I beg to move, That the Bill be now read a Second time.
At the end of 1963, outstanding instalments under hire purchase and other credit instalment business totalled £954 million. Private and commercial vehicles and caravans accounted for £451 million of this and household goods for £397 million. The House will agree that these are very large figures. The turnover is also very rapid. The amount of new credit extended in 1963 was £818 million.
These figures are some indication of the higher standard of living now being enjoyed in this country. But experience has shown that the consumer needs protection in hire-purchase transactions. The basic Hire Purchase Act in England and Wales was passed in 1938 and some right hon. and hon. Members will certainly remember, a quarter of a century later, that this was Ellen Wilkinson's Act. It still stands as a landmark.
The Act dealt, in particular, with the worst evils of the "snatch back", which had been very common in relation to furniture and household goods. With minor amendment in 1954, the Act has served well but the protection it affords is now needed over a wider area of trade and the present Bill sets out to remedy this. There may be different views in the House as to how this should be done, but I think that the principles will commend support in all parts.
The Bill is largely based on the recommendations of the Molony Committee. There have been suggestions, with which I should like to deal now, that we are, by this Bill, only tinkering with something which is basically unsatisfactory and that we need an entirely new legal approach dealing in realistic terms with the facts of buying and selling where the customer has not got ready cash; indeed, a suggestion that we ought to make a fundamental reform.
When I foreshadowed the introduction of the Bill, in a statement in the House in November, I also said that more fundamental questions were involved, that we were studying these, and would welcome the views of finance houses or any other bodies concerned. That is what we are doing. But I should like to make this point. The question is not a very simple one. It is not just a matter of consolidating or amending a few obsolescent Acts. The hire-purchase laws, as they exist at the moment, provide a code of protection for the consumer, which is an effective code, and which the Bill will make better.
For any new system we should have to devise comparable safeguards, and to achieve, once again, the proper balance between the different interests concerned in any of these transactions. That is the problem on which we have to focus our attention if we are looking to a different way of dealing with it—what some would term a more realistic and fundamental reform.
In the meantime, I suggest to the House that there is no reason for leaving the law relating to hire-purchase in an unsatisfactory state, where that is so, and where we have practical proposals for improving it. That is the purpose of the Bill. It is, of course, bound to be rather technical in nature, but I do not propose to deal with the technical details on Second Reading, and perhaps we could leave that to the Committee Stage. I propose to cover the main principles of the Bill.
Part I amends the hire-purchase legislation of England and Wales. At present, this applies to agreements where the hire-purchase price, or, in the case of a credit sale agreement, the total purchase price, does not exceed £300, or, in the case of livestock, £1,000. The Molony Committee recommended that the Acts should apply to all consumer transactions. We have not specifically incorporated this recommendation of the Molony Committee that the Acts should apply to all consumer transactions.
We felt that there were difficulties of definition here. For example, it would have excluded from the protection of the Acts people like the owner of a one-man shop. Therefore, we have adopted a different approach. What the Bill does is to raise the limit to £2,000 in all cases. This, in effect, embraces the great majority of all consumer transactions. We considered that this was a more effective approach to the problem and, at the same time, would achieve the objective of the Molony Committee.
While the Bill was under consideration in another place, the Finance Houses Association represented to us that practical difficulties would be caused under this arrangement for transactions which were purely commercial. For example, where a business acquires plant on hire-purchase terms. An Amendment was introduced to meet this, which we accepted, and the Bill now excludes from the scope of the Acts all agreements where the hirer or the buyer is a body corporate. The result is in line with what the Molony Committee recommended, but it avoids any possibility of confusion or doubt about whether any particular transaction will or will not be covered by the Acts.
This is a very important practical consideration. The main effect of raising the limit to £2,000 will be to bring in most motor vehicles which are subject to hire-purchase agreements, except, of course, where they are being hired by companies, for the reason I have just explained.
The limit refers to the hire-purchase price, but, as a rough guide, any car costing less than £1,600 for cash will be covered by the Bill. This is a very important extension of the scope of the legislation, and, again, it is in accordance with the recommendations of the Committee.
May I remind the House of the basic safeguards of the existing Hire Purchase Acts. First, the hirer is protected against the repossession of the goods except under a court order once he has paid one-third of the hire-purchase price. The court also has power to make a postponed order, and so it can give a hirer in difficulties a further opportunity to pay up by instalments which the court considers reasonable.
Secondly, the hirer has the right to terminate the agreement and return the goods. His maximum liability is to make up what he has already paid to
one-half of the hire purchase price, or to the amount due to date under the agreement
On the question of the extension of this second right to motor car transactions, I full realise that this has caused some discussion. The alternative which has been advocated, not only by the finance houses concerned, is what is called the true measure of damages principle. Under this, if the hirer does not go through with the agreement, his liability would be the difference between what the goods realise when he returns them and the amount which is outstanding.
The Molony Committee commented on this and said that, in theory, it would produce a more equitable result, but it also said—I quote from paragraph 548 of its Report:
Such a provision would inevitably lead to disputes as to whether the true value had been obtained on realisation, with subsidiary issues as to the necessity to spend money on repairs, etc.
For this reason, it preferred the simpler restrictions which exist in the present Act. Under this, all parties know what the hirer's maximum liability is at any time. There is no delay or uncertainty and no possibility of dispute or deception.
This is of primary importance in this field of consumer protection, where the strength and the expertise of the parties are very often unequal. I hope that any discussions which we may have on this point, either on Second Reading or in Committee, will be carried on in practical teams about the consequences of adopting the procedure in the Bill or alternative suggestions, because it is essentially on the practical considerations that safeguards of this kind must be judged and stand or fall.
The next change to mention, simple though it is will help to avoid hardship in those cases in which a man or woman commits himself or herself to a hire-purchase agreement without realising what he or she is doing. The Molony Committee was very concerned about this and suggested that the hirer's signature to the agreement should have to be in the special place—a box, clearly marked—with clear words to warn him that if he signed he was offering to commit himself to a hire-purchase transaction. This we have provided for.
It was also strongly urged in another place that the consumer would understand his commitment better, plainly set out as it is, if he were immediately given a copy of whatever he signed. I will confess that the Government had doubts about this, which is why it was not embodied in the Bill in the first place. We felt that the risk of creating consumer safeguards was that they became so complex that they confused the consumer and thus defeated their own purpose. Under the existing provisions of the 1938 Act, the customer already receives a copy of the hire-purchase or credit sale agreement after it has been completed. The case for another statutory copy is fairly evenly divided. That was our conclusion on weighing up the arguments.
We felt that it would lead to confusion in the circumstances in which it would often be given, but we felt that the argument was evenly balanced but that it would be right to provide that he should receive a copy of what he signs immediately, even if it is only an offer. That is now embodied in the Bill.
Another new safeguard, which, in principle, is simple, is that the consumer shall have the opportunity to reflect and change his mind, if he so desires, if he signs the agreement at any place other than trade premises. This means any place except premises where goods of this sort are normally sold, or the offices of finance houses. The House will appreciate that this new safeguard is aimed at the door-to-door salesman who puts pressure, perhaps undue pressure, on customers in their own homes and induces them to sign binding agreements.
The Molony Committee received many complaints about this practice and so, I know, have many hon. Members on both sides of the House. The complaint often is that the salesman gets the housewife on her own, and gets her to sign before she has a chance to talk it over with a relative, her husband, friends and advisers. Sometimes, of course, all the members of the family are present together and are unable to resist the sales talk or the sales pressure, but, on reflection, they realise that they do not want the article, or that, even if they do, they cannot afford the payments and that they have entered into commitments beyond those which they can carry.
Under the Bill, the hirer will have the right to cancel an agreement simply by writing a letter. A copy of the agreement must be posted to him and, following the day of its delivery, he will have three days in which to send off his cancellation. This is the period for thought and reflection. He will be entitled to the return of any deposit he has paid. Of course, if he wants to do this within the remaining three days from the day on which he receives the notice, he can do so, but from the day on which he receives the notice he has three days for consideration and in which to cancel the agreement and obtain a refund of his deposit. This safeguard take up the whole of Clauses 4 to 8, but I am sure that the principle will command widespread acceptance.
It has been suggested that these provisions are unnecessarily wide. I agree that we should keep interference with normal trade practices—normal trade practices—to a minimum, but unless this safeguard is simple to understand and invoke, I do not believe that it will work. Of course, there has been the opposite suggestion that, far from restricting it, we should broaden it and apply it to all hire-purchase agreements wherever they may be completed. This would mean interfering with a very large number of commercial transactions being carried out normally in shops to which the purchaser has voluntarily gone. The salesman who over-persuades people in their own home is a different case, which justifies an exceptional solution such as we have set out in the Bill, even though it takes up a number of Clauses.
Those who are not reputable are a very small minority, as most people with experience would agree. We have to strike a balance, and I think that we have done so. This is a slightly longer period than the Molony Committee recommended, but we think that it is practical and clear and easy for everybody to understand.
Before leaving Part I of the Bill, I should like to mention one or two more changes. One deals with a matter to which the Law Reform Committee drew attention in its tenth Report. At present, a person may enter into a hire-purchase agreement because of what the salesman tells him about the goods in question. If it turns out be a false statement, he may have no remedy, because his contractual relationship is with the finance company and not with the dealer who told the story and whose information proved to be false. The Bill gives him the remedy, because it deems the dealer to be the agent of the owner or seller in respect of any representations which he makes about the goods.
This could have a considerable effect on improving the treatment which hire-purchase customers receive. No doubt the finance houses will ensure that the dealer in his turn recompenses them if anything he has said involves them in any loss. This provision will also have the effect of causing the finance houses to be particularly careful about the dealers from whom they accept business and will, therefore, have a double benefit.
Another change which the House will welcome is the provision that if the hirer dies, the finance house cannot terminate the agreement and take the goods away from his heirs regardless of everything that he has paid. Most finance houses would rightly claim that they do not do this and that if the family can keep up the payments, the finance house is glad to allow the agreement to run its course. This is perfectly true, but the fact remains that most hire-purchase agreements contain provisions which enable the finance house to terminate the agreement and recover the goods if the hirer dies. The Bill will ensure that the heirs have the same protection through hire-purchase legislation that the hirer would have had.
I should like to make two general comments about the courts, one of which has been raised in public discussion. Actions under the Act for repossession of the goods where more than one-third of the hire-purchase price has been paid are automatically within the jurisdiction of the county courts. In Committee, we shall be bringing forward proposals for enabling them to deal with actions for the return of the goods where less than one-third of the purchase price has been paid. It has been suggested, consequently, tint to extend the scope of hire-purchase legislation in the way we are now doing will overburden the county courts and cause delays.
Naturally, we have examined this very carefully and we have taken the appropriate advice. We are satisfied that, by and large, the county courts will be able without difficulty to absorb any increase in cases. Naturally, this is a position which we shall have to watch carefully when the Bill becomes law.
Has the right hon. Gentleman also been advised about the position of the Scottish courts, which are also overburdened, aid has he been told about the alterations at the Glasgow courts? Can he assure me that he will inquire into the situation?
I can give that assurance. Those responsible for the courts will watch very carefully in both countries to ensure that there is not any overburdening. The very suggestion of overburdening implies that this legislation will mean many cases coming before the courts, and some of the provisions will not work that way. However, we shall watch the situation very carefully.
There are some other detailed improvements for the protection of the consumer which were suggested in another place and which we have accepted in principle. For example the terms of hire-purchase agreements are not to be printed in such small type that nobody can read them. Nor is an oversight about making a payment when it is due to prejudice the hirer without his being given a warning and a week in which to make good his omission. In Committee, we shall bring forward proposals to deal with those matters.
Part II is very important, because it deals with the Amendment of the Scottish law relating to hire-purchase and credit sales.
I think that the hon. Member for Kilmarnock (Mr. Ross) will agree with everything I have to say—on the Hire Purchase and Small Debt (Scotland) Act, 1932.
By 1938, when the English Act was passed, our experience showed the way to more comprehensive safeguards for the consumer. Some of these have since been incorporated in the Scottish code, but the law of England is now more detailed and more comprehensive in this respect, as I think hon. Members will agree. In particular, the powers in the courts of England to make postponed orders to help a hirer who has run into difficulties are not paralleled under Scottish law, but there is one respect in which the Scottish law is rather more favourable to the hirer. In Scotland the minimum amount which the hirer must pay if he wishes to terminate the agreement is one-third of the hire-purchase price. In England, as I mentioned earlier, it is half the hire-purchase price, so in this respect the Scottish law is more favourable.
The Molony Committee recommended that, as far as possible, the same code should apply throughout Great Britain, including the minimum payment of half of the hire-purchase price, which, on the face of it, looks as though the Scots are losing something here, but I think that in the new circumstances of the Bill this can easily be exaggerated, because the ceiling is now being raised to £2,000, which is an essential element in the Bill. whatever rights Scottish consumers have at present, they do not extend above £300, so they will get the advantage of the extension in any case.
The Bill's effect on the Scottish consumer must be looked at as a whole. The English Acts will apply to Scotland, together with the amendments and extensions introduced by Part I of the Bill about which I have been talking. Any differences which remain arise solely from differences in Scottish legal terminology and Scottish practice. The position of the Scottish consumer taken as a whole will therefore be very much better than under the existing Scottish legislation. I think that the new safe guards and the greater discretion which the courts will have will far outweigh the fact that the Scottish consumer's rights in relation to an agreement for less than £300 will be diminished in the way which I have just described.
We are grateful to the right hon. Gentleman for that explanation, because no one reading the Bill would have been able to understand anything about it. Has the right hon. Gentleman studied the Schedule which applies to Scotland? Does the right hon. Gentleman appreciate that because of the way in which it is drafted Schedule 2 is virtually a Bill in itself? Will the right hon. Gentleman take steps to ensure that the pledge given by the Leader of the House, when we saw him to discuss the shocking way in which Scottish law is being dealt with, is carried out, and that this Schedule will be considered by the Scottish Committee?
Any undertaking given by my right hon. and learned Friend the Leader of the House will be observed. I am sorry that the hon. Gentleman is disappointed with the Schedule. We thought that by reprinting the Schedule for the purpose of applying the 1938 English Act to Scottish law we were greatly facilitating the reading of the Bill by the hon. Gentleman and his hon. Friends. I am sorry that he has not appreciated that, but we shall try to meet his request. I am sure that the Leader of the House will carry out any undertaking that he has given, and I shall be happy to do what I can to help.
I refrain from further comment.
Part III deals with problems which are familiar to many hon. Members. What happens is this: a man is offered a second-hand car; he buys it, and pays for it. Later, it emerges that the car is still the subject of a hire-purchase agreement. Legally, the purchaser has no right to the car, because it belongs to a finance house, and that finance house can take it away from him.
In practice, it allows him to keep it if he pays off whatever is outstanding under the hire-purchase agreement, but that may not help, because he has paid for the car once, and the outstanding balance may be substantially beyond his means, apart from the fact that he is paying twice for the car. His only remedy is to try to find the man who sold him the car and attempt to get his money back. Very often this proves to be a forlorn hope.
We decided that the way to deal with this situation was to bring in the scheme embodied in Part III of the Bill. The Minister of Transport is empowered to make regulations under which a man who is acquiring a car under a hire-purchase agreement will receive from the finance house a licensing card which he will use when he renews the car's licence. The car's registration book, what we term the log book, will be kept by the finance house. Thus, a man who is acquiring a car on hire-purchase will have a licensing card and not the log book until the purchase has been completed, when it will be sent to him.
Under this scheme anyone who is offered a car by a person who can produce only a licensing card will have fair warning that the car is still subject to a hire-purchase agreement, and that he should not part with his money. If a finance house fails to keep the log book, and as a result it gets into the hands of the hirer, the innocent buyer will have a good title to the car. The finance house will have to go after the fraudulent hirer to get its money back.
if the log book has been forged, and the buyer buys in good faith and then finds that the car is owned by a finance house, will he have any remedy? I am aware that he will have rights against the vendor, and it may well be that the vendor will have committed a criminal offence, but generally in these circumstances vendors disappear. Will the buyer have any remedy under the Bill?
I understand that in those circumstances the position will remain unaltered. It will be the same as for fraud in the existing situation. The Bill makes no change in the present provisions in that regard.
In another place an alternative method of handling this problem was proposed. Before this scheme was devised for the Bill we had many consultations in an endeavour to find the simplest and most practical way of dealing with the problem. The principle proposed in another place was that the loss through such transactions would be borne by an indemnity fund which would be financed by contributions from the finance houses and other concerns who let cars on hire-purchase.
I should like to assure the House and those who are interested in this matter that we are, fully prepared to explore this alternative, but I must make one thing quite clear, namely, that we are prepared to do so only if the innocent purchaser would, in our opinion, still derive as good protection as we believe he would get from the scheme in Part III of the Bill. I must make that plain to the various organisations who are considerng and negotiating about this matter. It, between now and the Committee stag, the finance houses can satisfy us that there is a better practical alternative than this, well and good, but I cannot emphasise too strongly that we intend to deal with this problem, and that we intend to deal with it under the Bill.
Finally, we come to Part IV which amends the Advertisements (Hire-Purchase) Act, 1957. Again, what we are doing is based on the recommendations of the Molony Committee. The purpose of the 1957 Act was to prevent the inclusion in advertisements of information which may mislead the consumer about the cost of obtaining goods on hire-purchase terms, and in this respect the Committee drew attention to the two deficiencies in the present Act.
First, the Act requires in certain circumstances that an advertisement shall include the cash price, the amount of the deposit, the amount of each instalment, and the number of instalments, but what it does not do is to require the two total figures to be shown, one if the consumer buys for cash, and the other if he buys by hire-purchase, and, therefore, the Bill will require advertisements to show both these totals.
Secondly, advertisements sometimes show the hire-purchase charge as a rate of interest. For example, they say that easy terms will cost only 5 per cent. But this bare statement—a rather attractive one—can conceal a rate of interest which is in fact very much higher. Traders are not compelled to quote interest rates in advertisements, but if they wish to do so in future they will have to quote a rate of interest which is calculated in accordance with the Bill, and under a formula shown in the Schedule. Comment may be made about the formula, but I do not think that it is complicated, or that it will be difficult for the trader to apply.
This is an extremely important point. I am not satisfied that the advertisement Clause will give proper information to the purchaser as to the real rate of interest that he is being charged on certain transactions. I accept the Minister's assurance that it is his intention to ensure that that information is given, but a slick operator will get round this by not stating the rate of interest at all, but by merely stating the number of payments to be made over two or three years, or whatever is the term of the contract.
I have often taken the trouble to work out the actuarial equivalent of advertised rates of interest. The true rate of interest has often been between 30 per cent. and 40 per cent., whereas the nominal rate has been shown as a much lower figure. I should like this provision to be strengthened so that the true rate of interest on hire-purchase transactions is always revealed to the purchaser.
No doubt we can consider that at a later stage. This clearly makes him state the true rate of interest if he includes a rate of interest in the advertisement, and it will also mean that the two total sums will have to be stated. Some may argue that this gives a clearer indication to the purchaser of the difference in price involved in the two forms of transaction. We have dealt fully with those two aspects.
The Bill is essentially a practical Measure for consumer protection. It makes changes where experience has shown that they are necessary. The cases where this protection will be needed in practice, however, are undoubtedly in a minority. That does not make them any less important, but in fairness to all concerned with such transactions we should emphasise that they are in the minority. Many of the safeguards which the Bill introduces are already part of the normal commercial practice of many traders. This is, nevertheless, a useful contribution to the protection of the consumer.
We have tried to hold a balance between the interests of purchasers, on the one hand, and traders, on the other. I hope the House will agree that at this stage the Bill gets the balance right. It is obvious from what the hon. Member for Kilmarnock (Mr. Ross) has said that when the Bill becomes law it will be appropriate to consider the consolidation of legislation dealing with hire purchase, and I hope that this can be done. It is our intention to put the work in hand as soon as the Bill is passed. That would be for the convenience of both traders and hon. Members.
