Clause 13. — (Special provisions as to Pawnbroker's Loans.)

Orders of the Day — Moneylenders Bill. – in the House of Commons on 1st July 1927.

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Photo of Mr Rhys Davies Mr Rhys Davies , Westhoughton

I beg to move to leave out the Clause.

I will be very brief in moving the deletion of this Clause. In the first place, those of us who have taken an interest in this Measure fail to understand why Clause 13 was inserted at all. The first point I want to make is that the Clause in fact does not belong to the Bill and has no connection with it, as the Bill would be complete without it. I think the hon. Gentlemen who are responsible for the Measure have succumbed to some pressure in connection with this Clause, though we have failed to find where it came from. Having said that the Clause does not belong to the Bill, I must ask what does the Clause do? We object to this Clause because it gives the pawnbroker what it fails to provide for the moneylender, and in that connection it is grossly unfair. I would like to remind the Committee of what the pawnbroker can secure when he lends money. First of all he can get 20 per cent. interest, and make a charge for the preparation of the documents relating to the loan, not exceeding the sum of 1s. for every £10 lent. More than that, he can also get a charge equal to the actual amount of the Stamp Duty paid by him upon any such document. There are three things, but it does not stop there, for see what else he gets. As a matter of fact, if it went very much further, I do not think there would be anything of the loan left. But it provides that the pawnbroker shall not be deemed to have failed to comply with the foregoing conditions by reason of his having, in good faith and in accordance with the terms of the contract for the loan, made a reasonable charge for the storage or the care of any pledge. Again, towards the end of the Clause it appears to me there is another provision for him to make a further charge, so that it seems a pawnbroker can make five, if not six, charges from the person who borrows money from him. That is not the case with an ordinary moneylender, and for the two main reasons which I have given I move that the Clause be deleted, because it does not belong to the Bill, which would be complete without it, and because it allows a pawnbroker to make several charges which the moneylender is not allowed to make.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

I beg to Second the Amendment.

I and those associated with me in this Amendment would like to know the reason why this Clause was introduced at all, and why there is this difference in the, treatment meted out to the moneylender in the ordinary course of business and to the pawnbroker. As my hon. Friend has pointed out, the pawnbroker is allowed under this Clause to make five different charges on the person who pledges something with him and receives a loan from him. A question that was much debated in Committee was that we should not allow any loophole for the moneylender to get any additional charges beyond what was regarded as reasonable interest, and that we should prevent any interest being charged which was harsh and unconscionable. Now here in the first sub-section of this Clause the pawnbroker is entitled to charge 20 per cent. per annum in respect of the loan or on the pledge. In most cases, as the pawnbrokers themselves will agree, they do not give any more than two-thirds of the value of the pledge as a loan. The next thing they are entitled to charge is 1s. for every £10 lent, and also, where documents are pre-pared, the value of the stamp put on the document. I cannot see what extra work is involved on the part of a pawnbroker to make out a document for £10 or £20. In addition to these two items, he is entitled to make a reasonable charge for the storage or care of any pledge. What is "a reasonable charge"? What would be reasonable to the pawnbroker, might not be reasonable to the pawner. In this case the pawnbroker is taking the place of the moneylender whom you have dealt with rather harshly, but whether or not you are dealing harshly with him, he is called upon under this Bill as it stands to pay any charges arising out of a mortgage or a bill of sale.

3.0 p.m.

This Clause was introduced on the last day of the Committee's sittings and we had no opportunity of considering it. If it is allowed to stand, I intend to move the Amendment standing in my name later on with the object of improving its wording with regard to what is a reasonable charge. When we come to Sub-section (2) of this Clause we find that not only is the pawnbroker entitled to make all these charges which have been mentioned, but he is entitled to deduct from the amount he has loaned to the pawner all these charges upon which he is equally entitled to charge interest, because they are to be regarded as part of the principal. I do not think it was ever the intention that that should be so. I think the law should be altered in the interest of the community generally, because, when you are dealing with pawnbrokers and pawners, you are dealing with the poorest section of the community. The pawnbroker has been, and I think is to-day regarded in many cases, as the poor man's banker, but there are, many cases also where the pawnbroker is as unscrupulous as the moneylender. I hope, when the hon. Member for Grimsby (Mr. Womersley) gets up, he will throw some light on the reasons why this Clause has been introduced. The moneylender had no one to speak for him in this House. At any rate, they have no direct representatives here as Members of Parliament. We should like to have some enlightenment regarding this Clause, so that we may either withdraw these Amendments or press the Amendment for the deletion of this Clause to a division.

Photo of Mr Walter Womersley Mr Walter Womersley , Grimsby

The hon. Member for King's Norton (Mr. Dennison) referred to the fact that moneylenders had no direct representation in this House, and, if he means by that that the pawnbrokers have appointed anybody to represent them in this House, be is greatly mistaken. I hope he did not mean that.

