MONEY-LENDERS.

New Zealand Times, Volume LXXI, Issue 4438, 19 August 1901, Page 4

MONEY-LENDERS.

The motive which prompted the Hon, W. Hal>Joties to introduce his Moneylenders Bill must be appreciated. Pub; lio sentiment is not always effective in restraining money-lenders from inflicting “harsh and unconscionable” condh tions upon their patrons, hence the necessity for having the methods of the usurer reviewed in open Court and his business to some extent legally controlled. By the exaction of harsh terms and conditions of repayment, tho Lora» bardian fraternity inflict considerable injury upon their clients, and in that way they do harm to the community. This is the priijpiple on which legislative interference with harsh and unfeeling money-lenders is justifiable. The English laws against usury were abolished many years ago, because they created innumerable legal fictions, and induced interminable litigation, the burden and expenses of which were found to be oppressive to small borrowers. There was. in addition to this, the fact that political economists had demonstrated that the rate of interest would bo such as to equalise the demand for loans with the supply of them. Interest, it was affirmed, would regulate itself and would be measured by the amount borrowers were willing to give, and the price at which capitalists were ready to lend. That is to say, if lend ers were eager for investments interest would fall; an extraordinary demand for money would, on the other hand, raise its value. This is, however, a principle that affects the money lending business as carried on by dulj-'icenscd pawnbrokers, building societies, insur ance companies and banking institutions, and does not touch the monej’lenders, who, as Mr xxall-Jones pointed out, lend five pounds and exact as much as thirty and over before the loan is finally repaid. It was to deal with such harpies that the Minister designed his measure.

In his speech urging the Bill to the approval of the House of Represen La. tives, Mr Hall-Jones said his object was to provide for an honest adjustment of accounts between borrower and lender, by giving the borrower power to have his transaction with his pursuer reviewed by a' Stipendiary Magistrate. No objection to this is ordinarily taken, hut it is to be feared that the evils of wmcu the Minister is cognisant will not be remedied by this proposal. Bills of exchange, by means of which much of 'ho “harsh and unconscionable” business i- -

done, are negotiable, and the person who is pursuing the borrower may hav; acted perfectly honestly in his purchase of the bill of exchange, while it is pos sible that the borrower only received tuenty, thirty or even fifty per cent, less than the face value of the document in the first instance. There .’c also much in Mr Hanan’s contention that those engaged in the money-lending business will in another way escape -lie provisions of the measure by combining money-lending with some other avooa. tion and calling the latter the “prrmaxy business.” By doing this a money lender could evade the Bill, since it exempts from its provisions “any person carrying on business not having for its object the lending of money, in the course of which and for the purposes whereof he lends money.” When Mr Hanan noted this obvious flaw in the measure, had he any thought of those members of his .own profession who make bill-discounting one of the ad juncta to a business which has not money-lendmg for its primary object? Money-lenders have invariably laugbed at all legislative attempts to suppress their .ruthless practices, and should Mr Hall-Jones’s measure pass unamended they need not despair of being able to successfully evade it.

It was urged that the Money-lenders Bill should fix a legal rate of interest, at. say ten per cent., so that the borrower might be able to go to the Court and ask for a rebate if charged more than that amount. But the weak point of all enactments against usury has been the inclusion of a fixed rate of interest; and even if the rate were fixed it would not prevent needy ind>. viduals with little security from tempting lenders to make advances at usurious rates. The difficulty the Minister has had the courage to face is great and he is conscious that the harmful noneyjending business is chiefly caw ried on by those persons who are wilt ing to take enormous risks in the hope pf extraordinary profits from those who have, through extravagance or other causes, exceeded their incomes, or re.

toilers who have by mismanagement reached the verge of bankruptcy. The Minister cited instances of unregistered bills of sale which secured creditors as much as forty per cent., while other creditors obtained nothing, even when the crash to the borrower ultimately came. It is doubtful, however, if the provisions of the Bill will be able to eepe with such cases. At all events, ii. is not clear that the money-lender will fail to escape under cover of the exemption to which Mr Hamm drew at tention. Although the Hon. Hall. Jones would not agree to the fallacious proposal of fixing the rate of interest recoverable at law, the seventh section of his Bill proposes to repeal the Mer cautile Law Act of 1880, in so far as it provides that “there shall be no limit to the amount of interest which any person may lawfully contract to pay.” It would seem, however, that this restriction will not bo sufficient, since another section of that Act implies that persons have a right to enter into contracts providing for the payment of a higher rate of interest than eight per cent, and having their contracts ratiaod by a Magistrate. One thing which Mr HalhJones’s Bill will effective'y put a stop to is the institution of “long money-lending firms”—one firm trading under different names in various places in the same country. This was the chief object of the English Bill of last year; hut the evil has not as yet raised its head in this country. As the current rate of interest depends upon the accumulation of capital and its relation to the demands of the borrower—the less the security the higher the rate of interest—it is scarcely possible to conceive a measure that would effect tually put an end to harsh and unconscionable exactions by money-lenders. Mr Hall-Jones in his attempt to do so will have, however, much sympathy and encouragement.