Looked at more widely, the Bill should be regarded as part of the Government's general policy for strengthening the position of consumer protection. We have already had the Weights and Measures Act. Last year we set up the Consumer Council, to which the Molony Committee gave its first priority. Its second priority was the improvement of hire-purchase legislation, and that is contained in the Bill that I am now putting before the House on Second Reading. After that, the Molony Committee suggested there should be a revision of merchandise marks legislation and a consideration of its own proposals about the labelling of goods, the revision of the law on the sale of goods, and so on. We mean to deal with the Committee's other proposals as quickly as we can, because we recognise the need for the protection of the consumer in modern conditions.
As the country's standard of living rises, the public buys a much wider range of goods. These goods are becoming increasingly complex and difficult for the ordinary shopper to judge, although there are ways in which he can be helped, by private institutions and organisations. At the same time, trading methods in our more advanced economy are becoming more complex and varied, and, therefore, there is a task for the Government to do in introducing legislation of this kind. There is also a task for Parliament to do, in considering, helping, advising on, and producing Measures which will govern this economy.
The Government's task is to create a framework within which each consumer and trader is free to buy and sell to his best advantage. The rules must be clear, effective and workable. That is what we have tried to achieve in the provisions we have set before the House in the Bill. The rights which these rules confer and the obligations they impose must also be clear-cut and indisputable. It is against this background that I commend the Bill to the House.
I am sure that the whole House will join me in thanking the Minister for the clear explanation that he has given of the terms of the Bill. His explanation, although somewhat incomplete, was much clearer than the Bill itself. I know that the right hon. Gentleman will not mind my saying that he, in common with other hon. Members, has had the great advantage of the decks-clearing operation in another place. This is one occasion when we can sincerely thank their Lordships for helping us to understand a very difficult piece of legislation.
We welcome the Bill, but I hope that the right hon. Gentleman will not read into our welcome any note of enthusiasm. He has pointed out that this is not the hire purchase Bill that we have long been asking for. Neither is it the Bill that the Government promised us. I am not referring to the right hon. Gentleman's statement of last November, but to the statement given to us three years ago, when the Government rejected a Private Member's Bill. This is not the comprehensive reform of the hire-purchase law for which we have been pleading and arguing for many years, and for which—as the right hon. Gentleman knows—harassed county court judges have also been pleading.
Despite what he said, I believe that we are failing in our duty by confining ourselves—as we must, on this occasion—to this somewhat limited and restricted Measure. We should be spending our time dealing with all the other weaknesses, faults and omissions in the hire-purchase law, which the Bill ignores. Speaking as a layman, my view is that the passing of the Bill will make the administration of hire-purchase law even more difficult than it is today—and that is saying a lot. It will make things more difficult for the customer, the trader, the finance companies and, above all, the courts.
We agree that it will remedy many abuses, and for that reason we welcome it; but it will make hire-purchase law almost incomprehensible. With due deference to my hon. and learned Friend the Member for Liverpool, Edge Hill (Mr. A. J. Irvine), who will deal more adequately than I can with the legal issues, I believe that the Bill will make the law a paradise for lawyers and a nightmare for everybody else.
The Bill is very complicated, and appears to me to have been very hurriedly drafted. In fact, it is clear from what went on in Committee in another place that even the right hon. Gentleman is not quite sure how some of its provisions will work out. As far as I can see there are a dozen or more vitally important proposals which, instead of making the existing complicated legal rules clearer, will make them rather more obscure.
In spite of the proposals contained in the Bill we are leaving a great deal of what I call, in layman's language, the application of the rules of hire purchase not to the statutes but to the common law, and we will still depend in far too great a measure on the decisions of the courts. One of the basic objections to this piecemeal legislation is that we still need consolidation of hire-purchase law, and with this piecemeal approach we shall make it far more difficult to obtain that comprehensive, up-to-date, clear and concise law on hire purchase and credit trading which has been urgently needed for many years.
The main provisions of the Bill could have beer brought into force many years ago, for the Private Member's Bill which my hon. Friend the Member for Warrington (Mr. W. T. Williams) introduced three years ago contained the main provisions that are now in this Bill—provisions for raising the legal limits of protection, for giving customers a cooling-off period in respect of doorstep transactions, for legible and straightforward forms of agreement, and for ensuring that finance companies should be responsible for any misrepresentation by dealers who act as their agents.
In point of fact, those proposals were put forward on several occasions long before my hon. Friend the Member for Warrington introduced his Private Member's Bill. There was no need for the Government to wait for the report of the Molony Committee, as we said time and time again while the Committee was sitting. These reforms had been advocated for years by people who had studied hire-purchase law far more intensively than that Committee was able to do. We could have put them in an amending Bill years ago and by now we could have had a comprehensive consolidating Measure such as was referred to by the Minister.
The Government, however, preferred delay. They told us to wait for the Report of the Molony Committee and they gave us a promise. They said that if we would wait until the Committee reported there would be a comprehensive Measure to remedy what the lawyers, judges, customers, traders and social service workers had been criticising for so long.
It is clear that despite the promise of three years ago the Government were not ready to produce a Bill this Session. It was not mentioned in the Gracious Speech and I believe that it would not have appeared but for the fact that, in desperation, another Private Member's Bill was introduced in another place. It was the Bill introduced by Lord Peddie which forced the hands of the Government. So we have what I would describe as an inadequate, ill-drafted Measure on which some of us will have to spend a lot of time during the Committee stage, as the right hon. Gentleman has more or less promised we shall, in an attempt to remedy its defects and weaknesses, following the considerable efforts made in another place to improve it. That is why we do not exactly give the Bill an enthusiastic welcome.
We can more or less give approval to one or two provisions in the Bill without qualification. The first is the raising of legal protection for transactions under £300 to cover transactions of up to £2,000. I agree that the right hon. Gentleman was right to reject the approach of the Molony Committee in this regard. Had he followed the advice of the Committee, we should have been involved, as he said, in trying to define what is a consumer sale. Goodness knows, we shall have sufficient difficulty in trying to define some of the terms of the Bill in a practical form so that traders and customers may understand what is the legal definition. I should hate to become involved in an attempt to define a consumer sale in order to leave out the industrial arrangements for credit trading.
The £2,000 limit will catch almost all car sales, which is what we desire, and, clearly, it will catch practically all sales of household equipment. I do not think that it will catch many of the industrial credit sales not conducted by companies, which are, of course, excluded from the Bill. But we ought at this time to point out to the public that the £2,000 figure includes the hire-purchase charge so that anyone considering the purchase of a £2,000 car on hire purchase will not come within the protection afforded by the Bill as drafted. There will be some tricky borderline cases, as there were in the £300 limit. I am glad that the Bill gives authority to the Minister to raise the limit by statutory order if experience shows this to be necessary.
This, at any rate, is a substantial spreading of the proper legal protection over transactions which are now quite unreasonably excluded, and will stop some of the worst abuses in hire-purchase transactions. As the right hon. Gentleman said, one of the worst is the unjustified "snatch back". To understand how some dealers operate, especially in the car trade and how they have exploited our failure—do not let us run away from this—up to now to provide equal protection under the law for buyer and seller in transactions above the £300 figure, I will quote a letter from a lady which I received only last week.
It is one of many letters which I have received since I became involved in this business. I will leave out the name or the firms concerned, because I want to raise the case immediately afterwards in another connection. The lady writes:
We have a desperate problem…The position is this; two years five months ago, we bought a Mini-Minor from"—
then she mentions the name of a garage—
and paid a deposit of over £100 and the balance of £14 7s. 6d, in monthly payments to the finance company"—
and the name of the company is mentioned.
We have paid over £400 and as far as we are concerned have paid regularly and the last payment was on January 14th. We paid our payments in exactly the same way as we did when buying our first car from another firm who gave us a high rating credit status card on completion. To our horror a man came to our house on Friday, February 7th, at 8 o'clock in the evening, from a firm.
Again the name is mentioned, and I have checked that it is a firm of inquiry agents which goes in for this kind of business.
He said he had authority to seize the car. I said it was nonsense, when I showed him our credit, thinking it was a mistake. He seemed puzzled at first, then said that even if we had been a few days overdue he was entitled to take the car. I called my husband who wart to phone the police and the man got into the car with master keys. My husband tried to stop the man, who shouted to passers by that my husband was trying to take his car. He said he would slash the tyres and tow the car away. Eventually, he got away. We went to see the police C.I.D., who were most kind and helpful in every way and phoned the firm for us on Monday. The firm said that by some peculiar calculation they made us one month in arrear. We had no notice…and are perfectly capable of paying all the repayments with ease.
The letter goes on to say:
When we bought the car 7,000 miles was registered on the clock, but in the car was the previous owner's service card with nearly 14,000 miles registered…We have heard nothing from the firm and do not know what to do next and are afraid of making a mistake in law.
This is the important point—
Can you help us as to who to consult and what to do next?
This is the kind of deplorable behaviour that we have allowed to go on and which we could have checked years ago. We have let it go on for far too long. I do not know how many honest purchasers of cars are robbed in this way, but if it is only one it is one too many. I am told, and I believe it, that reputable finance companies do not go in for these dishonest, swindling tricks.
I will explain in a moment why I have not mentioned names.
When we examine, discuss and perhaps reshape the Bill we ought to keep in mind the fact that not only must we lay down and reasonable rules for reputable dealers and finance companies and their customers, but also we must make sure that we put the disreputable firms out of business. Let us make no bones about it, by our failure to clean up the hire-purchase rules in the past we have encouraged the practices which now we condemn. The so-called finance company which behaves as I have described should not have been started up in the first place. It would be very interesting to find out who finances this kind of company. I think that we should try—
Wait a moment. Allow me to explain how I see some of them coming into being. I have made some inquiries about this case and this is why I have not quoted names.
I have reason to believe that the garage company, the car seller, has a franchise arrangement with a reputable well-established finance company. But what seems clear, if this is so, is that it has been exploiting the reputation that this arrangement gives it for honest dealing—to pass some of its hire-purchase business to this thoroughly disreputable outfit. That is because it gets a bigger commission for doing so. The reason I do not give names is that the inquiries have not been completed, but as soon as they are completed I will give the names in Committee.
The point is—we cannot run away from this—that we have to insist that the commissions should be stated on the hire-purchase agreement, because in the end the customer has to pay. We ought, in the Bill, to limit the rate of commission which can be charged. We ought to work, if we can, for the complete abolition of dealers' commissions. I do not want to labour this case. We shall come back to it in Committee and we shall stop this sort of deplorable behaviour by the Bill. This is what part of the Bill is for, but the snatch-back, the unjustified repossession of goods, is not the only malpractice that we are in duty-hound to prohibit.
Some of the worst practices are dealt with in the Bill, as the right hon. Gentleman explained, but the more I study the Bill and the more I study the debates on it in another place the more doubtful I am whether its provisions are really satisfactory and whether the best methods are being adopted to stop the practices we want to prohibit. I shall mention a few of the provisions which, it seems, should be looked at again. I take to begin with the cooling-off period. There is general agreement, which was endorsed by the Molony Committee, on the need to give some sort of extra protection for householders who are subjected to high pressure salesmanship on the doorstep, but it is not only the slick pressure to get people to sign agreements which they cannot afford that we are concerned about.
Some of these doorstep agreements, to put it mildly, are very misleading. The Bill, I agree, attempts to stop this part of the operation, the misleading documents, by laying down what shall and what shall not be in the agreements. It has been generally agreed, also, that the best way to stop the slick salesmen is to give the customer time for reflection and in many cases time for the harassed housewife to consult her husband. Incidentally we ought to look a little more carefully at the effect of this cooling-off period on credit traders who regularly visit householders in the course of their business.
The Bill provides four days in which the potential agreement can be cancelled. This is what we have been asking for, but it has been put to me that this apparently admirable arrangement could open the door to worse abuse. I am told that a slick salesman could seize on the four-day period which under Clause 3 might be extended if he is to go in for a little postal arrangement also, but I shall leave that for a moment.
The salesman could exploit it by leaving whatever he is trying to sell with the housewife, telling her that she can look at it and try it out, that she need not sign for it if she does not want to. He will go back after a few days, he will call again and refuse to take back the washing machine, or whatever it is, on the ground that in using it the housewife has damaged it. He will point to scratches, or one or two minor defects, which were on the machine before he left it, and claim that the housewife is responsible for those defects and she must sign the agreement whether she wants to do so or not.
In such a case, of course, the householder should refuse to sign any agreement. She should allow the salesman to take her to court if he is prepared to do so, which, of course, is unlikely. But the ordinary person has a built-in prejudice against being involved in legal action, for very good reasons. It is this horror of legal proceedings which the slick salesman will exploit. In Committee, we should try to plug up this loophole if we find that there is a loophole, but the Government should do something more. They should prepare, not only to help the householder beat off the slick salesman on the doorstep, but should prepare—or perhaps it would be better to ask the Consumer Council to prepare—a clear and concise booklet explaining the customer's rights under hire-purchase law, written in simple terms.
The Government should make it a condition that this explanatory booklet must be handed to the customer before any kind of hire-purchase or credit trade agreement is signed anywhere, not only on the doorstep but also in a shop. I do not want to add a single penny to Government expenditure by this suggestion. The hire-purchase dealer should pay for the booklet, which we should compel him to give to customers. Of course, the customer will pay in the end. This is done in the United States of America. I have seen some of the documents issued by some States in the U.S.A. I think that it is done in Canada and I have grounds for believing that it is also done in Australia. I see no reason why we should not do it here.
I turn to one or two of the points which the right hon. Gentleman raised, and on which, if he does not mind my saying so, I have some slight differences of opinion. First, there is the very difficult problem of how to assess the true measure of damages incurred when a hirer terminates an agreement and returns goods. As the Bill stands, the hirer can end the agreement at any time and return the goods, but he will have to pay the instalments due on them plus the amount, if need be, to make up to one-half the hire-purchase price. It seems that this provision can be very unfair to the hirer in certain circumstances.
Suppose that for very good reasons he is compelled to cancel the agreement fairly soon after it starts on something which does not depreciate quickly in value, in other words, an article which has a fairly high second-hand value, such as a camera. To pay half the price in those circumstances is an utterly unfair imposition. This is argued, as probably the right hon. Gentleman knows, in the Law Society's memorandum on the matter.
On the other hand, to cancel an agreement on something such as a car, which depreciates in value quickly, would mean that the car owner can, in some circumstances, be heavily out of pocket even on the 50 per cent. arrangement. Nevertheless, I think the balance of hardship as the Bill stands will fall on the customer in most circumstances. I am not very impressed by the arguments put forward by the Government spokesmen in another place to retain the provision in the Bill as it stands, although I would support the rejection of Lady Burton's new Clause if only on the grounds of excessive length. I agree with the right hon. Gentleman that we have to be essentially practical here; this is a practical problem.
The solution I would offer—and I have not consulted my hon. Friends about it and, therefore, it may not work, as, very often, my ideas do not—is that the 50 per cent. condition for ending the contract should be the maximum amount. I know that this applies in the Bill, but it is not stated clearly enough. If we say that in all circumstances it is the maximum rate of damages, so to speak, someone will have to come in somewhere in each case to decide what the figure for damages should be within the 50 per cent.
This proposal, at first sight, could be ruled out—this argument has been advanced—because it is indefinite and would call for judgments outside the terms of the Bill. Let us be realistic, which is what the right hon. Gentleman invited us to be. As I see it, only about half a dozen trades will be seriously involved in this problem. The motor car trade will be, obviously. Television, radio, record players, tape recorders, etc., will form another group. Other groups will consist of furniture, household appliances—for instance, washing machines—cameras and photographic equipment, and perhaps one or two more.
What is wrong with the Bill as it stands is that all these goods that these various traders sell are being treated alike, whereas they are all different. Their rate of depreciation is different. I do not think that we can possibly assume a level of uniformity for the purposes of the Bill which does not exist. I believe that the correct approach is to tell the recognised and reputable trade associations in these trades that they must submit a fair and reasonable formula for assessing the true measure of damages in their individual trades.
There is plenty of time for the exercise. It we put the requirements into the Bill, asking for regulations on this, and if the Bill is passed within the next two months, as we hope it will be, the trade associations will have eight months before the Bill becomes law in which to produce in each case a formula acceptable to the Board of Trade and then subsequently, because the Orders will have to come here, acceptable to Parliament. If they fail, or refuse to produce a workable formula, they must accept the consequences which are at the moment in the Bill. If a hirer thinks that the 50 per cent. rule is too harsh, he can go to the courts for a more reasonable assessment of what he owes the finance company.
We can discuss this proposition in Committee, but I am sure that this is a more practical way than trying to get something written into the Bill, a detailed pro vision such as the proposed new Clause, moved in another place, which cannot possibly apply in all circumstances as they would apply in the case which the movers of those Clauses clearly had in mind, namely, the motor car case.
I am impressed by my hon. Friend's argument about the variation in the rate of depreciation. Is that not the strongest possible argument that the only true way to deal with it is the ordinary measure of damages at common law?
That is what we fall back upon. If nothing else were done, I agree with my hon. and learned Friend that that is what we should fall back on. If we could find a formula that acts quickly and fairly in all cases so that there is no need to go to the courts, it would be far better all round.
The different usage to which these goods are put must also be borne in mind. The man who drives a motor car into the ground in 18 months is a different proposition from a man who drives in the way that the hon. Gentleman drives.
That is true. I do not want to go over these Committee points, but I point out to the hon. Gentleman that this is a problem which car dealers themselves have to deal with almost every day when selling second-hand cars. They have a schedule of prices for secondhand cars to take as their basis, and they vary their prices according to the condition of the car. If we could work out a formula on that basis, so much the better, However, these are Committee points which we must face up to in Committee.
One thing is certain. We must remove from the law the offensive provision which is now there under which the hirer who defaults on his agreement is better off than the hirer who honestly gives notice to terminate it. We must get rid of the equally absurd situation in which, as now happens, there are three different interpretations of damages, depending on who ends the agreement or whether the hirer defaults.
I turn to the other parts of the Bill which I promised to deal with. Obviously, we approve the provision to protect the heirs of a hirer on his death. This was a very sore problem in Scotland. I hope that some of my hon. Friends from Scotland will purseue the matter to find out whether the Bill remedies a situation about which they have long complained. While I am on Scottish matters, may I say that the device adopted in the Bill to extend the English law to Scotland, with some modifications, seems to me to be a very extraordinary precedent. I do not know of it being done quite like this before. Schedule 2 is, in fact, the 1938 Act lifted out and put into the Bill. If any further evidence were needed to show the need for a new comprehensive consolidated Bill, we have it in the fact that the Government were compelled to adopt this device.
Thinking of the Committee stage, I sincerely hope that my hon. Friend the Member for Kilmarnock (Mr. Ross) will go ahead and press for the Scottish section of the Bill to be considered by the Scottish Standing Committee.
I have three further comments on the contents of the Bill. First, Part I do not think that we can accept the proposal as now stated in the Bill to deal with hire-purchase frauds arising from cars that are in the process of being bought on hire purchase and then sold to an innocent third party. Somehow or other, as I see it—I am not a lawyer—we must attach a title of ownership to the car as it passes from the garage to the finance company to the customer. To use either a logbook or a licence card for this purpose as a certificate of title seems to me to be an arrangement which is wide open to abuse.
There are already thousands of logbooks around to which no cars can legally be attached. The cars have been dismantled or destroyed. It is the simplest thing in the world to forge a logbook, if one can get hold of the type of car which suits the logbook. It will be even easier, I should imagine, to forge a licence card. I am told that some of the "wide boys" in this business have already engaged printers to produce forged cards, even before the Ministry has designed them.