Photo of Mr Walter Womersley Mr Walter Womersley , Grimsby

I am very glad to hear that, because I think it would be a reflection on some hon. Members of this House. The question was asked why there should be any exception made with regard to pawnbrokers from the general provisions of this Bill. I will state the reasons why as briefly as possible. In the first place, pawnbrokers have been restricted under the Pawnbrokers Act of 1872 as to the amount they can charge for interest and the tickets and other things, on loans up to the amount of £10. The Act of 1872 was passed to deal with amounts up to £10. Beyond that the pawnbroker, like every other person, is simply subject to the common law of the land; he can lend money on any terms he likes, he can charge what he likes, and do exactly as he likes, provided the borrower is prepared to agree. When the Moneylenders Act was passed in 1900 it was not intended that pawnbrokers should be included in it at all, but in the Courts it was laid down that pawnbrokers were included in it, and as the fee charged for registration was a guinea and the registration period was three years, the pawnbrokers did not regard it as worth their while to fight the matter in the Courts, simply because of their having to pay that small fee; and the other payments under the Moneylenders Act of 1900 were no hardship at all to the pawnbrokers as they were already conducting their business on the lines laid down by that Act.

I suggest that the reason why the pawnbrokers are entitled to this Clause is that they are prepared to allow their interest to be restricted to 20 per cent. If the moneylenders were prepared to come forward and say the same thing, I should, say "Give them any other little advantages you can." But they will do nothing of the kind; they know that 20 per cent. is not sufficient for their particular purpose, and they want a much higher rate of interest. The question has been raised as to security. It has been pointed out that a pawnbroker can afford to lend at 20 per cent. because he gets security. Because the Pawnbrokers Act did not apply to amounts over £10 a great majority of the moneylenders of this country are to-day acting as pawnbrokers for sums over £10. They are demanding security. I know they say in their circulars "We will send you back notes on return," and so on, but my experience is that a big majority of them are asking for security. They are entitled to do so in the same way as the pawnbroker under the present Acts of Parliament. Many of these men have actually got large warehouses in our large towns, where they store goods that they take in as pawnbrokers, simply because the Act cannot affect them if the transaction is over £10. So they are getting security and charging a much higher rate of interest than 20 per cent. A question was raised as to why they should be able to charge for documents. This provision is simply copied from the Pawnbrokers Act. A further question was asked about charging the Stamp Duty. This Duty goes to the Government and not to the pawnbroker. There was a further question as to the charge for storage.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

I am not objecting to the charging, but I am objecting to the Clause permitting what is described merely as a "reasonable change."

Photo of Mr Walter Womersley Mr Walter Womersley , Grimsby

The hon. Member has an Amendment to deal with that point, and if it is called I assume we can discuss it. I would ask Mr. Speaker to tell us whether it would be in Order to discuss that question of a reasonable charge on this Amendment.

Photo of Mr John Whitley Mr John Whitley , Halifax

It will be in Order because the present Amendment is to leave out the whole Clause.

Photo of Mr Walter Womersley Mr Walter Womersley , Grimsby

Let me return to the question of storage. It is laid down clearly in the regulations here that no charge can be made for an article that is capable of being sent through the Post Office, but a charge is allowable for very bulky articles. What are the articles that are usually deposited with the pawnbroker by the lender for a loan over £10? In many cases the article is a piano which has to be stored in a building where it will not deteriorate. It must be kept in a building properly constructed for the purpose, and properly heated, and a certain amount of expenditure is incurred in providing that storage. This Clause will allow a reasonable charge in that respect, according to the class of the article, and I submit that is a fair proposal considering the fact that the pawnbroker is only going to charge 20 per cent. There is another feature about these pawnbroking transactions which is possibly unknown to many hon. Members. The Pawnbrokers Act lays it down clearly that any article pledged for an amount over £2 cannot be sold at the expiration of the term of the contract except by public auction and that any surplus accruing over and above the amount lent and the interest on it, shall be handed over to the pledger on application.

The point raised by the hon. Member for King's Norton that the pawnbroker only lends two-thirds of the value and is bound to gain every time cannot be maintained under the law as it stands. They are restricted to receiving the amount of the loan and the interest, and, as I have shown, any surplus accruing from the sale of the article must be handed over to those who have pledged the article. I submit this Clause is a reasonable one and is fair to a body of traders who have proved themselves to be men of the highest integrity and have carried on their business for the benefit of the community. In some parts of the country attempts have been made to restrict and in some cases to do without this type of trader, but those attempts have proved dismal failures. As the hon. Member for King's Norton said, the pawnbroker is the poor man's banker, and members of that body conduct their business on strictly legal lines. This Clause was accepted by the promoters of the Bill, after consultation with the authorities of the Home Office, and it should be allowed to remain in the Bill.

Photo of Mr John Burman Mr John Burman , Birmingham Duddeston

It has been suggested by the hon. Member for Westhoughton (Mr. Rhys Davies) that we have been unduly favourable to the pawnbrokers in framing this Clause. I may point out that this Clause was introduced by Lord Haldane in another place in 1925 and the present promoters are not responsible for it. The hon. Member for Grimsby (Mr. Womersley) his dealt very fully with this matter, and he is always very capable when he comes to speak of pawnbrokers. He has fully explained the position to the House and I do not wish to take up further time. There are subsequent suggestions for the slight modification of some of the provisions which are thought to be a little too favourable to the pawnbrokers, and we are quite willing to accept certain of these, if the Opposition will allow us to have this Clause as it stands.

