CHECKING USURY.

Evening Star, Issue 10903, 11 April 1899, Page 1

CHECKING USURY.

In view of certain scandalous facts that had been disclosed in the law courts on various occasions, a Select Committee of the House of Commons were„appointed two years ago to inquire into and report upon the evils arising from the methods of business adopted by professional money lenders. The Committee were reappointed last year, and after the examination of a large number of representative witnesses the conclusion unhesitatingly arrived at was that the system of money-lending at j high rates of interest was productive of crime, bankruptcy, unfair advantage over ; other creditors, extortion, from the bor- ! rower's family, and other serious evils to/the commuity. The report. sjf the Committee was taken into consideration by the Salisbury Government, who satisfied themselves that the decision was only too well founded, and resolved to make the evils in question the -subject of a legislative measure. The Ttinisterial Bill was accordingly introduced in the House of Loids on February 20, its charge being suitably entrusted to Lord Jambs of Hereford, better known as Sir Henry James, the distinguished barrister of former days and Attorney - General in more than one of Mr Gladstone's Administrations. Lord (then Sir Henry) James left Mr Gladstone early in 1886 on the first hint of the Home Rule proposals—refusing the tempting bait of the Lord Chancellorship, which accordingly fell (during the shortlived Administration of that year) to Lord Herschell, who died only the other day. It may be remembered, in passing, that Mr Seddon made a show of legislating in regard to the money-lending evil in New Zealand two or three years ago; and though the scandal is not so great here as in the Home Country, nevertheless it does exist to some extent, and perhaps the example of the Salisbury Government may encourage our Premier to revive his project. Lord James delivered an able and lucid speech in introducing the Bill, enumerating the specific evils that called for treatment, and premising that the Government had no intention of reestablishing the old usury laws, though they did intend, with the concurrence of Parliament, to remedy a grievous wrong. The Bill proposes that every person carrying on the business of a money-lender shall be registered under one name only, and shall not carry on his business under false and deceptive names. The term " professional money-lender" is to include every person who carries on the business of money-lending, or who advertises himself or holds himself out in any way as carrying on the business; but it is not to include pawnbrokers, or bankers, or other persons carrying on commercial or general financial business, in the course of which they may lend money. Lord James admitted that the definition was not a perfect one, " but the " object was to provide a sufficient protec- " tion to those who were legitimate lenders "of money." The borrower is to be furnished with a copy of every contract, including all conditions. We now come to the really salient provisions of the Bill. Power is to be given to the courts of law to review and go behind any contract made with a money-lender, and to give relief to the borrower where the burden of the contract which he has undertaken is totally disproportionate to the amount of benefit he has received. This power of review is not to be exercised in cases where the rate of interest is less than 10 per cent, per annum.} but where the interest exceeds 10 per cdnt., or where the amounts charged for inquiries, bonus, etc., are excessive, the Court may reopen the transaction and order a statement of accounts to be made between the borrower and lender, in order to ascertain the amount which, according to all the risks and circumstances of the case, is fair and reasonable. Lord James expressed a hope that this legislation would prove to be an efficient check upon those who were carrying on the business of money-lending, and who would know that every contract in the future would bo subject to review by a just and impartial judge. The Bill appears to have been favorably received upou the whole, but criticism has not been lacking. It is suggested that the wily money-lender will find means of evading the registration clause of the Bill, and that the veto upon trading under - more than one name will be got the bettor of by the skilful employment of dummies. The Bill does not apply to pawnbrokers. Why, then (it is asked), should not the money-lender turn pawnbroker 1 "It " might be a nuisance to be compelled to " start a business of that kind ; but the

" profits of money-lending are worth some " sacrifice, and while the assistants were " lending two-and-nine on a pair of shoes " or fourpence on a flat-iron in the front "shop, the usurer might sit comfort"ably in the back parlor lending out "his money at 60 or even 150 per cent. " without any fear of the law." Ordinary money-lending is by no means an unusual feature of a pawnbroker's business in New Zealand. Other criticisms strike more boldly at the principle of the Bill. The sanctity of contract is cited, and borrowers are reminded that if they engage to pay 200 per cent, interest they do so with their eyes open. We have no sympathy with this plea; and, indeed, it may be regarded as obsolete now that a Conservative Government have turned their backs upon it. The recent revelations in the law courts have clearly shown the necessity of preventing unscrupulous Shylocks from taking unfair advantage of the dire straits m which borrowers sometimes find themselves. One point of interest remains to be noted. Lord James, while admitting that Parliament could not provide an equivalent for the money-lender, suggested that the German system of rural credit banks was worthy of consideration. Certainly there are decided advantages in this system of co-operative money-lending. To quote from an article in the 'St. James's Gazette': "The thing is simplicity itself. A certain number of people form themt selves into a bank, agreeing to become "lenders to each other; no person can "borrow unless he is a member of the ■" bank, and he borrows on his own simple "statement that he will repay, but is " backed by two sureties. There is no " necessity for bonds or bills of sale, and "the interest is. limited to 5 per cent. •'These banks had a turnover of eleven " millions in Germany the year before last, " Some small attempt has been made to " acclimatise the German system in Ire- " land, and always with success. The credit " bank became in jural Germany " because of the extortion of the money- " lender, who, like the Irish gombeen man, " preyed upon the whole countryside. The I" necessity for placing money-lending upon '«areasonable businessbasjs,aod for regard-

" ing it as a legitimate financial operation, "has become very little leas urgent in "England." In considering the bearing of this system upon the prevention of existing evils it has to be remembered, however, that the class of borrowers who are victimised at the rate of 200 per cent. • are the people who cannot secure the back-: ing of " two sureties." j