There are other serious technical objections to which the Minister referred. We can leave them to be dealt with in Committee. Personally, I am attracted to the idea of basing an arrangement to deal with this on the Finance Houses' Association indemnity fund arrangement, provided that, whatever we do, the innocent customer must have full legal protection. In Committee we may be able to deal with this point satisfactorily. I am told that there are relatively few cases of this kind of hire-purchase fraud. This was explained in another place. I am sure that we do not want the enormous sledge-hammer of Part. III to crack what may turn out to be a very small nut.
My next comment concerns the advertising section. I congratulate the right hon. Gentleman on at last providing—we pressed for this in 1957—that not only must the advertisement show the cash price, the deposit and the hire-purchase instalments, but it must also clearly show the total hire-purchase price: all four items must be in the advertisement. Even though it may be easy to poke a little fun at the complicated formula for calculating the true rate of interest or hire-purchase charge as set out in Schedule 3, this is a welcome innovation and I am very glad that the Consumer Association's proposal for this has been accepted.
My third comment concerns something not mentioned by the right hon. Gentleman—rebates of hire-purchase charges when a hirer settles an agreement in cash ahead of time. In such cases, in my view, the hirer is entitled to a rebate on the hire-purchase charges, and we shall put down Amendments in Committee to make sure that he receives a fair rebate.
Finally, let me quickly sum up our attitude to the Bill. We welcome it for what it does and criticise it for what it fails to do. We are also very critical of this piecemeal approach to the improvement and modernisation of the hire-purchase law. When the Bill gets on to the Statute Book we shall have four Acts of Parliament governing hire-purchase and credit transactions and a great deal of common law still to be relied upon to make confusion worse. All this statute law—the four Acts of Parliament—are built up on a slender foundation, because the 1948 Act was not a perfect Act by any means. It was a private Member's attempt to remedy abuses in hire-purchase trading.
Until we face up to the fact that all legislation affecting buyers and sellers of goods—and that legislation is increasing every day; this is the third Bill in the last month that deals with buyers and sellers—urgently needs a basic, clear, concise, modern law of contract as a firm foundation, we shall never get the rules clear and satisfactory. But we must take the Bill as it is, and we can assure the right hon. Gentleman that we shall do all we can in Committee to improve it where it can be, and needs to be, improved.
I should, first of all, mention my own position, which is that of a director of a finance house, but I would make it quite clear that do not speak in any sense as representing either the finance house or the Finance Houses Association and that such ideas as I have are those which I feel personally.
The first and most important thing which, I think, was said by my right hon. Friend is that there is to be an attempt, after this Bill has gone through, at a consolidation Act. I am extremely worried to hear that, because I do not believe that the basis on which we are now proceeding in this Bill, though the Bill has what I might describe as considerable interim merits, is the way to deal with the general consumer credit position.
I would like to have heard that this was, as I say, a Bill to meet certain clear abuses and that it was in the mind of the Government to produce a Bill that would deal with consumer credit on a much wider basis. That, of course, would involve the ending of the Bills of Sale Act, which would enable title to be given as security in a way that at the moment it cannot be given. It would also involve considerable amendment of the Moneylenders Acts.
However, I am satisfied in my own mind that in future the way in which this method of getting credit will be based will be on the individual, as it is very largely in other countries, particularly in America, where, of course, the proportion of consumer credit is very much larger than it is in this country. I hope that that will be considered again, because I am sure that it is the way to deal with the matter. We should then have credit ratings which, I believe, is of value in dealing with matters of this kind.
I now pass from that to deal in a little more detail with the question of repudiation of the hire-purchase agreement. The law as it stands is very difficult. It has, I think, been decided in one case that failure by a hirer to pay one or two instalments does not amount to repudiation, but if the hirer merely writes a letter, and says that he is unable to pay the instalments, that is repudiation of the agreement.
The question arises, when agreements come to an end either by repudiation or termination, as to what ought to be done. In that connection I should mention—which I do not think the hon. Member for Sheffield, Hillsborough (Mr. Darling) mentioned—that there is, of course, a minimum payment clause which may not be as much as 50 per cent. of the total hire-purchase cost. I believe that the way to deal with the measure of the loss is to look at it from the point of view of the amount of the unpaid balance of the hire purchase price less (1) the value of the goods and less (2) the option fee, which is only nominal, for the exercise of the option and (3) any discount for accelerated payment due to the payment being made before the termination of the agreement at its full time.
A difficulty arises under the hirer's rights to determine the contract. He can do that by paying the amount stated in the minimum payment clause which, as I said, may be under 50 per cent. But it is open to the court to find that that is, in fact, a penalty and should not be recoverable. That produces the position referred to by the hon. Member for Hillsborough. It produces a position where a hirer may be better off if he breaks a contract rather than if he terminates it. He may pay the amount up to 50 per cent. only if that is not found to be a penalty?
The more one looks into this question of repudiation and termination of hire-purchase agreements the more one is convinced that there must be some method of arriving at the true value of the property concerned. If we look at the position that arises when the owner desires to terminate, then we see that there ought to be some rule under which he notifies the hirer that his failure to keep up the instalments will involve the termination of the agreement if he does not remedy the situation by a certain date. Seven days, I believe, has been suggested as a basis, but I should have thought that a longer period than that would be right.
After the transaction has been determined then, of course, the owner, that is, the person who has advanced the money—the finance house or otherwise—has power to abandon the security and recover the unpaid balance. But, of course, the unpaid balance is a matter of question, and until a decision has been arrived at as to what that amount is one cannot arrive at a figure that is fair as between the parties. The payment up to 50 per cent. was no doubt quite a reasonable computation under the old conditions where the limit was £300. However, when one is dealing with £2,000, which involves a payment of up to £1,000, more careful consideration would seem to be required, to arrive at the true measure of loss.
I have been searching my mind to see whether there is any way in which something like the Order 14 procedure might be possible in the High Court in these cases. If these cases are all going to the county courts I realise the difficulty that there is bound to be there, with the amount of work involved in these matters. I am sure that something not quite on the lines of that suggested by the hon. Member for Hillsborough might be devised, for the question of finding the real loss is absolutely essential if one is to get a satisfactory result from the Bill as it stands.
I would like to damn the Part III procedure with faint praise. The first thing about it that strikes one is that it is a cumbersome procedure. It is also expensive—although no one will mind that because people always seem to think that the finance houses have plenty of money. They should realise that it is only our stock in trade and that we cannot fritter it away. This procedure will involve considerable delay because all the necessary transactions must be at a distance in the sense that there are three parties all at different places. It is considered that the delay to complete the transfer of ownership will be 11 days at the very least.
When one realises that there are nearly 5 million motor cars in this country and that a great proportion of them are the subject of hire-purchase agreements one can assess the considerable difficulty involved in this matter. That might be got over, but the use of the logbook is another difficult question. It is always possible to fake a logbook. It has been done time and again and on a good scale it sounds a most excellent racket for anyone who has not thought of it before.
I sincerely hope that some arrangement will be made that does not involve what I think is an invitation to trouble in connection with fraudulent treatment. I am bound to confess that there are some people who are capable—in the motor car business and, to my sorrow, in the finance house business—of taking advantage of such an opportunity.
I have been asked to mention something relating not to motor cars but to ordinary businesses, the furniture shop or store, for instance, which does its own financing. There are advantages in simplicity in this sphere and it has been suggested to me that the ordinary order form, which is filled in in considerable detail—and this would apply to the person dealing only with such a store—should be given to the customer and on it should be listed all the articles he has selected, totalled up to the cash price, to which should be added the credit charge, then the total price should be written and below that should be a sentence signed by the customer.
I has been pointed out to me—though it could be supplemented by a subsequent agreement—that the sentence should be as simple as this:
I understand that if I enter into a hire purchase agreement for the above mentioned goods to the total hire purchase price of £…, that after paying a deposite of £…I will be required to pay…instalments of£…
If a copy of that were given to the customer that would be a great advantage because there would be a certain degree of expense and complexity saved to the ordinary store doing business in this way and the copy of such a form signed by the customer would be of help for them to take home and think over.
Something which has never been suggested before—and this is my own idea and I will be interested to see if there is any answer to it—is that we live in an age when I sometimes wonder whether some of our legislation is not too grandmotherly and whether we look after people who should, in this world, learn to look after themselves to a greater extent. We must exist in this state of affairs, but I do not see why it should not be required that a statement should be made by anyone seeking to enter into a hire-purchase agreement to supply particulars of all their outstanding hire-purchase liabilities.
It is so easy to slip into these things. Often people with very little capital resources, put with substantial wage packets, enter into hire-purchase agreements these days without fully realising the number and amount of hire-purchase agreements they already have. It is only when tragedy, e.g. unemployment or death, strikes the household that they become completely unstuck. Would it not be possible to make a provision that before the documents in an agreement are finally completed the proposed hirer should give the details of his or her outstanding hire-purchase liabilities? I am convinced that if that were done many people would draw back and not enter into something that might become to them a terrible cross to bear should bad luck overtake them.
I am sure that the Bill is of value within the limits I have indicated and I hope that it will receive thorough consideration and emerge a better bill from Committee.
The hon. Member for Aldershot (Sir E. Errington) said that the finance houses were poor; certainly by no means as wealthy as some people imagined. He will not expect my hon. Friends to believe that. He later said that the time had come when we should stop being grandmotherly in our legislation.
The fact that we have had to introduce this Bill means that because we have not passed sufficiently grandmotherly legislation in the past many people have been defrauded by some clever people in the business world.
We welcome this Bill, but I very much regret that the Government have taken so long to introduce it, and no one can convince me that it has not been produced just because Lord Peddie took the opportunity of reintroducing his Bill in another place. It is also to be regretted that, in spite of the Molony Report, the Government did not do more a long time ago because, even now, it is quite obvious that the Molony Report will only be implemented in stages.
We have gone far beyond the grandmotherly days when we were told that we must never buy anything unless we could pay for it. We are living in a completely new age when people are not prepared to wait until they have saved enough money to buy something on the spot. I am old-fashioned, but it may be that those people are right who are no longer prepared to save until they can buy outright a washer, a refrigerator, or even a motor car.
One thing that stands out quite clearly is that the Bill has had to be introduced to protect people from slick salesmanship. We have for long been telling the Government that something should be done about that. We all know from our constituents or from letters that some of the greatest hire-purchase tragedies are the result of slick salesmanship on the doorstep, through mail order, and even in some shops—we do not say that every trader is disreputable, but there are undoubtedly some shops in which slick salesmanship is pursued.
The cooling-off period will apply only to door-to-door selling, but I am still not quite sure that there should not be a cooling-off period in respect of transactions in shops, too. We all know of the fancy-looking shop, with the salesman hovering behind the door. He asks some couple looking in the window, "Would you not come in and look round? There is no obligation to buy." Before the poor souls know where they are they have succumbed to the come-into-my-parlour tactic, even though they may not have intended to make a final decision to purchase that day. It is not just politicians who need to talk well—some salesmen have to learn to do the same thing, and they can often get people to enter into an agreement before they know where they are. We should look again to see how far we can protect customers from this kind of salesmanship.
I am sure that a man and wife who are on proper terms talk about their problems before spending money. The wife probably says," It's about time I had a washer "or" Don't you think we should have a fridge '?"or" We need some new furniture"—
I am not a Yorkshire lass. A couple look at the price and the quality and see the terms that are offered—particularly in the case of furniture. A woman usually knows what kind of washer or cleaner she wants, but with furniture there can be a doubt, and these people need to look very carefully and compare prices and terms. Here, again, the slick salesman ought not to be able to talk them quickly into signing an agreement. We should look at this aspect again in Committee.
Hire purchase is growing rapidly in this country. It may not have reached the same height as it has in America, but we must remember that this country is not as big as America. Nevertheless, this type of business is rapidly growing here. There seem to be only two things that make people realise that when they sign a hire purchase agreement they have undertaken certain legal obligations. People can be brought up very sharply against that fact when, because of illness, unemployment, or the like they cannot meet their obligations, and then, perhaps, find that they have not properly read the terms of the agreement.
Whether we like it or not—and I am sure that some of us may be a little guilty ourselves sometimes—many people fail to read an agreement, especially when it is in complicated language—
Some steps are taken in the Bill to remedy that kind of thing.
Further, we still have much to do to educate people in the facts of this kind of business. I should like to see hire-purchase trading taken as part of civics in all secondary modern and senior schools, not only in colleges of commerce—and taken by both boys and girls. It is not only women who make mistakes in this respect—
We have taken on big jobs before and have done something about them. I should like to see boys and girls at school taught this form of trading so that when they go into the world, and particularly when they become adults, they are not faced with situations that ought never to have arisen.
We all welcome the raising of the amount to £2,000, but we need to warn people who intend to enter into hire-purchase agreements that it is not £2,000 in cash but includes the hire-purchase charges. I am afraid that many people when thinking of buying an expensive car, or something like that, will be brought up sharply when they find that the amount is not £2,000 but something less.
Financial writers have said that this provision will make the finance houses much more careful about the kind of people to whom they lend money. I will welcome that, because I believe that as this business has grown there has also grown a tendency not to bother too closely as long as the money has been available and there has been an easy return on it. In addition, those doing the financing have had many safeguards in the terms of the hire purchase and the reclaiming of the commodity. If this makes the finance houses more careful, the Bill will have achieved some good.
The Bill provides that Section 3 of the Hire-Purchase Act, 1938, is to apply only if a credit-sale agreement exceeds £20 instead of £5, but I wonder whether a figure of £20 is high enough. I do not suppose that there are many hon. Members opposite who pay only £20 for a suit. I am sure that many of them pay a great deal more. People buy suits on credit-sale, and many other articles are bought at a price exceeding £20 under this system. One of my hon. Friends was concerned whether, if funeral expenses came under this provision, anybody could be buried for a sum of only £20.
We might also consider in Committee the question of the marking of credit-sales cards. A case was brought to my notice last week of a person who entered into a credit-sale agreement with a mail-order business. She sent off a monthly payment but did not have the card returned and, therefore, her only proof of payment was the postal order counterfoil. It was a great worry to her, because she did not want to get into debt and she knew that if she missed one payment the article could be taken from her. If failure to return the card continued over a fairly long period the sum represented in payment could be quite considerable. I hope that in Committee we shall consider the question of how such a person is to be safeguarded. On this same point of the sum not exceeding £20, it must be remembered that a person might have other undertakings. Some people join a credit club with more than one firm. The question arises whether the sum of £20 covers those other undertakings.
I am sure that we all welcome the cooling-off period provided for in the Bill. It is a good thing that no slick salesman can enter a house and talk the occupier into having some commodity. Fortunately, the provision applies to the salesman who, knowing that the householder has children, tries to sell educational books. The case was cited last week of the practice of making a telephone call and saying to the householder, You have been selected". When the salesman arrives at the door he says that he has the books in his car and asks whether he can leave them with the householder so that he or she can look at them.
Many people are afraid to tell the salesman in the first place, "You take them away. I do not want to look at them." In the second place they are afraid that they must sign the agreement because the books have been left with them. They believe that in law they have entered into an agreement to buy them. It is good that, under the Bill, although the goods can be left, there is provision for a cooling-off period.
Even within the cooling-off period, however, there is the question of how the damage which may be alleged to have been done to the goods after they have been left with the householder is to be assessed. A householder might find that a knitting machine which had been left with her had been returned from somewhere else with imperfect needles and had never been put in order. The house holder tries to use it and the seller then says that she has damaged the needles. The would-be customer would have great difficulty in proving that the damage had been done before she received the machine.
This is a special difficulty with furniture. It is the easiest thing in the world to deliver furniture which has been scratched, or a chair with a badly fitted leg, and then when the purchaser decides not to buy to allege that the damage had been done while the goods were in her possession. It is difficult to avoid responsibility for the damage. It is equally difficult to assess what true damage, if any, has been done.
I welcome the fact that the Government have accepted the recommendation of both the Molony Report and the Consumer Council that the hire-purchase form must carry words within a "box" which show clearly that the customer is signing a hire-purchase agreement. This is absolutely essential. I remember a case where a person signed an agreement but did not afterwards receive a copy. When she believed that she had met all the payments under the agreement, she suddenly found that the form was not for hire-purchase but for rental. Fortunately, in this case we were able to engage a good lawyer at little cost. He appeared in the county court and ensured that that practice on the part of that firm was stopped for all time. If, as provided in the Bill, the form is returned to the purchaser, he or she knows exactly what has been signed and many of these difficulties can be put right.
I should like the Parliamentary Secretary to inform the House whether the cooling-off period for the mail-order business is four days, seven days, or eleven days. I am not a lawyer, and I find great difficulty in understanding some of the phrases in the Bill. I believe that a little more than four days should be allowed in the mail-order business.
I welcome the new provisions in the Bill relating to guarantors. Unfortunately, many people enter into an agreement to be a guarantor, especially for things like motor-scooters. The poor souls do not know that they have taken the responsibility for the debt if the youth concerned decides that he has spent ail his spare money and he will not pay the instalment. I welcome the fact that under the Bill the guarantor will be made aware of what he is undertaking and his potential liability.
My next point relates to motor cars. When we discussed the Weights and Measures Bill, we talked about the "racket" by coal dealers, but I do not know whether there has not been a bigger "racket" in the sale of second-hand cars. In view of all the difficulties, I am sure that even with the provisions of the Bill we shall by no means be safeguarding the purchaser against a slick person who finds the selling of secondhand cars a very profitable business. At least, an attempt is being made to safeguard the buyer of particularly a secondhand motor car.
Another point which might be examined concerns proof of posting of the agreement which now has to be sent. I have had a lot of difficulty with one or two constituents who do not think that the Post Office sends their pool betting coupons in time, with the result that they do not win, and the blame is always put upon the Post Office. I do not want any doubt concerning proof of posting to arise because of any argument of that kind. We shall need to consider carefully what constitutes proof of posting on account of both the trader and, if the purchaser decides upon cancellation, on the consumer's side, too.
There will be many points to discuss in Committee. The Committee stage will be difficult for a lay person like myself. We know the problems which arise because consumers are not dealt with as they should be, but traders also might have difficulties which cause problems. When we come to the legal jargon, which is still used in many Bills, some of us will find difficulty. This is a Bill in which we shall have to tie up some of the points which arise.
I reinforce the suggestion by my hon. Friend the Member for Hillsborough that the Board of Trade should consider issuing a document which explains the terms of the undertaking which a person has entered into. Recently, I have been trying to get the Board of Trade to do something about explaining both to traders and to consumers the implications of the Weights and Measures Act, but the Board of Trade has said that the task is difficult. It is, however, the people in the Department who have to meet the difficulties. They say that the traders themselves must do some of this. As a co-operator, I know that the Co-operative Union has been forced to issue explanatory leaflets to its members.
I hope that when we discuss this point after the Bill is passed, the Board of Trade will not put up the same sort of argument concerning difficulties in producing a document to explain the obligations, the implications, the terms and even the charges which are made against the consumer. I should like to think that the Board of Trade would do this without asking the consumer, even indirectly, to pay for it, but I shall not quarrel about that as long as an explanatory leaflet is given to the purchaser. We are often told that we follow America, and some of us sometimes think that we follow America in ways in which we should not, but this is an instance when we might follow the example of some of the American states.
I welcome the Bill because it is one step further to getting consumer protection. It is a little step further, but, nevertheless, a step, in implementing some of the recommendations of the Molony Committee. I hope that the President of the Board of Trade and the Government, if they are in office much longer, will not take as long to implement other provisions of the Molony Report.
Like the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) and, I am sure, everybody in the House, I welcome the Bill. I go further and say that I welcome the open-minded attitude towards it by my right hon. Friend the President of the Board of Trade. I have followed closely the passage of the Bill through another place, and it has been visible that there was adaptability on the part of the Government. I am sure that that can give nothing but pleasure to all of us on the Government as well as on the Opposition benches. I must declare an interest in the hire-purchase industry, which, I trust, will not be taken to undermine my judgment but may provide me with a little more insight into what is a fairly complex industry.
