with the details which I require in the Amendment—the name and address to which cancellation could be made, and the name and address (if she has taken the goods) to whom the goods could be returned. Then there is this period in which she can in fact cancel the agreement; that is to say, the period before the hire-purchase company signs it. It may be a question of two, three or four days, or it may be longer, but at least she will have 48 hours in which to effect cancellation. In the case of the housewife who has been beaten and battened upon by the shop salesman and who walks out and says, "I did not want to buy it. I 793 wanted to cancel it", she then has the opportunity—she has the facts—to effect cancellation.
We may have to discuss later the point as to whether the arrangement in the Bill about the mere posting without any evidence is going to be satisfactory, I do not know about that. But if the Government were able to accept Amendment No. 12—and we recognise that there is a period in which cancellation could be effected by the customer—I think this would meet the point of the very strong case made by my noble friend. It would not give her her Amendment, but it would in essence give what she is asking for, a period in which the customer who has been beaten by the salesman can in effect cancel if she wishes.
§ BARONESS ELLIOT OF HARWOOD
I shall not detain your Lordships for very long at this hour, as the noble Baroness has in fact set out my views on her Amendment. I could not support the Amendment for the reasons she has herself given. I would support the noble Lord, Lord Shepherd, and he also, I think, has put the case against Amendment No. 11 very cogently indeed. Of course, there are abuses and there are people who are incapable of making up their minds, but one really cannot protect people from themselves indefinitely. Somehow or other they have got to be able to cope with possible, abnormal circumstances. I am afraid I have not got the same knowledge as the noble Baroness has of the kind of shops she mentioned. I pass by them very often, but I do not think I have ever stopped at the window and been enticed in. I think I shall have to try it to see what happens, but I have not yet actually done so.
There is a great difference between going into a shop and buying something and having a salesman in your house whom you cannot get rid of. That is why I would not be in favour of Amendment No. 11. However I would be in favour of Amendment No. 12, for I think Lord Shepherd's Amendment is a good one. Whether we are in order in discussing it at this point I do not know, because we are now of course on Amendment No. 11, but I must say that I would be opposed to Amendment No. 11 and in favour of Amendment No. 12.
§ LORD DRUMALBYN
I hope we shall not confuse this issue too much. I listened to the noble Lord, Lord Shepherd, with great interest, but I have no doubt that he now appreciates that his Amendment would not really help the case the noble Lady was making, because we are here dealing withthe relevant document …signed by the prospective hirer or buyer at a place other than the appropriate trade premises".What the noble Lady wants to do is to widen the definition of "appropriate trade premises". If we rejected this Amendment and accepted that of the noble Lord, it would not help the noble Lady because we should then still be limiting the effect of the Amendment to documents signed by the prospective buyer at places other than appropriate trade premises—for, as the noble Lady is suggesting, it would include documents that are signed at appropriate trade premises. Therefore, perhaps the noble Lord will excuse me if we do not pursue that one this time. In the meantime, I will certainly take note of what he has said.
I think I can answer the noble Lady very shortly. She put her case extremely cogently, and nobody would doubt that this would be an additional protection for the consumer. Equally, nobody would doubt that she would not on this occasion happen to be on the same side as the finance houses, because I do not think the finance houses would agree with her in this. The real thing is to maintain a proper sense of proportion. The noble Lord, Lord Shepherd, on Second Reading used words to the effect that the right to go back on a bargain is a pretty drastic sanction, and I think that we must be rather careful as to how far we extend it. The Committee on Consumer Protection considered this very carefully and decided that there was not a case in general, so far as all hire-purchase contracts were concerned, whenever a transaction with a dealer or retailer on hire-purchase is made. They decided that the case of the unscrupulous salesman on the doorstep, or the salesman who gets past the doorstep, is a very much stronger one—so strong that it is worth giving protection against. There is a clear distinction between the two. It is a question of where you hold the balances, and, while I quite 795 understand the noble Lady's case, I think that at this stage it is not sufficiently strong to justify the Government in accepting it. I very much regret this, because I should have liked to accept it.
§ BARONESS BURTON OF COVENTRY
Yes. It will give me a great surprise when the Minister does. But, if I may say so, I disagree of course with what he has said. I think there is a case for this. I think it should be stopped. I think it should be stopped in the home, and I think it should be stopped in the shop. But I would ask the Minister—he may think it presumption on my part—not to fall into the same error as I think Molony fell into, of defeatism on some matters, by listing the problem and then saying, "We cannot do it." The only reason the Minister really gave for not doing this was inconvenience to the shopkeeper. I will not divide the House, because obviously nobody agrees with me—and I say that as I know the Lord Chairman will be asking me that question in a minute. I just wanted to make that point. I still think I am right on this matter, and I will have to keep on. I ask the permission of the Committee to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ LORD DRUMALBYN
I beg to move that the House do now resume. I think we have reached a satisfactory stage. Perhaps we have not made quite as much progress as I, at any rate, had hoped, but I think we have reached a stage where we deserve to go home.
§ Moved, That the House do now resume.—(Lord Drumalbyn.)
§ On Question, Motion agreed to, and House resumed accordingly.