Photo of Mr Rhys Davies Mr Rhys Davies , Westhoughton

In view of the explanation given by the hon. Member, I feel inclined to withdraw my opposition to the Clause. On the understanding that the hon. Member will accept three, at any rate, of the ensuing Amendments, I am prepared to withdraw this Amendment.

Amendment, by leave, withdrawn.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

I beg to move, in page 14, line 30, after the word "pawner" to insert the words "within seven days."

The object of this Amendment is to bring this provision into conformity with the rest of the Bill. The words "within seven days" are precisely the words which appear in relation to moneylenders in this connection.

Photo of Mr John Burman Mr John Burman , Birmingham Duddeston

This is a very reasonable Amendment, and I accept it.

Amendment agreed to.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

May I move the Amendment standing on the Order Paper in the name of the hon. and gallant Member for East Rhondda (Lieut.-Colonel Watts-Morgan)—in page 14, line 30, after the word "memorandum" to insert the words, "signed personally by every party to be charged?"

Photo of Mr John Whitley Mr John Whitley , Halifax

I was not proposing to select that Amendment.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

My name ought to have been attached to it, because I regard it as important.

Photo of Mr John Whitley Mr John Whitley , Halifax

I do not think I can allow that Amendment.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

I beg to move, in page 15, line 3, to leave out the words "for every ten pounds lent."

Photo of Mr John Burman Mr John Burman , Birmingham Duddeston

This also is a very fair Amendment, with which the promoters can agree.

Amendment agreed to.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

I beg to move, in page 15, line 11, to leave out the word "reasonable."

This Amendment, in conjunction with the one on the Paper immediately following—in line 11, after the word "charge," to insert the words, "not exceeding the amount expended by him"—is to make it quite clear what the pawnbroker is entitled to charge the pawner. As has already been stated by the hon. Member for Grimsby (Mr. Womersley), the pawnbrokers are a highly respectable section of the community, and in my younger days, I remember, I used to earn pocket money by going to and from the pawnbroker's shop. If these amendments are agreed to it will be quite clear that a pawnbroker is not entitled to charge anything more than the actual amount expended by him.

Photo of Commodore Henry King Commodore Henry King , Paddington South

This Amendment and the next really need to be read together. It will be realised that it is rather difficult to ascertain the amount expended by a pawnbroker in storing articles on his own premises. Take the case of an article that is frequently pawned, namely, a piano. It would be difficult to say what expense bad been incurred by a pawnbroker in storing such an article on his own premises, and the word "reasonable" that is in the Clause would meet such a difficulty. The word "reasonable" is a term well known to the courts, and I am sure that in actual practice there would be no difficulty whatever in ascertaining what amount was reasonable for a pawnbroker to charge for such storage. I, therefore, hope the hon. Member will agree to the wording of the Clause as it stands.

Photo of Mr Walter Womersley Mr Walter Womersley , Grimsby

It has been rightly pointed out that there would be a great difficulty in deciding what the amount actually expended by the pawnbroker had been in certain cases. Take the case of a piano stored in a room properly prepared for storing such articles. It may be that a pawnbroker has only two pianos in pledge in a building costing him 10s. a week rent, and I take it that, if the Amendment were agreed to, that pawnbroker would be entitled to divide the 10s. a week rent between the two owners of the pianos and charge them 5s. each. The pawnbroker is going to be in a much worse position than in the Clause as at present. I think to leave in the word "reasonable" is a fair thing. It may be argued that there may be pawnbrokers like other traders, who are not reasonable, but it is for the Court to decide, and there is laid down in this Bill something which has never been laid down before, that a transaction can be reopened. Therefore, if the pawnbroker is so foolish as to charge an unreasonable amount, he lays himself open to the transaction being reopened by the Court, and possibly lose far more than he would otherwise gain.

Mr. J. BAKER rose

Photo of Mr John Whitley Mr John Whitley , Halifax

The hon. Member has exhausted his right to speak.

Amendment, by leave, withdrawn.

Photo of Mr Robert Dennison Mr Robert Dennison , Birmingham King's Norton

I beg to move, in page 15, line 22, to leave out the words "five shillings," and to insert instead thereof the words "one shilling."

Photo of Mr John Burman Mr John Burman , Birmingham Duddeston

I think this is a very reasonable Amendment, and, on behalf of the promoters, I should be very glad to see it accepted by the House.

Photo of Mr Walter Womersley Mr Walter Womersley , Grimsby

I had hoped that the promoters would have been prepared to accept a figure something less than 5s. and something more than 1s. as a compromise. This is a point where the difference comes in between the pawnbroker and the moneylender. In addition to other expenses, the pawnbroker has to keep a specially prepared book, and a rather costly one, in which entries have to be made. He has to make a search on behalf of the customer in the sale book of the auctioneer, who must sign the book to certify that the price has been secured. The pawnbroker will have to go to all that trouble, employ a man, and so on, and I submit that he ought to be entitled to a fee of 2s. 6d.

Amendment agreed to.