I have been saddened, as other people must also have been, that we are adding to this patchwork of legislation, as my right hon. Friend so handsomely acknowledged. We are perpetuating an absurdity, because hire purchase is, let us face it, a sort of legal fiction. I certainly have not heard of anybody who has ever tried to hire anything by hire purchase. It is rather silly that we should continue through the decades to perpetuate this term, which is entirely meaningless and which, as we have heard, stem; simply from the handicaps under which a private Member labours when trying to produce legislation in that it was not possible, in 1937 or whenever it was, for the late Ellen Wilkinson to undertake changes in the Sale of Goods Act or the Moneylenders Act in private Members' business on a Friday. We could now have been stronger and changed the whole position somewhat.
It is retrograde to build upon such shaky foundations. Even if we are putting Act up)n Act, they are all on such a tiny base that the whole thing seems slightly absurd, because only this country and countries which have derived their legislation from it use the term "hire purchase" or have this concept.
Nevertheless, I admit that until we have a thorough review of the whole credit system, we must welcome the Bill, because it is the best Bill that we have. It is encouraging to know that my right hon. Friend is busy collecting the voices on methods of more profound legislation on credit and on advances against chattels. I only hope that we live to see action as a result.
The ideal of the Bill is unexceptionable. It is to protect the weaker party in a deal while keeping "interference in normal trading practices to a minimum", as my right hon. Friend so succintly said. The Bill provides new safeguards which are much needed, and I am glad that the Government are so ready not to enforce safeguards where they are not needed. This has been conspicuous in the passage of the Bill in another place, where, for example, we have seen the exclusion of bodies corporate from the provisions of the Bill and we now have the inclusion of finance offices as well as showrooms under Clause 4(5). This was an Amendment which I never thought would be accepted so readily. I am very pleased that it has been accepted, and I only hope that there are not many loopholes for fly-by-night accommodation office addresses purporting to be finance offices.
There are many other matters in the Bill about which the Government are still showing flexibility of mind, notably Part III, which is clearly unpractical, because it is specifically known that a motor-car log book is not a document of title and we cannot make it so at this late stage. I agree with the safeguards which Part III seeks to provide, but this does not seem to me a practical way of going about the matter.
As the hon. Member for Hillsborough said, there is one subject on which the Bill is wholly inadequate. In another place the whole House was against the Government on it. I hope that that will not have to be the case in this House. It concerned the conditions of the termination of an agreement under the heading, familiarly known by all who have been delving into this matter as the "true measure of damages". The magnification of the scale of sums covered has warped the equity of the Bill. The £50 maximum was rough justice. The sum of £300 makes it very rough justice. But the maximum of £2,000 makes it outrageous. This settlement of 50 per cent. is a sort of judgment of Solomon. It is legally nice, but who finds half the baby fair? It may be all right perhaps when it is "only a little one", but surely that is not so with today's huge infant. This must be modified.
I agree that the Amendment put forward in another place was unpractical. However, it was very ungallant of the hon. Member for Hillsborough to damn it because it was "too long". It was prodigiously long, but, even at that length, it would not have worked. I agree that the Government should not accept uncertainty. I do not honestly believe that the protestation of the Government spokesman in another place that it would introduce doubt and uncertainty was altogether well based. I am glad that my right hon. Friend is ready to consider anything practical—and he stressed "practical". I trust that we in this House will put forward Amendments to the effect which I have indicated which will be practical and which my right hon. Friend will find acceptable. Would it not be a terrible disgrace if this House and Government were not in fact capable of arranging this matter?
We shall have much to do in Committee. I will not say more about other parts of the Bill because the Committee stage will absorb any amount of our loquacity on this subject. I regard the Bill as an earnest effort towards finding an interim solution, and I hope that this House, with the hearty co-operation of the Scottish Standing Committee, will help to make it workable.
When my hon. Friend the Member for Warrington (Mr. W. T. Williams) presented his Hire-Purchase Bill, and when the Second Reading debate on that Bill took place in December, 1961 he put forward a number of suggested reforms strangely similar to the essential reforms in this Bill, particularly on what I called in that debate "the pay pause", or what has since been called the "cooling-off period", and on the point that dealers should be considered in law the agents of the finance company so that they might be liable for misrepresentations made by the dealers.
That Bill was talked out. It was not even examined in Committee. It was not allowed a Second Reading. The Minister of State, Board of Trade, who sponsored this Bill in another place, was then Parliamentary Secretary to the Board of Trade, and he was particularly energetic in his efforts to ensure that the Bill was talked out. He criticised severely the two main points which I have mentioned. In his words concerning the housewife, the cooling-off period meant to him
a serious weakening of her sense of responsibility."—[OFFICIAL REPORT, 8th December, 1961; Vol. 650. c. 1780.]
The effort to make the dealer the agent for the finance company so that the finance company might be responsible for misrepresentations made by the dealer was, in his view, a doubtful one, to say the least.
Now we have the spokesman for the Government eating his own words. He introduces a Bill which adopts both those suggestions, except that instead of the cooling-off period being 48 hours it is now four days. We are thankful for this death-bed repentance by the Government. Perhaps it is a belated repentance made in a desperate effort to prevent their death. One can only say how much better it would have been if the Government had supported the Bill introduced by my hon. Friend the Member for Warrington.
Over two years have passed since the Second Reading debate on my hon. Friend's Bill. One wonders how many cases of hardship might have been avoided and how many deluded housewives might have been spared some misery and suffering if only the Government had acted then to deal with what everyone recognised was an evil. As my hon. Friend said at the time, the reason put forward as to why the Bill should not have a Second Reading was, "Let us wait for the Molony Report. This comprehensive Report will go to the roots of the hire-purchase system and will deal with it exhaustively." That was the excuse put forward, and the Government have lamentably failed to deal with the matter.
I, too, welcome the Bill as far as it goes, but there are a number of points that I desire to make. The 1954 Act applied to agreements under which the hire-purchase price, or, in the case of a credit sale agreement, the total purchase price, did not exceed £300. This Bill raises it to £2,000. The Molony Committee's recommendation was that all consumer hire-purchase transactions should be brought within the Bill, and it put forward its recommendation for reasons which are well set out in the Report. The Molony Committee thought that there should be no limit.
The Government have rejected that recommendation. I know that some of my hon. Friends agree with them. I recognise that there is a difficulty, particularly in the proposed definition of a "consumer sale," but it seems to me a little illogical to lay down a limit of £2,000, or any limit at all. if there is to be legislation on contracts of this kind, what is the reasoning behind laying down a £2,000 limit? Why not £3,000, £5,000 or any other figure? The same reasoning applies to these figures as it does to the figure of £2,000. I think it would be worth while to look at this point again to see whether it would be wiser not to have a monetary limit.
I see the point which the hon. and learned Member mikes, and I think that there is some substance in it, but, since the Molony Committee was concerned only with protection for the consumer, what sort of article is likely to come outside the limit of £2,000? I should have thought that £2,000 was a pretty high figure.
My argument is that if it is necessary to have legislation on contracts of a certain kind, the same reasoning applies equally to other contracts. There is no magic in the figure of £2,000. The Molony Committee went into this in detail and, having done so, it made a recommendation. All that I am saying is that it would be wise to examine this problem in Committee and see whether it would be better to pass this legislation with no limit in it at all.
Under the 1938 Act, if the hirer wishes to terminate the agreement and return the goods, he may do so provided that he makes up what he has paid to half the hire-purchase price or pays all the instalments due to date if they amount to more than half the hire-purchase price. I cannot help feeling that the Government have neglected the opportunity to try to resolve the somewhat chaotic state of the law which results from a number of decisions in our courts. There have been references to this already. The hon. Member for Aldershot (Sir E. Errington) referred to the present state of the law.
Often, hire-purchase contracts will have penalty clauses in them. I need not go into detail, but, as the hon. Member for Aldershot pointed out, under comparatively recent decisions in our hire-purchase law, the honest man is the man who suffers as compared with the possibly dishonest man because, in the case of the honest man, the courts will hold that the penalty clause applies whereas in the other case the courts will hold that the penalty clause does not apply and they then proceed to deal with the question of damage. As I pointed out in the debate on my hon. Friend's Bill in 1961, the situation is quite extraordinary.
I will take a simple example to show how the system of paying up to half the amount in the hire-purchase agreement works. Let us suppose that an article is sold on hire purchase, the total price payable being £360 payable by 18 instalments of £20. After paying one instalment of £20, the hirer wishes to terminate the agreement. He returns the article—let us suppose that it is a car—and he pays £180, that is, £160 plus £20, making up half the purchase price. Thus, the owner after one month receives back the article plus £180.
I have taken an extreme case. As has been said, it may well be that rough justice is done by keeping to half the purchase price in the case of amounts under £300, but when one takes it up to the limit of £2,000 and contemplates what the hirer will have to pay in meeting half the purchase price in those circumstances the rule is seen to be absurd on the face of it.
I know that some of my hon. Friends may disagree, but I make this point as strongly as I can. Why should there be a departure from the ordinary rule at common law that, when there is a breach of contract, the person claiming damages should prove the amount of damage? I have never understood why. It is said that keeping to half the purchase price gives a rough and ready way of doing things and, from a practical point of view, it is a good way of proceeding, but, clearly, there are cases in which injustice is caused. My hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) made a very good point when he reminded the House that different types of article coming under hire-purchase contracts were subject to different rates of depreciation. How absurd the rule requiring half the purchase price becomes, on the face of it, in these circumstances.
We already have the rule at common law. A person bringing an action for damages because the other party has committed a breach of contract has to prove his damage. He puts to the court the material facts as he knows them, and the defendant can put forward the facts which he desires the court to take into consideration. The court then decides what the amount of damage is. I submit that, on the face of it, this is the only way to deal with this matter. Indeed, as was said by the Minister in another place, the consideration here is as between the principle in the Bill and what is called the "true measure of damage". I hope that in Committee we shall go into the matter in detail and put right what I am certain will lead to injustice if it remains as it stands.
Now, a few words about what is called the cooling-off period. I welcome this provision, but I offer two points of criticism. Clauses 4 to 8 give the hirer or buyer the right to cancel a hire-purchase transaction or a credit sale transaction exceeding £20 within four days if the documents are signed at a place other than trade premises. In other words—I think that the Minister himself used this example—it relates to the activities of the salesman who goes from door to door, and the consumer is given an opportunity for reflection and can change his or her mind. It certainly does not apply to any bargain made at trade premises where the goods are normally sold.
I appreciate the need to guard the gullible housewife against the persistent salesman, but why is the Bill restricted as it is? I have had, as other hon. Members will have had, many complaints from persons who have entered shop premises perhaps to make a small purchase and who have been induced or tempted by a salesman into making a hire-purchase agreement for something which they did not really want and could not afford. The housewife may be just as gullible in shop premises as on her doorstep. In my view, there is a strong case for extending this provision.
Of course, the Government's answer is that we must be very careful not to interfere with trade, that there must be a limit to this sort of thing and we should not interfere with people in shop premises carrying on business. But are not we trying to protect the weaker class against the stronger? Most tradesmen are honourable, honest people and the need does not arise, but hon. Members know that there are many "flashy" shop premises with goods exposed for sale on the hire-purchase system and there are many salesmen, or some salesmen, at least, who do tempt housewives in the way I have suggested. Why should the housewife be protected only if what is done is done on her doorstep and not in the shop? I hope that this question, too, will be gone into carefully in Committee.
Clause 9 provides that the dealer is to be the agent of the seller in respect of representation as to the goods, and I frankly say that this will be of tremendous value to the hirer, particularly in cases when the dealer, as he often is, is a man of straw. Clause 11 deals with implied conditions as to merchantability. These are two matters which I myself pressed on the House in December, 1961, and I am glad that the Government have adopted them.
Clause 14 prohibits the owner, when one-third of the hire-purchase price has been paid from recovering the goods on the death of the hirer except by going to the courts. I welcome this.
Although some may differ from me on this, I am glad to see the provisions enabling regulations to be made requiring the retention of the vehicle registration book by the owner and providing for the issue of licensing cards. This is a difficult question. I remember being personally concerned in a case in which many log books had been forged by certain people and distributed all over the place. I realise that there is a problem here. But on the other hand, if we are looking for a safeguard, it has often been said that in car transactions the log book is really the document of title and as such should be retained by the finance company and a licence of some kind issued in its place. If this proposal is considered insufficient, we might look at the proposal that, in addition, the finance companies should have a scheme through which innocent hirers could be paid compensation in such cases.
There is another provision about which I feel a little doubtful. In another place the Government inserted a Clause excluding bodies corporate. That sounds attractive because one thinks automatically of large companies. There are, however, many small companies. A man and his wife might form a company, for instance. There are also partnerships—these are not bodies corporate—of a very large kind. The Government are excluding all bodies corporate—even the small limited company but the members of a partnership are included. The position should be re-examined. It may be satisfactory—I do not venture a firm opinion tonight—but we should look at it carefully to see whether the Government have found the right solution on this matter.
Many other Clauses will require careful scrutiny, and Amendments can be made to improve the Measure. I welcome the Bill but regret that it has been introduced so late in the day and is not the comprehensive overhaul we had been promised.
It is always very grand to follow a barrister. It gives me a feeling of self-esteem to be operating in that rarefied atmosphere. I always feel that hon. Members should be paid time and half on these occasions. I am surprised, however, that the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) takes issue with my right hon. Friend on the methods by which hire-purchase agreements may be terminated and the critical values arrived at.
I suppose that the hon. and learned Gentleman, being a lawyer, wants everything to be done in the courts. This is natural because he thinks that it is only in the courts that complete justice can be obtained. But, if we can, we should remove from the courts all unnecessary work, and I hope that in Committee we shall bear, his point in mind, for the insurance companies, for instance, settle thousands of claims every year in connection with the values of bills without seeking legal advice or going to court.
This is a good Bill. It comes from a good Government and follows a succession of good Measures over the last 10 or 12 yean. It amazes me how the Government keep up the pace with such freshness. Having said that, I am sure that all hon. Members opposite will agree with everything else I shall say.
This is a difficult and technical matter on which to legislate because we are trying to pro
I would like an assurance that the point put by the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater) will be pursued. The protection of the guarantor is a very important issue which can easily be forgotten. The saddest case I have encountered since I entered this House was that of a widow, a cleaning woman with five or six children. One evening she was called in by a neighbour with whom she had been friends for a long time and was asked to sign a form. She was told that she was merely helping her friend to get a coat. The friend later disappeared and, of course, the coat went with her.
My constituent found herself in court. She is a simple woman with a large family to look after and she works very hard in doing so. Here she was faced with the responsibility of paying the outstanding balance on the coat. However, in view of her impoverished circumstances, the court ordered her to pay about Is. a week. I want to be certain that the guarantor has equal protection with the customer and that he will have the same time limit for reflection so that other people can advise him.
The dreadful thing about the guarantee signed by this lady was that it went on for ever. Incidentally, I inspected that guarantee with a solicitor whom I myself paid because the House provides no facilities for that sort of thing, even if it provides speech writers. But that is a digression. We found that the guarantee went on for ever. It did not finish with this one transaction. There was no time limit to it and it was not attached to the value of the coat. The buyer could have obtained another £100 worth of goods and my constituent would still have been guarantor. If the Bill does not already contain protection for guarantors, I hope that my right hon. Friend will prepare something for the Committee stage.
The hon. Member for Sheffield, Hillsborough (Mr. Darling) made the interest ing point that we might persuade finance houses to create a pool out of which they could compensate those unfortunates whom we know too well—the people who lose their cars after purchasing them because they are found to belong, in fact, to a hire-purchase company. This sort of thing bears heavily on the family involved because it is a matter of hundreds of pounds. A compensation pool is working well among insurance companies. The motor insurance companies created it to deal with claims outside the technical part of insurance policies. It has worked satisfactorily for years. If the finance houses could follow suit to deal with victims of forged registration books, this would save a great deal of misery.
There is one point about a purchaser being given a licence card while the hire-purchase company retains the logbook. It means that a person is telling the clerk behind the counter that his car is on hire purchase, and this is something one likes to keep to oneself. It should be simple to persuade the finance companies to adopt the idea of a pool. We must not forget that they always have the right of recovery against the thief if he has any money. That is their right also in the motor insurance pool.
Having made this short speech, I am in no doubt that I shall be on the Standing Committee dealing with the Bill. That is one of the tragedies of the House if one has no more sense than to speak on Second Reading. In addition, there do not seem to be many of my hon. Friends to pick from. However, it will be an interesting Committee because from both sides we shall be working to make the Bill better. I wonder if my right hon. Friend will promise that we shall not do three half days a week in Committee.
I have a good deal of affection and respect for the hon. Member for Bradford, West (Mr. Tiley) who has just made a typically humorous speech—an earthy speech, if I may say so—delivered in a fruity North Country accent which I like to think that I share with him. I hope that I can bring the same kind of down-to-earth approach to what is a very serious problem. The Secretary of State for Industry and Trade must have been somewhat alarmed at the rather tepid enthusiasm on his own side for the Bill. It may be a foretaste of what is to come when he tries to introduce legislation to end resale price maintenance.
Reference has been made to various attempts over several years to tackle this very serious social problem. The attempts have been predominantly from this side of the House and not least by Scottish Members. My hon. Friend the Member for Motherwell (Mr. Lawson) introduced in July, 1959, a Bill on personal credit schemes which were peculiar to Scotland. But the Government treated the Bill in the typically cowardly way in which they approach these problems by allowing him to introduce it and then refusing facilities for its consideration by a Committee.
On 28th January, 1960, my hon. Friend the Member for Motherwell sought an Adjournment debate on the same problem. I am glad to see the Solicitor-General for Scotland here, because he will know the firm to which reference has repeatedly been made in the House—Napier's, of Ayr—which, I think, must be one of the most unscrupulous traders in the whole of Britain. Hon. Members on this side have over the years tried to get the Government to deal with that problem but have always met with obstacles on the ground that to do so would involve complicated legislation. I am not so sure that this Bill will be the answer to it.
Before I come to the Scottish problem, I want to refer to a point made by my hon. and learned Friend the Member for Stoke Newington and Hackney, North (Mr. Weitzman), who referred to the cooling-off period and the attitude of the then Minister of State, Board of Trade, when my hon. Friend the Member for Warrington (Mr. W. T. Williams) introduced a Bill which provided for a cooling-off period of 48 hours and the then Minister of State talked about this leading to a serious weakening of the housewife's sense of responsibility. After the Minister had been sent—buried alive, politically speaking—to another place, where he now operates as Lord Drumalbyn, he asked the other place to accept the principle not of a two-day cooling-off period but of a three-day plus cooling-off period. He used startling words.
Lord Drumalbyn talked about the Committee accepting this in principle, and said:
I think that there will he no objection in principle to these proposals. The activities of unscrupulous salesmen have caused unhappiness in many families."—[OFFICIAL REPORT; House of Lords, 10th December, 1963; Vol. 253, c. 1143]
It was the same man who said two years before that this would lead to encouragement of irresponsibility on the part of the housewife. That shows how wonderfully concentrating the imminence of a General Election can be on the Tory minds. They can turn around when it suits their convenience.
I question very much whether the cooling-off period is long enough. There are—this point was emphasised in another pkce—some transactions which involve the husband being away from home for much longer than that period. Members of Parliament are away for a whole week. If the wife of my hon. Friend the: Member for Kilmarnock (Mr. Ross) enters into an H.P. agreement on a Monday and he goes home on the Friday and finds she has signed the agreement, I am not sure what happens there. I would hate to be in his wife's shoes.
I put this proposition so that the Minister can realise that there are these difficulties concerning haulage men and people of that kind.
The question of not applying this cooling-off period to business premises needs careful consideration. I can anticipate a situation in which a slick salesman—these salesmen can be an awful pest at people's doors—with a car, says, "If you jump into the car I will take you up to the shop and you can sign there". He might leave the goods at the house and take the housewife in the car to the shop where she signs the agreement, and that makes it legal. There is no doubt that the salesmen will already be on to getting round the law. I see no reason why the cooling-off period should not apply equally to business premises as it does in the household itself.
I often go shopping with my wife, with no firm intention to buy, and one might quite well get inveigled into signing a document in a shop and find oneself with a legal disability as a result. I do not agree that there should be discrimination between the cooling-off period when an agreement is signed in a house and the no cooling-off period when it is done on business premises.
I think that most hon. Members realise that no legislation, however comprehensive, can protect completely a person from his own foolishness, or from the wiles of salesmen who go round from door to door. The damnable part of it is that sometimes these salesmen operate in new housing estates, or in new towns, where the predominant proportion of the population is of young people setting up homes, who are very susceptible to the kind of sales talk that goes on. The salesmen do not go so much to the owner-occupier areas, where people are very heavily committed with house mortgages. They go the housing estates and new towns, where young couples are paying rent and are desperately anxious to get all the durable consumer goods that they can in very quick time. They are very susceptible to these salesmen. I do not know how we can protect them from the door-to-door salesmen. It is an extremely reprehensible trade, and I wish that we could legislate to stop it, or, at least, to get it under control.
Let us make no mistake; the more unscrupulous of these firms usually have the most highly skilled and competent legal advice. There is no doubt about that in Scotland. They have better advice that the Scottish Office has—which is no commendation of the legal advice given to Napier's. They have won more cases against the Scottish Office than they have lost, because they have known very well how to get round the law.
My hon. Friends know it to be true that in Scotland the abuses and exploitation of hire purchase have been proportionately much higher than has been the case in England. One of the reasons for that has been that the Scottish law on the subject has been weaker and easier to circumvent. To the extent that the Bill remedies those weaknesses, we welcome it, even though we do pay a penalty, which the right hon. Gentleman mentioned.
However, I speak on behalf of all my hon. Friends when I say that we must strongly object to the way in which this is being done. To make an enormous change in Scottish law in a matter of fundamental importance and to do so by a Schedule to an English Bill is scandalous treatment of Scotland. The effect is to apply to Scotland the 1938 English Act as modified by Part I of the Bill. This represents a tremendous change in Scottish law made in a Schedule of 15 pages.
As the hon. Member for Bradford, West said, when one speaks in a Second Reading debate like this, one is committed to the Committee. That is the penalty for opening one's mouth on Second Reading. This means that we will have perhaps three or four Scottish Members on the Committe who will have to wait until we reach the Schedule at the end of the Committee stage. There will then be pressure on us from our English colleagues to keep quiet. They will tell us, "We are fed up with the Bill". We shall be able to move Amendments to the Schedule, but there will not be any of those celebrated debates which we have in the Scottish Standing Committee on the Question, "That the Clause stand part of the Bill"—and very interesting debates they are. There will be a similar debate on the Schedule, but on the Clauses the Committee will be deprived of those pleasures.
I should like the right hon. Gentleman to do with this Schedule what has already been done with the Schedule to the Police Bill, which applies to Scotland. The Leader of the House was very forthcoming in accepting the arguments of my hon. Friend the Member for Kilmarnock and my hon. Friend the Member for Motherwell, and the result is that the Scottish Standing Committee has had a full and fair discussion of the Scottish provisions of that Bill. We would like the same treatment with this Bill. It would provide the Government with a very convenient get-out for their Countryside and Tourist Amenities Bill, which has run into considerable opposition in Scotland. It would give them an excuse.
I know that my hon. Friend has been in the House most of the day, and is anxious to get on with his important speech, but may I tell him that the Government have already decided to dump that Bill.
That makes it all the more appropriate to send this Schedule to the Scottish Standing Committee. It would be possible to spend much more time on it. If the Government do not do so, I can tell them quite frankly that we shall expect to have at least the Scottish Law Officer on the Committee to deal with Schedule 2. As a layman, like the hon. Member for Bradford, West, I find it extremely difficult to understand that Schedule. In fact, I find it almost completely incomprehensible and in Committee I might have to ask the Solicitor-General for Scotland to explain it, sub-paragraph by sub-paragraph.
For instance, at the bottom of page 36 there are the words:
Subsections (3) and (4) of the last foregoing section shall apply in relation to a creditsale agreement to which this Act applies under which the total purchase price exceeds £20 as it applies to a hire-purchase agreement, with the substitution for any reference to the hirer of a reference to the buyer and for any reference to paragraphs (b) to (e) of subsection (2) of the said section, of a reference to paragraphs (b) to (d) of subsection (2) of this section.
I have no doubt that that is crystal clear to the Solicitor-General for Scotland, but it is not to me and we shall want to make sure that he gives a full and clear statement of exactly what that and many other things in the Schedule mean.
The Schedule will lead to a dreadful amount of confusion in Scottish law circles and among retailers and consumers. I underline the suggestion of my hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling), who made a brilliant speech and who had obviously done his homework. He did not need a speechwriter; he wrote his speech all himself. I suggest, in all seriousness, that there should be an "Everyman's guide to H.P. law in Scotland", available in all shops likely to engage in this kind of anxiety.
My greatest anxiety, which is shared by all of my hon. Friends and which was eloquently mentioned by the hon. Member for Bradford, West, is the liability of the guarantor. We hope that the Solicitor-General for Scotland will make the position abundantly clear and will show that the effect is completely to end the kind of activity in which Napier's has indulged. Under that scheme, innocent people have been subject, and are still subject, to the most wicked and ruthless exploitation. Almost every Scottish Member of Parliament has had cases of enormous hardship brought to his attention. The 1932 and 1954 Hire Purchase Acts and the Advertisements (Hire Purchase) Act, 1957, have been evaded by what has been called the "personal credit scheme" operated by this firm.
As the hon. and learned Gentleman must know, it has operated on the basis of a charge of 2 per cent. per month at compound interest. In an Adjournment debate in January, 1960, which he initiated, my hon. Friend the Member for Motherwell quoted a case of a person who had agreed to pay £99 for a television set, plus operating costs. The set went wrong and was out of action for several months. The dealer refused to come and co anything about it. Naturally, the person who was buying it refused to continue paying his instalments. Napier's was adding 2 per cent. each month to the outstanding debt and the last time the consumer wrote to my hon. Friend he had paid £51, but had reduced his debt only £13. In other words, up to that point he had paid £38 in interest.
It may be that the hon. and learned Gentleman will say that this kind of extortion was ended by the Credit-Sale Agreements (Scotland) Act, 1961, which was brought in by the late Sir James Henderson Stewart, then the hon. Member for Fife, East, the Government being under pressure, predominantly from this side of the House. However, I am not so sure that the problem of the guarantor has been dealt with, and it is that which still causes concern.
Under Napier's arrangements, the guarantor's obligation extended beyond the grave. It was an open-ended commitment which the guarantor made, what my hon. Friend the Member for Hillsborough described as revolving credit. There are some people in Scotland today—I am not saying that there are thousands, but there are very many—who will be paying to the end of their days as a result of the Government's neglect to deal with this problem.
I hope that my hon. Friend will forgive me if I quote him again, but he has been extremely active in putting forward the problem as it has appeared to him front his correspondence, and as it has appeared to many of us. He quoted the case of a local tramway man who undertook to purchase a television set costing £89. After this man had paid £31 19s. 6d., he died. His widow wrote to Napier's and told the company of her difficulties. The company wrote a nice letter in reply saying that it was very sorry to hear of the death of her husband, but added that it would now have to get after the guarantor and make him pay.
The guarantor paid £61 up to the time of writing to my hon. Friend, which means that £93 was paid for a television set which cost £89, but the guarantor was then told that he would have to pay another £26. I do not know the end of the story, but that was certainly extortion of the grossest kind.
While the Credit-Sale Agreements (Scotland) Bill was being considered in Committee the Lord Advocate said:
There is a wide measure of protection in respect of credit sales to the guarantor under Section 3 of the 1938 Act, which the Bill seeks to apply to Scotland."—[OFFICIAL REPORT, Scottish Standing Committee, 22nd June, 1961, c. 14.]
I want a categorical and unequivocal assurance that from now on there is no prospect of any guarantors being subjected to the kind of exploitation to which they have been subjected for far too long under the existing Scottish law.
I did not agree with a lot of what was said by the hon. Member for Aldershot (Sir E. Errington), but I agreed with him on one point. I do not take the view that hire-purchase should be made too easy for consumers. It is very easy to over-commit oneself. My wife does a certain amount of social work in the East End of London, and finds that many of the problems of child care and child neglect in that area are due directly to over-commitment on hire purchase; and this is true of Scotland too. Indeed, I think that a committee of inquiry into this problem would be well worth while.
It is easy for people to over-commit themselves, because the risks run by traders are almost non-existent. The position is probably worse in Scotland than in England, because in Scotland wages can be arrested for H.P. commitments. This means that the trader runs hardly any risk at all. He knows that if he gets a signature, whether it is a good risk or a bad one, he can cover himself by arresting the person's wages at source. He can arrest wages right down to 35s. a week, irrespective of whether the man has a large family, a small family, or no family at all. The situation was remedied to a slight degree by a Bill introduced by my hon. Friend the Member for Central Ayrshire (Mr. Manuel), but it is still a serious problem, and one to which the Government ought to bear in mind.
I give the Bill a tepid welcome. As one hon. Gentleman opposite said, it is the best Bill that we have, and, therefore, we have to put up with it. We commend the Government for their timid step towards the modernisation of the law on this subject, but we look forward to the day when we shall get a comprehensive Bill which will deal with the problem as it ought to be dealt with, namely, as a major social issue. I end by appealing to the Minister to ensure that Schedule 2 is considered by the Scottish Standing Committee.
I apologise for being out of the Chamber for some time. I was present earlier this afternoon, but, unfortunately, I had to leave to deal with some urgent business. I shall not detain the House for more than a few moments, and I apologise to my right hon. Friend for not being able to be present when he winds up the debate because I have other urgent business with which I must deal.
I am not happy about the proposed increase in the limit to £2,000. It will cause considerable difficulties for some of the smaller finance companies. As my right hon. Friend knows, there are a number of these small companies who do a useful job. If they are subjected to a limit as high as this, a lot of them will be driven out of business, or they may even decide to abandon the practice of hire-purchase and go in for some other form of financial assistance, such as contract hiring of lorries, and so on, which I do not think would be so desirable as allowing them to continue with their normal hire-purchase business.
The present limit of £300 is a considerable sum, and I think that it covers most of the articles which are purchased by the housewife. I think that pushing this figure up to £2,000 will cause great difficulties for some of the smaller hire-purchase companies. It is said that various associations were consulted before this limit was introduced. My information is that they were consulted, but that they did not agree to this figure.
I also think that it will be unfortunate, to say the least, if the dealer is made an agent o; the seller. It seems to me that they perform two separate functions, and I would not have thought that it was right for the financier to be made the agent of the seller. He finances the purchase of the goods, but often he is not present when the sale takes place and is not aware of the representations that are made by the owner of the article to the hirer.
I am not happy about the state of affairs which will result from the introduction of this Measure. One thing that is likely to happen is that it will not be so easy to purchase articles on hire-purchase as it has been in the past. In my view—and I believe that it is the view of many people engaged in this kind of business, which I am not—is that this wilt result in a substantial increase in the charges for these facilities, and I do not think that that will be to the advantage of the hirer. I think that he has to pay quite substantial sums now, but if the risk to the banker or the financier is increased, undoubtedly he will raise his charges.
Those are the points that I wished to raise, and I hope that my right hon. Friend will deal with them tonight.
There is something in the argument about hiring being substituted for hire purchase. We have heard that "hire purchase" is a very unfortunate expression. It is a nonsensical one, in fact. I thought that instead of people purchasing motor cars there would be an increasing tendency for them to hire a car by the month, running it for 12 months and then replacing it with another. I thought that the practice of buying even consumer durables would decline, because of the many weaknesses in commercial transactions under the general label of what we call hire purchase.
The Bill is evidence that in our modern society special measures of this sort have to be taken to protect the average citizen, who now buys a variety of very complex products in respect of which—quite within the law and without any deliberate cheating—he is liable to be deceived, exploited or led into considerable difficulties. We are protecting him not from dishonest traders but from a commercial system which is quite legitimate. That is why I regard some of the Bill's proposals as being inadequate. We are permitting not foolish but honest people to be deceived in undertaking these commercial obligations.
We have heard about interest rates. We know how deceiving they can be. A person buying a product may be told that he i paying only 5 per cent. interest, whereas he is really paying anything from 40 per cent. to 55 per cent. This is within the law. People who engage in this business are not crooks; this is ordinary commercial practice. It is the usual form of compound interest at work.
Whenever Scottish hon. Members on this side of the House have mentioned the case of Napier's, in Scotland, we have been told that the firm is acting within the law and is merely pursuing the normal commercial practice of the credit system. If the hon. Member says that this is not common commercial practice but is unjust commercial practice, why has not something been done about it? I still believe that the Bill provides further evidence that even with operators working within the present commercial system the consumer stands in an unjust and unfair relationship with the producer, distributor, and financier.
Another thing that it shows is that money is made much easier by financing a product than by manufacturing or distributing it. Between the wars many companies manufacturing consumer durables went to the wall, while the Dominion Trust was growing fat. It still is. One of the finest ways to make money is to get into the 5 per cent. business. It is easier to make money that way than by doing the hard, practical engineering work involved in manufacturing products. My heart will never bleed for the finance houses. I have always thought that they made far more money out of our economic system than did those who produced the goods. I have never heard of any of them going bankrupt, but several firms with which I have had dealings in the past 40 years have gone to the wall.
Many of the matters that I want to raise are not covered by the Bill. The first concerns several unfortunate cases of which I have heard. I give one as an example. A retired gentleman bought a radiogram and owed £80 on it. Unfortunately, he knocked over an oil heater and had a fire, as a result of which his set was destroyed. It was not insured. When a person buys a motor car he has to take out insurance if he intends to take that car on the road, and a person who buys a house on mortgage has to take out insurance against fire and flood. My hope is that it will be possible for a system of compulsory insurance against fire and flood to be introduced in the hire purchase of consumer durables. I do not know whether that would be practicable, but I hope something like it can be done.
Does not my hon. Friend agree that it would also be worth considering the possibility of insuring a hirer against unemployment, sickness and an inability to carry on his repayments?
Yes. That is an extension of the same principle. In Committee am sure that hon. Members will have this point in mind.
My other point concerns the leaving of models for demonstrations. I have never had a model left in my house. I have worked in the light engineering industry and in the production of consumer durables all my life, and I have always been sceptical about models being left. I have seen so many wonderful advertising campaigns in housewives' journals, where there has been a tremendous pressure to get models on the production line and out on to the market as soon as possible.
I would never accept a demonstration model on my premises. Models which are sent out for use by salesman should be clearly marked, and they should not be sold as new models. I hope that this point can be dealt with. It is quite wrong for a salesman to be able to go around with a demonstration machine that has developed a fault. The machine may not have had to pass the various factory tests. The salesman may take it from house to house and he may give five demonstrations in five different households, and at the end of the line a householder may purchase it.
This practice can lead to no end of difficulties for purchasers. I should like to see the leaving of models for demonstration purposes completely forbidden. If the salesman wants to demonstrate his machine he should arrange for a taxi to take the prospective purchaser to his showrooms, where the model can be demonstrated. I hope that in Committee a way will be found to put an end to this business.
Manufacturers take an enormous amount of trouble in printing leaflets showing how their machines work. They print well-illustrated brochures, with diagramatic illustrations of their machines, showing all their possible uses. All the details are covered, and the address of the agency and all other information is given. But the product is really sold by a finance house, which has never done anything to help or advise the purchaser about the product. It has never given him a clear exposition of the way in which the hire-purchase agreement works, and what it entails.
They may put their name on it, but what has that to do with the question? There may be a booklet giving instructions about how the machine works, but when a person signs a hire-purchase agreement he should also be provided by the finance company with a booklet showing exactly what are the terms of the agreement. I hope that that point will be considered.
It is possible to go into a distribution house and see machines at a marked-down price of as much as 20 per cent. These machines are offered for sale on easy hire-purchase terms, but very often that type of machine has gone out of production and people who buy them will find that they cannot obtain spare parts. Several of my hon. Friends referred to the mail order business. I heard recently of a person who bought a machine which had a lot of extras thrown in, but the purchaser found it impossible to get the machine serviced. I know of cases where machines have been out of operation for a period of months because servicing facilities were not available. But the purchasers were obliged to go on making the hire-purchase payments for all that time.
My attention was drawn to a case involving the purchase of furniture. I know nothing about tapestry of the kind with which this furniture was covered, but my wife was of the opinion that the upholstery of this suite might have contained some material which was not clean. When the suite was installed in a room the heat from the room affected some greasy material in the upholstery and caused a stain to appear on the tapestry. The purchaser lost the use of the suite after having paid money for it. The manufacturers said that it was not their fault and there was a great deal of difficulty for the purchaser.
We must make provision to protect people in such circumstances. It is not always the case that people act stupidly. A high pressure salesman can persuade people that if they do not buy the product which he is selling they will be acting foolishly. I object to people talking about the foolish housewife. It is easy to tell the average young wife that she is acting intelligently by purchasing some product.
Yes, men too.
Why should the cooling-off period relate only to doorstep sales? Why should not there be a similar provision in relation to sales at exhibitions like the Furniture Exhibition at Earls Court or the Ideal Home Exhibition? Are the places where these exhibitions are held commercial premises? The stands are occupied by top salesmen. I have been to exhibitions at Olympia in the old days in connection with the light engineering industry and I have done a bit of it myself. The best technicians and engineering salesmen are engaged to sell products at such exhibitions. Why should these sales be excluded? There is the Ideal Home Exhibition, the Dairy Exhibition and similar functions. Why should not there be a cooling-off time after an exhibition? Many of the sales made at such exhibitions are like the conversions which took place at the old evangelical movement meetings which were held in South Wales when I was young. A lot of peculiar phenomena happened at such religious revivals.
If a car is purchased through a hire-purchase agreement, the purchaser will receive a licence card and not the log book for the vehicle. But suppose only the four tyres on a vehicle have been bought on hire purchase. Suppose that only the engine of the vehicle is being purchased in that way or, it may be, the battery or even the gear box. Is that motor car to be regarded as an article being obtained on hire purchase? How much of the vehicle must be on hire purchase before the car can be regarded as being obtained on hire purchase? If only the engine is being obtained in that way, will the log book be removed? This appears to me to create an extraordinary situation. If after this Bill becomes an Act I buy a motor car secondhand and I park it by the side of the road, it would be an absurd situation if a dealer could take the four tyres from the wheels because they were on hire purchase. That is the kind of situation I should like dealt with. Although the Minister, in introducing the Fill, dealt with its provisions precisely and effectively, I hope that my hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) will continue with the research work which obviously he has undertaken and will see to it that Amendments are put down for the Committee stage of the Bill to deal with points such as I have mentioned. I think that the guarantee system should be wiped out completely. That is a shocking business. Hire-purchase companies are doing very well and they should take a chance with the people to whom they give credit. They should not ask that the loan be guaranteed by a friend or neighbour.
I think it obvious from all the speeches made today that this Bill is capable of a great deal of improvement in Com mittee. It is very tempting on the Second Reading of a Bill of this kind to refer to detailed points which will inevitably arise in Committee. A great many of them have been canvassed by my hon. Friends and suggestions for Amendments have also been made from the benches opposite. I hope to resist the temptation to deal with what are purely Committee points and to make a few observations on the principle of the law which we are discussing.
I have no doubt that it is a common experience for all of us—certainly all of us on these benches who see constituents at regular intervals—to have heard of numberless cases of innocent, unfortunate, honest people who have suffered great injustice and hardship as a result of the present operation of the law relating to hire purchase. We are amending the law on hire purchase because as it stands it is very unsatisfactory. It is worth examing from what the unsatisfactory nature of the law arises. I think that it arises from two important principles embedded in the law of England.
The first is the undue importance given in the last century to the doctrine of freedom of contract. It has all too readily been assumed, as law reports show, that there is freedom of contract between contracting parties. There has been a slavish adherence to the so-called principle of sanctity of contract. What the common law ignores is the complete inequality in the status of different contracting parties. The law has already had to intervene in a great many spheres, such as the carriage of passengers, workmen's compensation, relations between master and servant, in order to redress the injustice which would result from freedom of contract.
Precisely the same principle justifies the hire-purchase law which we are today seeking to improve. We have to face the fact that there is no equality of contract between the slick, able, evocative businessman trying to sell some goods and the housewife or her husband trying to purchase some furniture or a motor car. It is therefore necessary that the law of England should introduce safeguards and provisions for the protection of those who cannot protect themselves when, necessarily in the civilisation in which we are living, they have to enter into contracts of that kind.
Secondly, the present unfortunate nature of the law seems to result from a very technical decision which generally goes, if my hon. Friend will forgive me, by the Latin tag: Nemo dat quod non habet, which means that no one can give what he has not got. The legend is that the purchase of goods on hire purchase is in reality no more than a purchase of goods by the buyer or a sale of goods by the vendor. It is merely a transaction in which the payment for the goods, instead of being made once and for all at the outset, is made by instalments over a period of time.
The operation between the two parties was originally conceived to be a transfer of property between the owner to the purchaser, the person who acquired furniture and put it into his house or the person who bought a motor car. But then the law said, if that is the result, if it is a real sale and the buyer acquires the property, although he has not paid for it he can transfer the property to third parties. In that way certain dishonest people transferred property which they had not acquired. The result was that in those circumstances the vendor who was quite innocent was left without redress.
Therefore, the system grew up by a circumventing of what was ordinarily a sale by instalments into a bargain which had the legal result of not being a sale at all but a hiring. The original object of hire-purchase agreements was exclusively to prevent the property passing to the purchaser until the last instalment had been paid. It was that technical rule which was the origin for the growth of these complicated hire-purchase documents. I suppose that, in a sense, it is right that a person should be bound by a document he has signed, but it is common knowledge and every day experience that, unfortunately, a great many people who sign hire-purchase contracts do not read them.
That is wholly regrettable and there have been a number of occasions on which I have had to point out to some unfortunate person who has been the victim of some unscrupulous rogue or scoundrel that as a matter of law he or she had no redress, and I only wished that they had read the document before signing it. I am sure that in the forefront of the remedies which we are seeking in this field is the necessity of doing all we can to make sure that people who enter into these contracts shall read them—or certainly have a much better opportunity and inducement to read them than they have at present—and are not bound by them until they have had an opportunity of reading them.
Therefore, I welcome, as of paramount protection the requirement that people entering into hire-purchase agreements should as a result of statute law have the right to obtain a copy of the document and not be bound by it unless they have a copy. I hope that the provisions of this Bill will be strengthened in order that the contract which they sign is in such a form as to bring home to them far more clearly than is the case at present the nature of the contract they entered into. I have heard that there will be a box for signature and certain information. That could be of considerable importance. I should like to see a notice at the top of the document with the warning, "Do not sign this until you have read it through".
I am sure that something must be done to stop these unscrupulous salesmen suggesting to innocent people, "All you have to do is to sign on the dotted line" and then afterwards, to their regret those innocent people having the document enforced against them. Some people say it is foolish to sign documents without reading them, but I agree with my hon. Friend the Member for Dunbartonshire, East (Mr. Bence) that it is not only foolish people who do so. I am sure all of us have been guilty of that slackness at some time or other. But when hon. Members of this House sign documents which they have not read they are usually dealing with people whom they can trust.
The difficulty in this matter is that one of the most regrettable facets of contemporary civilisation and the capitalist system of society under which we live its that so many people are prepared to take unscrupulous and dishonest advantage of the law for their own enrichment. That practice, which is so widespread, requires us to adopt the most stringent precautions for the protection of the public.
It is for this same reason, that people, foolishly or not, sign these documents without reading them, that I also attach great importance to the cooling-off period, as it is called. I would like to see it extended from four days to seven days. I would also like to see it made applicable not only to contracts signed on he doorstep or in a buyer's house but also to contracts signed in a shop, or at Earl's Court, or wherever it may be. A person signing one of these documents should not be bound by it until there has been a locus poenitentiae, an opportunity of reflection, of reading, it, and then of cancelling it, if he wants to, without any loss.
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I should very much like to see the practice adopted which I believe applies in the United States of America and in parts of the Commonwealth, which allows the courts in such circumstances to divide the loss between the two innocent parties. There is high judicial pronouncement in favour of such a change in the law, and it would merely bring this aspect of the law into line with the changes about contribution between joint tortfeasors, and so forth, which have been adopted in other spheres of the law.
Since the whole subject centres round not only changes in the statute law but also changes in the common law, there is another aspect of law reform which I would very much like to see introduced, either in the Bill or at some convenient opportunity. In the restatement of commercial law' in the United States of America the courts are given power to decline to enforce an unconscionable contract. I am paraphrasing the exact terms. I would like to see something similar introduced into our legal system, because it is notorious, as the hon. Member for Aldershot (Sir E. Errington) will agree, that whereas a good many traders are free from criticism there are unfortunately in our society a large number of quite unscrupulous traders who, if the law will allow them, are quite ready to take advantage of the law and enter into unconscionable contracts with people less well educated, less literate than themselves, and less able to protect themselves. It is part of our duty as legislators and of those interested in the law of England to protect the victims and to bring our law in this sphere into line with that in some other civilised countries.
I welcome the fact that in the Bill the dealer will be made the agent of the seller. A great deal of the hardship and injustice which have occurred have resulted from the fact that hitherto the seller has been able to ride off from what I regard as his proper obligations by saying that he had no responsibility for any representations which the dealer made. Therefore, it is very salutary that in future the dealer will be deemed in law to be the agent of the seller, thus making the seller responsible for any misrepresentations of fact or for false warranties or false inducements made by the dealer to persuade the purchaser to make the purchase.
I go further. I would also like to see the dealer made responsible as an individual for any false representations that he makes. I am not sure whether this is in the Bill. I will examine the Bill very carefully before the Committee stage.
I go even a stage further. I would like to see the whole law of hire purchase equated to the law with regard to the sale of goods, so that a purchaser who suffers as a result of any misrepresentations has precisely the same rights. I would like to see written into the law of hire purchase the same kind of statutory warranties as to fitness, merchantability, and so forth, as are contained in the Sale of Goods Act. I see no reason why this should not be done.
I entirely agree with what the hon. Member for Aldershot said about the damages which flow on cancellation or termination. It is ludicrous that, as the law stands at present, a purchaser is better off in some circumstances if he breaks his contract than if he terminates it by honestly writing to the seller and saying, "I am sorry. I have lost my job and I canont afford to pay any more instalments". There are cases in the law reports—the hon. Baronet knows this; I have no doubt that the Minister does—in which a person who has had the honesty to write and say that he has fallen out of a job and unfortunately cannot go on with his agreement has been victimised, whereas if he had just failed to pay the instalments and had broken his contract he would have been better off. The Court of Appeal has extended itself as far as it can to try to interpret the facts in any given case so as to make it appear as a breach of contract and not a cancellation. This paradox and absurdity must be put right.
On this aspect of the law I personally am not at all happy about Clause 1 in its extension of Clause 4 of the 1938 Act. It must be more just that, when there is either a termination or a cancellation, the damages to which the seller is entitled are the true measure of his loss and not some arbitrary written in figure. Hitherto, the law has produced a great deal of injustice when there is a measure of damages written in of half the value. This was so when the limit was £300. Now that the limit is to be raised to £2,000, the number of cases in which real injustice will be caused by the retention of Section 4 in its present form will be very considerable. This provision must be changed.
My last point is as regards the ambit of the Bill. The Government have rejected the advice of the Molony Committee that there should be no limit of amount and that the 1938 Act should apply to all consumer goods. On the whole, I agree with the Government's decision not to accept the recommendation of the Molony Committee by confining it to consumer goods. There is something to be said for having a limit, but I do not agree that £2,000 is necessarily the right one. The only reason that I understand for having a limit at all is to exclude certain large-scale contracts—engineering and other contracts—which would necessarily be right outside the scope of hire-purchase arrangements. The conditions under which hire purchase operates now make it preferable, I should have thought, that the existing limit should be nearer £4,000 to £5,000 than £2,000, otherwise I can foresee many cases in which, on the purchase or sale of a motor car, arrangements will be made by dealers to bring the amount involved just outside the limit.
I appreciate that the President of the Board of Trade is facing this difficulty by putting in the Clause power by Order in Council to extend the limit. I hope that he will reflect on this because it is always difficult to change an Act shortly after it has been enacted by an Order in Council. It would be more satisfactory to face the reality of the situation now and to make the limit £4,000 or £5,000 rather than leave it in this form. I am sure that we will be able to improve the Bill in Committee.
The Bill is concerned with the important question of standardising the law governing hire-purchase trading. I hope that Part II of it will be assigned to a Scottish Standing Committee, because there are peculiarities in the Scottish law. Faced with the changes suggested in this Measure, hon. Members who represent Scottish constituencies will wish to consider in detail the degree of protection to be given to consumers. I appeal to the Minister to ensure that a Scottish Standing Committee is allowed to look at this aspect of the hire-purchase problem in greater detail.
It has been suggested that when a hirer terminates an agreement in England he must bear 50 per cent. financial responsibility to the supplier. In Scotland, it does not work that way. I understand that in Scotland, when a hirer decides to terminate an agreement, he is responsible for one-third of the purchase price of the commodity or one-third of the instalments due, whichever is the higher. This is one reason why hon. Members who represent constituencies north of the Cheviot Hills should examine the practical application of the Bill upon Scots law.
I also appeal to the Minister to consider abolishing the guarantor provision, which is a sore point with many people. I once knew a guarantor who was unaware of the fact that the amount which he had guaranteed had not been paid. One morning, in the early hours, he awoke to find himself in the arms of a policeman and, ultimately, had to serve a prison sentence because he had guaranteed the payment of a sum of money on a hire-purchase account.
Only recently I interviewed a person who thought that a man whom he had guaranteed for a certain sum was such a fine personality, an industrial executive, that he had seen no reason why he should not guarantee this fellow for the purchase of a motor car. He discovered, however, that the person had used an assumed name and was not an industrial executive and, as a result, the innocent abroad was compelled to meet the cost of the deficit on the car. Even under the guarantor system it is said that the guarantor must be a householder. This man was not. He was a sub-tenant, but, despite not being a householder, he was held responsible and had to pay several hundreds of pounds towards the account. I am visualising a system under which the guarantor provision can be abolished.
It is all very well to say that people are supposed to read forms before signing them. If one trusts someone one may be a little careless in reading documents. That happened in the case I have just mentioned. If a firm decides to enter into a hire-purchase agreement with a consumer, then the firm electing to undertake that risk should bear some responsibility. It should certainly not be placed on the shoulders of someone other than the consumer. If an economic risk is involved the firm must come to terms with the consumer and, in the event of default, any payments due should be obtained from the consumer. This guarantor business is an anachronism and I hope that the right hon. Gentleman will eliminate this element in existing and suggested hire-purchase agreements.
I have always considered that guarantors and consumers require some protection. I have always believed, particularly from the point of view of Scotland, that one must be extraordinarily careful because the stage can be reached when not only wages but salaries are withdrawn. Two guarantor constituents interviewed me recently, one of whom had had his salary arrested for a £300 guarantee regarding a motor car, payments for which had not been made. These two gentlemen were members of the managerial staff of a firm and I can assure the House that when a situation like this arises in Scotland there can be serious consequences for the employee.
Many firms in Scotland will not employ someone if he has got into such economic difficulties. It is not unusual for a top man to be sacked on the spot because it is considered that he is setting a bad example by having his salary confiscated for the payment of a debt. My hon. Friends and I have in the past told the present Minister and his predecessor of examples in Scotland, revealing the inadequacy of our present hire-purchase legislation and credit-sales regulations.
Each case which we have cited has come from the same notorious firm, Napier's, of Scotland. I happen to represent a constituency which is overburdened with Napier cases. My heart is broken week after week at having to meet some of the decent people who have become the innocent victims of the Napier squeeze. Only recently I interviewed a man who met with an injury at work. Because he was living on industrial injuries benefit he was unable to maintain his rate of payments and, as a consequence, with every month that elapsed Napier's added 2 per cent. to the balance of the debt which this consumer owed—so much so that while this man had purchased goods to the value of £80, when I saw him he had paid £123 but still owed another £31. That is an example of the avaricious extraction by this firm, and unless this Bill is effective in preventing this kind of rapacious practice being continued we shall not be facing up to our responsibility as a House of Commons.
This is a burning issue north of the Border. As the Minister knows, we have a very high rate of unemployment in North Lanarkshire at present. This firm has been known to allow people to run into arrears, and then confiscate the television set, titivate it up a bit, polish it, and put it on sale again as a new set. We want an Act that will stamp out such an outrageous attitude towards consumers. The consumers I have in mind are ordinary working men and women who do not have a hope of furnishing a house, or of buying a tele vision set, or a washing machine, without hire purchase, so it is obvious that the Bill must give them maximum protection against such avaricious firms as Napier's.
The so-called high-pressure salesmanship on the doorstep is nothing unusual, but we also have it in the shops, and I was somewhat annoyed to find Molony concentrating on doorstep high-pressure salesmanship, but overlooking the shops. People living in counties gravitate to the big cities at the week-end, just as we gravitate to Glasgow. In such big cities the people are unknown to certain monopoly traders, with the result that the high-pressure sales system operates, and consumers sign on the dotted line before realising what they have committed themselves to.
Again, just as we have very good traders in the shops, so we have some good doorstep salesmen—they are not all slick, not all high-pressure salesmen. There are some respectable persons among them. But if we accept the principle of protecting the public from the high-pressure salesman on the doorstep we have to apply the same principle to the shops.
Here, I speak as an ex-shop assistant. Locally, people know the shopkeeper and he knows them, so there is no danger of smart-Alec techniques of the kind of which I am speaking—there is that mutual understanding between them. We ought to consider extending this principle to certain shops—it goes far beyond the commodity displays, not only at Olympia but in the Kelvin Hall, in Glasgow. We, as a House of Commons, should dedicate ourselves to protecting the consumers in every possible way, and I should like a tougher line adopted in regard to an extension of the 72-hour pause to shops.
I do not know exactly what is involved in credit sales south of the Border, but north of the Border it can cause a lot of trouble to the shopkeeper and inconvenience to the consumer, and it might be decided that £20 is not really a very high maximum. Most workers nowadays put in a five-day week, and some shops are not open on Saturdays while others are open only half a day. A wife cannot sign a credit-sale agreement; the agreement is between the debtor—the husband—and the supplier—the trader. In these circumstances, the trader has all the trouble of form filling and of making special appointments, perhaps late at night, to accommodate the householder who cannot possibly attend during the day to sign the agreement. This not only creates inconvenience for both parties, but means more paper work and more form filling in general for the supplier. That being so, the maximum amount would well be put at more than £20.
Another aspect of door-to-door trading is the supply of educational books. People in Scotland have signed for the supply of educational books which have later been found to be unsuitable for their children's standard of education. The fact remains that the consumer has already undertaken to have the books, and to pay £x for them. When these companies have been appealed to to terminate the arrangement, and recover the books, we have found them to be very obstinate. Some, indeed, have compelled ordinary working-class households to meet the cost of books in no way suitable to the children's education. We should look at this vexed question when we discuss hire-purchase and credit sales, because I should like to see a very strong line taken to protect not only adult consumers but the children who are the victims of swindles by having thrust upon them books that are of no advantage.
The Bill is a step in the right direction. It is long overdue but obviously, to judge from speeches made on both sides of the House, it falls short of the protection for which we would like to legislate for the United Kingdom as a whole. I hope that arising out of our deliberations the Minister will be willing to have second thoughts on some of these suggestions. My great regret on becoming a member of a Committee is often to realise the unwillingness of Ministers to have second thoughts and to allow greater minds to be brought to bear on Bills of this nature.
I hope that the fate of the Committee on this Bill will be somewhat different and that the Minister will not be unbending in willingness to listen to the experience of all hon. Members. If the right hon. Gentleman shows signs of that willingness and indicates to the Committee his intention to co-operate, I believe that the legislation which will follow from the Committee's deliberations will give consumers much greater protection in future from all sorts of malpractices in the distributive trades.
Like all my colleagues who have spoken in the debate I welcome the arrival of the Bill, but it is an example of the extraordinary death-bed repentances of the Conservative Party as we approach a General Election. Although there was nothing about consumer protection in the Queen's Speech not very long ago, we have had a whole series of proposals from the Ministers concerned, particularly in the Board of Trade.
We have heard that we are to have a White Paper on monopolies. The Government have given their blessing to a Bill introduced by the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) to control trading stamps. The Government have made that extraordinary and sudden decision to do something about resale price maintenance, which is provoking so many conflicts on the opposite side of the House and among the Conservative supporters in the constituencies.
Now we have this Bill, which was undoubtedly introduced because the noble Lord, Lord Peddie in another place decided to introduce his own Bill and force the Government to take action. None of these matters, of so much importance to consumers, were mentioned in the Queen's Speech, and therefore we can only assume that they have been brought in to do a little slick salesmanship and window-dressing to try to get the consumers' votes at the election.
Actually the Bill is a promise for the future, because there can be no action in relation to it until 1st January next year. On the other proposals which have been brought forward there is little likelihood of anything effective being done before the General Election, and then, do doubt, we shall have to wait for months before we see any actual effect on prices or on consumer protection generally. I do not think that we would have had this extraordinary apathy about the interests of the consumer if we had had a Minister of Consumer Protection who was wholly responsible for this matter. At the moment it is just part of Board of Trade activities. Even if there had been a Minister of State directly responsible in the Board of Trade he would have been able to give far more attention in past years to these problems of consumer protection than has been given.
These measures, as I have said have been brought to Parliament because the Government are trying to put on a good show for the electorate generally and to represent themselves as the consumers' friend, but I do not think that the consumers will be misled. They will say that if these measures are needed now they were surely needed 12, 8 or 5 years ago, or even three months ago. They will ask why the Government did not act long ago and why they have failed to act until we are right on the threshold of an election.
One of the reasons why hire purchase is one of the problems that perplex our constituents and is the cause of many hundreds of complaints that we receive from time to time—and in my case hire-purchase complaints are almost as serious as complaints about housing—is that people sign agreements which they do not understand. There are clauses in the agreements which are not made clear to them when they sign. Individuals have undertaken commitments which are far beyond their resources and are paying rates of interest which they did not appreciate when they signed the agreement. There are also the tragic cases where the wage-earner in the household dies and the widow finds that the goods for which the wage-earner contracted to pay are snatched back by the finance houses. I am glad that the Bill will go some way towards helping to deal with these tragic cases.
We should try to remove the shroud of secrecy which surrounds hire-purchase transactions. There is a great deal of mythology and mystery about them. They are almost mystical. We need to give a flood of information to the consumer so that he or she can understand exactly what is being paid for when there is a contract to buy on credit. There has been a sellers' market in credit and the consumer has had to take what he or she could get, often paying high interest rates because the trader or the finance house concerned could hold out for high rates. Consumers have not been able to play off one against another and often they have not appreciated exactly how much they have been paying because the whole operation has been shrouded in secrecy. When it is a case of so much down and so much per month or per week over a long period the average customer does not go to the trouble to work it out. Customers do not know how much interest they pay for the credit facilities they receive.
I hope that when the provisions in the Bill come to be worked out they will mean something to consumers and will give them a better idea of the rates of interest they are paying. I hope that the Board of Trade will listen to the case put, particularly by my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater), that brochures and pamphlets should be published on this subject so that at the point of sale and in the citizens' advice bureaux and in the town halls the general public can pick up attractively produced and interestingly written material which will describe their rights when they enter into hire-purchase contracts or any other credit arrangements. There is a great deal of ignorance about this type of transaction.
It is extraordinary that when families buy their groceries they will often go from one cut-price shop to another to save 1d. or ½d., but when it comes to buying a consumer durable like a refrigerator or a television set they are often prepared to pay £5 or £10 more in interest charges rather than go to the trouble of finding out whether they can have these credit facilities cheaper somewhere else. I believe that they do this because they are overawed by the transaction when the salesman puts the hire-purchase form in front of them and they are buying an expensive commodity for the home. They do not have time to think it out and they do not have proper advice on the transaction.
I hope that the Minister will accept that the Government should be responsible for providing information in the form of material which the customer can easily read and understand so that he is informed of his rights.
I feel that the work of the citizens' advice bureaux could be enlarged for this purpose. Many of them are doing excellent work in these matters already, but there are many towns where they have not been established, Although we are very glad to meet our constituents and hear their complaints, many Members of Parliament are troubled by complaints about hire-purchase transactions and the like which could well be dealt with by the citizens' advice bureaux if they were properly set up and financed. Perhaps we should also consider having consumers' advice bureaux, making quite clear that it was advice to the consumer which they would give.
I am glad that there is in the Bill provision for a cooling-off period. I do not go all the way with my hon. Friends who have suggested that the cooling-off period should apply in the shops as well as in the home. If I may make a marginal point, it is not the doorstep salesmen we are concerned about; it is usually the sitting-room salesman, who, by his slick salesmanship in the front parlour, is able to persuade a family, over a cup of tea, that it is in their best interests to sign the agreement which he offers. Very few agreements are actually signed on the doorstep.
There is a world of difference between a transaction discussed in the sitting-room or front parlour and a transaction discussed in the shop. When customers go into a shop, they have made a conscious decision to go out and buy a particular article. Usually, they go from shop to shop, and they are well able to form scone assessment of the quality and worthiness of the goods which they see. I agree that in many shops there are slick salesmen, but I do not believe that we shall be able to protect all consumers for all time against the slick salesman. This is something which consumers must do for themselves, and it is one of the reasons why I hope that we shall have more information in the form of brochures and leaflets to enable people to know their rights when they go into the shops.
If I were to make a compromise suggestion, it would be that we have a cooling-off period provided for in the Bill on all transactions in shops over a certain amount, say, £500 or £300. A major purchase is something into which a family may be tricked but from which, on reflection, they may wish to withdraw. Perhaps we should deal with this type of transaction. If someone wishes to go into a shop and buy a television set because he wants to see a football match the next day or tune into a party political broadcast that evening, then, provided that the shop wishes to go through with the transaction, the customer should be entitled to have the set there and then. Why the heck should not he have it delivered that day? Why should we interfere with the freedom of such customers who want to go ahead with a transaction on the particular day? Provided that tie shop is ready to go through with it, there is no reason why such comparatively small transactions should not be completed there and then.
Sitting-room sales are another kettle of fish altogether. Very often, the salesman turns up without any appointment at all. The housewife sees something which looks very attractive and makes an inquiry. She expects that, within a day or two, she will receive some communication through the post and be able to sit round the fire with her husband and talk about the prospect of buying a washing machine, a refrigerator or whatever it may be. Then, instead of the material arriving through the post, very often it is the salesman who turns up. He comes with a lot of glib talk. The housewife is very friendly, she gives him a cup of tea, and, before she knows where she is, she has signed a hire-purchase agreement, committing herself to something the extent of which she really does not know.
We discussed this problem in the House some years ago when we were worried about the practice, then very widespread, of switch-selling, the advertising of low-cost secondhand goods and switching from these to more expensive new goods. There was a real scandal about this, and, although the Board of Trade did not act—it was very slow about doing anything although the problem was put to it on the Floor of the House time after time—the Newspaper Proprietors' Association, I all glad to say, acted by refusing to accept the advertisements of switch-sale firms, and most of them have now gone, nit of existence. One firm known as Vactric, which continued the technique on a very large scale, has gone out of this business altogether because its trade was largely based on the dishonest technique of advertising a cheap com modity for a few £s and then persuading the customer, once she had admitted that she had the deposit for a more expensive article, to switch her purchase to a new article, which the salesman then had delivered that day so that she was committed to the deal.
I welcome the cooling-off period because it will prevent that sort of situation arising again. It is important not only in relation to switch-selling between secondhand articles and new articles but also in relation to the switching which is now going on in many consumer durables which are sold through advertising in the Press today. I am thinking particularly of the John Bloom organisation, which has had a tremendous boom—or should I say "bloom"—in the past few years, with a fantastic expansion of its trade. I understand that this organisation's salesmen are instructed to sell a large proportion of higher cost articles. The more expensive machines have to be sold. The cheaper ones are the ones which the customers write in for, but it is the job of the salesman, for which he is trained, to persuade the customer, once he gets on the doorstep or in the front parlour, to buy the more expensive machine. This is yet another example of switch-selling, though I do not pretend that it is nearly as serious as switching from secondhand really low cost goods to new goods.
I believe that the cooling-off period will deal with the problem. If the customer knows—this is crucial—that he has the right to cancel the contract within four days, he will certainly act accordingly if, on reflection, he thinks that he has been swindled. The crucial point is that the customers should really know. What guarantee is there that they will know? How many will study the correspondence which comes to them through the post? How many will really go through the agreement?
I hope that the Board of Trade will consider seriously the suggestion which I have made. If a simply written attractive handbill can be delivered to the customer at the same time as he makes his purchase or signs the contract, he will have three days to study it, and, during that time, he will have the chance to realise what his rights are and act on them if he wishes. This will prevent the practices to which we have been referring.
I hope that the Minister will comment on the practice prevalent particularly in the car trade of finance houses paying excessively high commission to salesmen to persuade customers to go to a particular finance house. This was referred to in Monday's Financial Times in an article headed,
The Evil that got left out of the H.P. Reform".
That is not the headline which I should like, but that it what it was, and the article was written by Lombard. I quote:
It must be counted remarkable that, although its sole purpose is to provide the public with better protection against abuses of the deferred payments system, the Hire Purchase Bill now before Parliament makes no attempt to do anything about something that is almost certainly the biggest evil in this sector of the consumer credit field today—the payment of excessive introductory commissions by finance houses to dealers at the public's expense. It must be counted even more remarkable that the Board of Trade has sought to justify this regrettable omission mainly on the grounds that these payments are basically no different from the commissions applied in other parts of the business field and do not necessarily affect the cost of hire purchase to the public.
The article goes on to show that many of these commissions are as much as 40 per cent. of the hire purchase charge and can amount to £22 on a three-year contract involving £700.
Do the Government agree that in Committee something should be done about this practice which is making the customer pay twice over in commission, particularly to car dealers, who get a commission when they sell a car and when they arrange a hire-purchase transaction? Many purchasers of cars, particularly second-hand cars, go to a dealer with the intention of paying cash, but the dealer persuades them to buy the car on hire purchase since the commitment may be £10 or even £20 higher because the customer is buying through hire purchase. As a result the customer pays two commissions to that dealer—one for the car and one under the hire-purchase agreement. Customers are paying much more than they should pay.
The extent of hire purchase is growing all the time. Outstanding commitments will probably reach £1,000 million in the next few months. In 1958, they amounted to only £556 million. The figures show that a major proportion of the trade in household durables is done by hire purchase. In 1962, out of a total expenditure on household durables of £860 million, £350 million worth of the business was done on hire purchase. It is obvious that this is a major subject and that it is becoming an increasing part of the retail trade and that it will continue to be extremely important.
I hope that customers will become as interested in the amount that they pay for credit as they are in the amount that they pay for groceries. I welcome the new developments in competition in groceries in the last few years. No doubt consumers have saved a great deal of money as a result of this competition. I welcome the Government's belated decision to abolish resale price maintenance because I believe that it will make a contribution to lowering prices. I hope that customers will take advantage of the increased competition which will come in the non-food sections of trade as it has come in the last few years in food, but I hope also that they will take an interest in the relative costs of hire-purchase agreements and the difference in cost between hire purchase and other ways of obtaining credit.
I hope that instead of seeking hire-purchase agreements many customers will consider going to a bank for credit. Banks should extend their facilities, as I know many of them are anxious to do, to more and more wage earners so that they can get credit facilities through the bank at a lower rate of interest than they have to pay under a hire-purchase agreement. I know that the Co-operative Wholesale Bank does a very good job in this respect. We want the municipal banks and the trustee savings banks also to be able to give these facilities. We want the regular wage earner to regard a banking account as the key to getting credit facilities at a lower rate of interest rather than to enter into a hire-purchase agreement, which tends to be, and is bound to be, more expensive.
I was glad when the Consumers Association some time ago did a survey on hire purchase. It arrived at a conclusion which showed that co-operative societies provided the cheapest hire-purchase transaction. I hope that custo mers will look at the sort of surveys done by the Consumers Association which are published in Which so that they can where they can get the best deal. They can choose between the different hire-purchase agreements available to them, the different shops and finance houses and also consider whether they should go to a bank for these facilities.
Obviously, credit will play an increasingly large part in our retail trade. There is no objection to it on principle, although I agree with the point made, in the debate that there is a danger that many households will get themselves over-committed, which is a dangerous situation for them. I think that they can avoid that by having proper education on the facilities available for credit so that they can relate the commitments which they undertake to their weekly income.
I think that, on the whole, we welcome the bill. We are glad that it has eventually arrived, although it is a death-bed repentance on the part of the Conservative Party. We look forward to amending and improving it in Committee so that it goes on the Statute Book as part of the action which needs to be taken by Parliament to protect consumers.
On a point of order. You will have noticed, Mr. Deputy-Speaker, that the speech of my hon. Friend the Member for Wednesbury (Mr. Stonehouse) was the fourth consecutive speech from this side of the House and that no fewer than three speeches have been made from this side by Scottish hon. Members.
Order. If the hon. Member has a point of order, will hear it, but the point that he thought was a point of order was not a point of order and cannot be pursued.
On another point of order. I was not attempting to criticise the Chair at all. What I was saying, as I think I am entitled to say, was by way of introduction to the point that I wished to make. Three Scottish hon. Members from this side have taken part, and I make no criticism of the Chair in pointing that out. All that I wish to say is that we have not had a speech by a Scottish Law Officer.
Order. I hope that the hon. Member will allow me to rule in what I believe is a correct way and in the tradition of the House. The point that the hon. Member has raised is not, in my judgment, a point of order.
On a point of order. As you know, Mr. Deputy-Speaker, there is a very important Scottish section in the Bill and some of my hon. Friends from Scotland have raised important Scottish points. During the debate, a Scottish Law Officer has been present and we understood that he was to reply to the Scottish points which had been raised. Whether it concerns a point of order or not, I think that we all protest against this behaviour.
The hon. Membe would be perfectly in order to make the point which he has made by means of an interjection in the course of the debate, but it is not correct to put that point to the Chair, because who is the Government spokesman at a given moment has nothing to do with the Chair.
Yes. We know that there is a common practice for the Chair to have a list of speakers, to which it is not committed in any way, but can you tell us, Mr. Deputy-Speaker, as Scottish hon. Members, whether the Law Officer of Scotland gave you an indication that he wanted to catch your eye?
Overall, the debate has shown that the Bill is welcome, but it has also revealed that some suspicion attaches to the timing of its appearance. As my hon. Friend the Member for Wednesbury (Mr. Stonehouse) has just said, the Bill has all the appearance, not having been mentioned in the Gracious Speech, of something which has been brought forward as the result of a quickly taken decision because it was regarded as embodying a theme appropriate for an election year.
The Government should not underestimate the strength of the criticism which they will meet on this score in the country concerning this and other Measures. The Government sometimes gives the impression of thinking that attacks upon them for their timing of Measures like this because of electoral considerations are part of the by-play of politics which they can easily shrug off, but this is not so. When Measures are brought forward in an election year which could, and should, have come earlier, or at least been intimated earlier, the public mind draws the obvious inference and this is harmful to the Government. There is no doubt about that.
As has been pointed out during the debate, a large part of the provisions of the Bill could have been quite practically and very usefully brought forward even before the Report of the Molony Committee. I think it right, therefore, to mention that suspicion attaches in a serious fashion to the timing of the Bill.
Factors of the kind to which I have referred have also a harmful effect upon the contents of the Bill. This was revealed by the speech of the Secretary for Industry and Trade when moving the Second Reading. The right hon. Gentleman has been courteous enough to explain to me and to my hon. Friends why he cannot be present at this stage of the debate, but I hope that in his absence one can fairly make the point, as I seek to do, that his introduction of the Bill on Second Reading revealed and illustrated the piecemeal approach of the Government to this whole problem.
The right hon. Gentleman put the Bill forward, indeed, as a piecemeal Measure. He indicated clearly, as I understood, that it was the intention at a later stage to have a comprehensive piece of legislation dealing not only with hire purchase, but with sales generally. That struck me as an extraordinary confession to make, because one asks whether it is intended, after a quite short interval of time, to have some sort of more comprehensive or consolidating legislation which would have the effect that parts of the Bill which is now before us would become out of date and irrelevant. Is that the intention? If it is not the intention, what will be the advantage at all of having the later projected legislation, to the extent at least that that comprises a treatment of hire-purchase problems and hire-purchase law?
As I have tried to suggest, the kind of factors which surround the appearance of the Bill and its timing are harmful to the contents of the Bill itself. It means that the Bill is not in every respect as comprehensive as one would wish and that its proposals do not synchronise with other steps which the Government are taking. This is well illustrated by some of the legal issues which arise under the Bill, and I should like to give what I think are fair and reasonable examples of this.
The Law Reform Committee has been invited to consider whether, as to the transfer of chattels, the rule that no one can give a better title to property than he himself possesses should be modified. That is currently an interesting question under reference and receiving consideration from the Committee or from those who are making preparations for the consideration of the matter by the Committee.
That question is one which many of us would have welcomed being taken up at an earlier date—I think that I can speak for both sides of the House in saying his. In the case of Ingram v. Little, in 1960, reported in 1961(1) Queen's Bench, Lord Justice Devlin, as he then was, suggested that in the field of innocent purchasers of goods from persons without title to goods or with a defective title, there were narrow distinctions in the developing common law which might give rise to injustice. The learned Lord Justice went out of his way at the end of his judgment to say that this was a matter which he regarded as appropriate for consideration by the Law Reform Committee.
The House will recognise at once that this whole issue, which is currently before the Law Reform Committee and was treated by a Lord Justice some years ago as an appropriate matter for such consideration as it is now receiving, is relevant to and overlaps the provisions of Part III of the Bill. The whole object of Part III, as I understand it, is to protect the person who, in good faith, acquires a vehicle from a hirer who either has no title to it or only a defective title.
Although I am ready to listen carefully to any contrary argument, I see no distinction in principle between the case of the sale a car to an innocent purchaser by a hirer who is a party to a hire-purchase agreement and the case of an innocent purchaser of any article from someone who has either not got a title or has a defective title to it. Thus, the Government are introducing legislation affecting this principle in a most important respect at the same time that the Law Reform Committee is engaged in considering it. That is not good government. It illustrates the lack of liaison and appropriate interrelations between Government Departments on this subject.
The recommendations of the Law Reform Committee are all too often dependent for their implementation on the hazards of Government time or on those attendant upon Private Members' Bills and the chance that an hon. Member will pick up a point made by the Committee if he is fortunate in the Ballot. But here is a new hazard where action on a matter is, in effect, taken ahead of a recommendation of the Committee. The Bill has many other points which are of interest to lawyers and which will, no doubt, give rise to interesting and, I hope, constructive consideration in the Standing Committee.
Tonight, I shall simply draw attention to one or two matters which strike me as being important, particularly so after listening to the debate. First, there is the all important question of the financial limit. It is, perhaps, a rather narrow limit. My hon. and learned Friend the Member for Stoke Newington and Hackney, North (Mr. Weitzman) wanted it to be removed, while my hon. Friend the Member for Islington, East (Mr. Fletcher)—whose speech I had the misfortune to miss—recommended, I understand, that the limit be raised.
My hon. and learned friend expressed the view that there was no logic or merit in a financial limitation. In doing so, he revealed a view somewhat different from that expressed by my hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling). Naturally, personal reactions differ in such matters, but, for my part, it is surely significant that the Molony Report recommended that the protective legislation affecting hire purchase should apply to all hire-purchase agreements irrespective of the price involved. I understand that that view is shared by the Law Society. In disregarding the recommendation of the Molony Committee on this matter, the Government are taking upon themselves an important responsibility. This matter needs careful watching and will no doubt give rise to interesting discussion in Committee. It is quite true that there is provision for the ceiling to be raised by Orders in Council, and it is further true that having no limit involves—this was the point on which my hon. Friend the Member for Hillsborough laid chief emphasis—the difficulty of defining consumer sales. The Molony Committee attempted, in paragraph 469 of its Report, such a definition. It is, unfortunately, a point which raises difficulty. But reason and logic, now that hire purchase is so extended and social and economic factors have so altered since 1938, would seem to me to run rather counter to the concept of a financial limit.
I cannot but be impressed by the consideration that at present-day prices £2,000, particularly relative to vehicles, is not an exceptionally wide limit. It represents, we are told, a cash price of a little over £1,600 where there is a deposit of 20 per cent. and instalments spread over a period of three years. That kind of price level is representative of a fairly wide range of transactions in vehicles, and it will be possible for vendors in that price range of vehicles, if they want to avoid the safeguards of the Bill, to raise the price beyond the £2,000 hire-purchase price limit by adding, perhaps, minor but attractive accessories to the car.
That is the kind of danger that is likely to attach to the concept of a financial limit. I think that this all-important and central matter will probably deserve very careful inquiry at later stages of the Bill.
I think that the cooling-off period is a good idea in principle. But what is the proper period seems to be a debatable matter. The object is really to get at the slick salesman who, in effect, traps the housewife at home, when her husband is away, into an agreement much more onerous than was known or realised at the time. I am not sure how far the housewives in Edge Hill would agree with the concept that they are all that less capable than their husbands of resisting the blandishments of salesmen.
Be that as it may, it must be recognised that the four-day cooling-off period provided by the Bill is not long enough to protect large numbers of families from this hazard arising when husbands are away, which is regarded as being a chief source of danger and difficulty. Seamen are an obvious example. Others are long-distance lorry drivers and locomotive men lodging at the end of long-distance journeys. They will often not have enough time to win any protection under this head.
Different opinions have also been expressed about the correctness of confining the advantage of a cooling-off period to documents signed at a place other than the appropriate trade premises. My hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) and other hon. Members have expressed their anxieties on this score. The point is that slick salesmen can operate in shops, garages and showrooms as smoothly as on the doorstep or in the parlour. It seems irrational that there should be no cooling-off period when the hirer is over-persuaded into an agreement by such a salesman on business premises.
One has in mind in this connection the case of the hire purchase of furniture. All too often it will occur that a husband and wife going from one shop to another find themselves, at the end of the day, tired and weary and easily over-persuaded into an agreement for the hire purchase of a suite of furniture, or something of the kind, which they will regret. There is no logic in the separation of slick doorstep and parlour salesmanship from slick salesmanship in the shop, and when law and logic part company there is often trouble; this is a case where they threaten to do so.
I want, in passing, to mention the important provision in Clause 9 which has the result that the dealer is to be deemed to be the agent of the owner when he has made representations about goods during negotiations antecedent to the hire-purchase agreement. We will have to go into this in Committee. I would have thought that this does not give the complete protection in this respect for which some of us had hoped. Arguments have been put forward in favour of making the dealer a party to the hire-purchase agreement. None the less, we have to bear in mind that in this connection the Government have adopted the recommendation of the Law Reform Committee in its tenth Report which was presented to Parliament in July, 1962, and which was published under the heading, "Innocent Misrepresentation". It was a powerful and distinguished Committee, as everyone will agree, and in those circumstances I hesitate to take a view different from that which has won the day. However, it is important to remember that there are those who think that it is desirable to go further than Clause 9 does.
In Committee, we shall have to investigate whether this proposed provision in Clause 9 will have any adverse or derogatory effect on the liability which may now sometimes attach to the dealer in respect of representations made by him to the hirer and which amount to collateral warranties within the ambit of decided cases.
It will be important to investigate further, at later stages of the Bill, the whole difficult and interesting matter which can best be described as the "measure of damages point" affecting the rough justice of 50 per cent., and the question whether a fairer and more equitable method of dealing with damage as a consequence of terminating agreements can be arrived at.
There is also a whole host of separate points affecting the law of hire-purchase in Scotiand—referred to by my hon. Friend the Member for Fife, West (Mr. W. Hamilton) and other hon. Members representing Scottish constituencies—which will require very special attention. It is clear to me from listening to this debate—as it must be to other hon. Members—chat hitherto not only have there been important differences between the law of hire-purchase affecting Scotland and that affecting England, but that there have also been peculiarly distinctive experiences affecting hire-purchase in Scotland which may call for special attention and perhaps distinctive remedies.
It is true of the law of hire-purchase, as of so many other branches of the law, that, as the object is to get at the tiny minority of dishonest persons, the vast majority of decent dealers and companies have to pay a price. We seem to be involved in a field in which that is peculiarly true, and, inevitably, we shall be told that the Bill's provisions will often get in the way of the smooth running of hire-purchase by perfectly honest parties.
In particular, it is said that Part III will be cumbersome in its effects. When I first studied that part of the Bill, I thought that it contained a rather neat and tidy series of propositions, but I am bound to say that the representations which I have received since are very much to the effect that the consequences of an effort to work out Part III are likely to be confused and difficult. We shall inevitably be involved in considering criticisms which can apparently be made from the practical point of view against the proposals in Part III. The main objection seems to be that it will take so long to come into effect because there is no provision for the calling in of log book s, and that, by the same token, no safeguards are offered to innocent purchasers of cars currently subject to hire-purchase agreements.
There is also the question to be pursued under this head of what is the objection to, or difficulty standing in the way of, a separate document of title in respect of a motor vehicle, which can follow the vehicle or go from owner to owner and be what a logbook is not now, a real, true, and effective document of title. What both sides of the House are concerned to do in this respect is to give such protection as we can to the innocent purchaser. But if a rogue hands to a purchaser who is innocent in every sense a document which is held out and represented to be a document of title and which is not one, the transaction is almost bound to be tainted. We cannot legislate for perfection in this matter.
But as between the different proposals which have been made—the licensing certificate proposal in the Bill; the logbook proposal, and the concept—the comparatively unexperimented-with concept—of a true document of title, I would have thought that the document the production of which would be most likely to prevent innocent purchasers being trapped would be a real document of title. It may be thought that these are important but relatively narrow questions, which are more appropriate for consideration at a later stage.
What we have here is a Bill with many merits, brought forward at a time and in circumstances which make it rather suspect—a Bill which is not lined up, as it should have been, with wider provisions affecting closely related matters of law, and one which gives rise to a veritable throng of questions, many of them legal ones of great interest and wide import, which some of us may hope to consider usefully later in Committee.
Order. I hope that the hon. Member will not go fur ther on that point of order, because I hoped that I had made it clear that it is not a point of order for the Chair.
Order. It is not a matter for the Chair to decide who may or may not speak on behalf of the Government. The Chair has no authority and no responsibility in the matter, and I cannot help the House or the hon. Member on that point.
There is a lot of presumption there. The House will be aware that the debate can continue until 10 o'clock, and if the hon. Member rises there is a chance that he will catch the eye of the Chair.
I think that it is a bona fide point of order This matter has been raised before. I appreciate that the responsibility for Ministers being in attendance to reply to a debate is the responsibility of the Leader of the House. Can you advise me, Mr. Deputy-Speaker, whether we can send for the Leader of the House in order to see whether he can arrange for the Solicitor-General for Scotland to be here?
No. I hope that hon. Members will not go further on this point. It has been clearly ruled upon. It is not the responsibility of the Chair to decide who shall speak on behalf of the Government. I cannot help the House on that point.
I would remind the House that this is a United Kingdom Bill and, so far as I know, Scotland is still part of the United Kingdom. It does not seem unreasonable, therefore, that one of the Ministers from the Department responsible for the Bill should wind up the debate. As the House will have observed, my hon. and learned Friend the Solicitor-General for Scotland has been listening carefully to what has been said—
For the greater part of the debate.
The hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine) thought that the introduction of this Bill was rushed. I would remind the hon. and learned Gentleman and the House that, during a most interesting debate on consumer protection which took place in the House on 20th May, I gave an undertaking that the Government had accepted what I might call the Molony "batting order" of priorities for introducing new or amending legislation pertaining to consumer protection. The order is given in paragraph 913 of the Molony Committee Report and, having set up a Consumer Council, the next thing was to introduce a Hire-Purchase Bill. I said last May that the Government would be introducing such a Bill as soon as possible. The hon. Member for Sheffield, Hillsborough (Mr. Darling) will recall that I said that. If hon. Members think that this Bill was suddenly produced because a noble Lord in another place introduced a Private Member's Bill, they have little idea of how long it takes to prepare such a Measure and I do not know what I was doing in the early part of last autumn.
—I wish to finish the point which I am making and then I will give way to the hon. Gentleman.
In support of his general argument, the hon. and learned Member for Edge Hill pointed out that the Law Reform Committee's examination of the whole question of "good title" was not yet completed. I assume the hon. and learned Gentleman would want us to hold up the Bill until it was completed, or alternatively, he has overlooked the fact that the time at which we should consider whatever recommendation is made on the question of good title would clearly be when we are amending the Sale of Goods Act. I will now give way to the hon. Member for Wednesbury (Mr. Stonehouse).
If this Bill has not been rushed and if these matters have been the subject of consideration by the Board of Trade for a long time, why were not they mentioned in the Gracious Speech?
I do not answer for what goes in the Gracious Speech as the hon. Member will know. In any case, the Government do not have to refer in the Gracious Speech to everything which they propose to do—[HON. MEMBERS: "Oh."]—of course not, and anyway I did not write the Gracious Speech.
We have had an interesting debate, and I think the House will agree that, in the main there has been support for the Bill. A number of helpful speeches have been made. But, on the whole, the arguments have veered towards Committee stage points, which is inevitable in a discussion on a technical Bill. I was delighted to have the support of the hon. Member for Hillsborough, who welcomed our formula for the true rate of interest. The hon. Member for Hillsborough and my hon. Friend the Member for Gosport and Fareham (Dr. Bennett), as well as a number of other hon. Members, raised a wider issue and asked why we should not do away with the concept of hire purchase and reform the whole thing. If I may say so kindly, the hon. Member for Hillsborough spared us his speech on chattel mortgages which we have heard before.
My right hon. Friend said that we are studying the fundamental issues involved, and we shall welcome positive and practical proposals. It is not enough to talk in general theoretical terms and use political and economic analogies. We have a hire-purchase system which is working and, if we are completely to change it, there must be good and positive reasons for such a change and people must be absolutely clear about how a new dispensation would work.
Is not it reasonable that we should be able to form some new mechanism for credit purchases without necessarily having to make one mechanism take the place of the other? Could not the two mechanisms easily be made to work alongside each other?
I think that my hon. Friend has in mind, perhaps, reform of the Moneylenders Act, which would make it possible. I can see merit in that, and we would welcome positive proposals from any hon. Member.
Since the hon. Member for Hillsborough raised this matter in the early summer in the debate on consumer protection, I have made a number of inquiries. I have not found quite the steam behind the general case for a change as hon. Members who today have given their views on the need for this reform would suggest. Any structural change would have to contain at least as adequate protection for the consumer as is afforded by this Bill, which extends protection further than it has been given hitherto. I am sure the House would agree on that, and this what we have to keep in mind.
I listened with interest to my hon. Friend the Member for Aldershot (Sir E. Errington), but I thought that he was carrying a little far some of the proposals he made on personal credit. I can see a new form of classification of citizens in relation to our personal credit rating. I cannot help feeling that some of us might find ourselves with a rather low personal credit rating.
Whether the question of credit rating arises or not does not really matter. What is important is whether the Government are prepared to consider the question of chattel mortgages, involving as it does the Moneylenders Act and the other Act which deals with the question of bills of sale. There is nothing difficult or awkward about dealing with those matters. If the Government and my hon. Friend are serious in the suggestion that something should be done about that, of course it can be done, but the Government must do it.
I think my hon. Friend must go a little further. It is not enough to say that we should move over to chattel mortgages and personal credit. I shall be willing to discuss specific matters on which my hon. Friend thinks the law is deficient. I make that offer to any hon. Member who likes to come forward with proposals, but I must re-emphasise that we would have to have the same degree of protection as we are gradually building up in respect of hire purchase in any change we made with a shift towards chattel mortgage or anything else which took its place.
We must remember that the great advantage of hire-purchase, as the hon. Member for Stoke-on-Trent, North (Mr. Slater) pointed out, is that people who are not immediately credit-worthy or have not got the cash are provided by hire-purchase with a way of buying before they have saved goods which they want and which they find more convenient to have now.
The hon. Members for Hillsborough, Aldershot, Gosport and the number of other constituencies have thrown doubts on Part III and the question of dealing with motor cars sold to innocent buyers. As my right hon. Friend said in his opening speech, we are determined to cover this case. We are quite willing to consider alternative arrangements. So far no one has come forward speaking with unanimity for those who would have to carry them out, but they may yet arrive. We are not prepared to have a voluntary system to take the place of what we propose here, unless it will work. This arises over the proposal about an indemnity fund. We must have this tied up. I am sure the House will agree that any alternative proposal, which we are perfectly prepared to consider, must provide the protection for the innocent buyer which is afforded by Part III of the Bill. If we can get that, we are prepared to consider it. We are determined to provide this protection for the innocent buyer.
There are various suggestions. We will go into them in Committee. I stated the Government's broad approach to this problem.
I was personally grateful for the generous comments of the hon. and learned Member for Edge Hill, who seemed to find Part III a little more elegant than certain other hon. Members. The hon. Member for Islington, East (Mr. Fletcher) and the hon. and learned Gentleman threw doubt on the £2,000 limit and thought that it would be better either to have no limit at all or to have some other figure. I was glad of the comments of the hon. Member for Hillsborough on this subject. We found that consumer hire purchase transactions cannot be adequately defined for statutory purposes, particularly with an eye to them having to be implemented. We therefore decided that the right thing to do was to implement the intent behind the Molony Report. The proposal in the Bill to raise the money limit to £2,000 seemed to us to be about right. As the hon. and learned Gentleman himself pointed out, we are asking for power in the Bill to raise the figure, if it proves to be inadequate.
This means that the vast majority of retail transactions are covered. This will be true even in the case of motor cars, which was the great deficiency when the limit was £300. Even allowing for the fact that this is the total hire purchase price and not simply the cash price of the car, I am informed that this takes one into a category of motor car which I personally am not in, in that it can enable one to buy one of the cheaper Jaguars. This seems to me to cover most of the people who need to be. protected. I am inclined to think so, at any rate. I should be inclined to doubt any argument to the effect that those who can afford to buy a 3·4 Jaguar are consumers who need to be protected, but I would listen to the argument with interest.
I think it probably will cover all of them. There must be some form of definition, and it seems to us that a monetary figure is the most convenient form of definition. It must be borne in mind that we feel, unlike Molony, that we ought to extend this protection to some of the smaller traders. This is particularly true when they come to buy motor cars. We feel this is about right.
A number of hon. Members, starting with the hon. Member for Hillsborough and running through several speeches, were concerned about the broad issue of the true measure of damages. This question was considered by the Molony Committee and it agreed that in theory the true measure of damages principle would achieve a more equitable result but came out in favour of the continuation of the existing provision in Section 4 of the 1938 Act. The Committee pointed out that a true measure of damages scheme would invariably lead to disputes as to whether the true value had been obtained by the sale of the vehicle. We have had evidence tonight in some speeches of sharp practice on the part of dealers and one or two finance houses. We therefore take the view that this would give a very great element of uncertainty and might well open up a big field for exploitation, if one cares to use that word, of the innocent hirer. As the House knows, there is a great deal of room for argument about the second-hand value of any motor car. A dealer may say that the normal price is X but that the market is bad and than: he can get only half X. The hirer who has ended his agreement would find himself in considerable difficulties in trying to prove that the dealer had not got him a fair market price for his second-hand car.
In another place an Amendment was moved to include the true measure of damages principle, but it was admitted that that Amendment did not cover all the details which would have to be included. We are now seeking to produce certainty in respect of vehicles, bringing them within the scope of the Act, and we want to get away from the situation of agreements at present lying outside the scope of the 1938 legislation; and the 1938 Act would affect the vast majority of motor cars. As we will, no doubt, go into this matter again in Committee, I will leave the subject there for now.
The hon. Lady the Member for Stoke-on-Trent, North, the hon. Member for Fife, West (Mr. W. Hamilton) and the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) raised with varying degrees of enthusiasm the question of whether the cooling-off period should not be universal. The abuses we are trying to deal with by the cooling-off provision concern principally the high pressure salesmanship exercised unfairly on the consumer in his home. There is general agreement that this is a social evil which must be dealt with; and the safeguard which we have produced is simple and deals with the problem adequately.
There may be the odd abuse in shops, but we do not feel that this amounts to a major evil. We believe that it does not justify drastic steps being taken and the extending of the cooling-off provision to agreements signed at retail trade premises. It is interesting to note that the Molony Committee stated on this subject in paragraph 524 of its Report:
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. It is a reasonable view that the need for further protection is not so marked in the case of persons who go to shops or showrooms, presumably because of their self-inspired interest in the articles on display. If a small minority ought to be restrained for their own benefit from entering into hire-purchase transactions, this cannot be achieved without disproportionate interference with the legitimate concern of the greater number, and the trader.
I was interested in the comments of the hon. Member for Wednesbury on this
subject and, if I have not got him wrong, I came to the conclusion that he was supporting the view taken by the Government. In the context of the cooling-off provision, the hon. Member for Dunbartonshire, East (Mr. Bence) raised the question of agreements signed by hirers at Earl's Court, agricultural shows and so on, and wondered whether they would be subject to the cooling-off period. The answer is "yes". This covers the point raised by the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine) who spoke about a clear three days which, in practice, will often be four days.
They are, I think, trade premises, although we can go into that in Committee. If my memory serves me right, they are defined as trade premises.
The hon. and learned Member raised the question of merchant seamen and the length of the cooling-off period, but if we were to accommodate every merchant seaman or arctic explorer then, instead of having three clear days—which, I think, can often in practice be nearly four days—we would have an unlimited period, which would make nonsense of any attempt at definition and precision—
I do not really think that there is an anomaly, except that it may be said to be an anomaly to try to get any precision into one provision. Each individual case is different, and one has to put forward a proposal that seems reasonable and covers the vast majority of cases.
The hon. Member for Coatbridge and Airdrie thought that the £20 lower limit for credit sales should be rather higher. The £20 was recommended by the Molony Committee in respect of the cooling-off period, and it also seemed to us to be appropriate that this provision of the 1938 Act, where a £5 lower limit had been hitherto applied, should be changed because of the change in the value of money since then. There have, however, also been representations that that figure is too high but, on balance, we think that £20 is reasonable, that it will protect the consumer where necessary and will not interfere with the vast majority of credit sale transactions. I know that it will interfere with some transactions of over £20, but the majority of articles sold on credit sale are individually less than £20 in value. I would here pay tribute, as did the hon. Member, to many of the credit sale traders.
The hon. Member for Hillsborough, the hon. Lady the Member for Stoke-on-Trent, North, and the hon. Member for Wednesbury all asked for booklets, pamphlets or some other type of guidance to consumers about their rights. On behalf of the Government I can give an undertaking to the House that we will look into this matter, and see how it can best be affected. I must tell hon. Members that we would not be keen on writing in a legal obligation that some particular pamphlet had to be given every time a hire-purchase transaction was entered into but, on the broad point that consumers should be made aware of their hire purchase rights, we would agree entirely with the hon. Members who raised the matter. I am inclined to think that probably our best approach would be to have a discussion with the Consumer Council. I hope that, at this stage, the House will feel that to be an adequate assurance.
The hon. Lady the Member for Stoke-on-Trent, North spoke of the length of the cooling-off period in the mail order business. The cooling-off period for a hire-purchase transaction made with a mail order house is precisely the same as that for any other hire-purchase transaction. It is timed from the arrival of the hire-purchase agreement from the mail order house in just the same way as if it had come from a local motor car dealer.
A number of hon. Members have referred to guarantees. The hon. Member for Coatbridge particularly disliked guarantors. This Bill deals with guarantees and guarantors only to the extent of giving guarantors certain rights they did not hitherto have with regard to receiving documents. As I understand it, there is nothing in any of our hire purchase legislation that sets up guarantors by law. I understand that this practice has grown up largely as a result of minors wanting goods on hire-purchase terms, where the finance companies will not give them agreements, and where in uncle, a brother, a cousin offers to stand guarantee for the payment of the hire-purchase price. This clearly can be for the convenience of many young people. I think that the provisions in the Bill which will give the guarantor the right to be informed at each stage will help to protect kindly and well-minded guarantors from giving their guarantees too freely. Anyway, this is a point which we can go into in a little more detail in Committee.
The question of dealers' commissions was mentioned by hon. Members and in particular by the hon. Member for Wednesbury. Among the strong practical arguments against prohibiting dealers' commissions the most convincing is that we see no way by which a prohibition could be effectively enforced. This applies also to the limiting of commissions, although I think that theoretically that case is weaker because these commission; are either bad or not. The practical consideration is that it would be difficult to get evidence that payments had been made if traders wished to conceal them, because they could easily be made in cash or even in kind. Even where there was evidence of payment this could be presented in such a way as not to relate to a particular transaction or commission.
Dealers perform services to finance houses, and being a guarantor is one of them, for which they are entitled to be remunerated. Such payments could easily be concealed behind commissions for introducing business. Again we could go into this in Committee, but I thought that the House should know my first reactions here.
The question of Napiers was raised in the debate. I understand that the Credit-Sale Agreements (Scotland) Act, 1961, has greatly alleviated the position from 1961 onwards so that all the complaints, of which my hon. and right hon. Friends at the Scottish Office are aware, which seem to have been made after 1961, all relate to pre-1961 contracts, that is contracts entered into before the Act was placed on the Statute Book. Hon. Members will be aware that protection is given under the Bill which will carry further the restriction under the 1961 Act on the sort of activities which this company has been undertaking.
My right hon. Friend emphasised in opening the debate that the Bill is, above all, a practical and down-to-earth Measure. Large numbers of ordinary people enter into hire-purchase transactions every day. The system fulfils a need and serves a useful purpose, but safeguards and protection for the customer are necessary. The existing law has stood for a quarter of a century. The Bill extends its scope and amends its provisions in ways which experience shows to be desirable, but where existing safeguards are satisfactory the Bill does not interfere with them. It follows that many of the points made in the course of the debate have been points of detail. This is not to imply that they are unimportant but that they are by their very nature more suitable for us to thrash out in Committee.
The objects of the Bill have commanded broad general support, and where criticisms have been made they have been promoted by constructive motives and a desire to frame the Bill to achieve its main purpose. We shall have every opportunity to consider these points in Committee. At the same time, I would ask the House that we should guard against over-elaboration. We must strike a balance. We want to protect the consumer where he needs protection, but we must remember that the trader and the finance house have legitimate business to carry on and we must not interfere unnecessarily with normal business transactions, with the serious risk that we enact safeguards so complicated that they may defeat their own purpose in that they will not be understood by traders and still less by consumers.
It is equally important that we so frame our legislation that the private citizen can understand the protection which is available. I ask that, when we consider the provisions of the Bill in detail, we bear in mind at all times the importance of arrangements which are in the end as straightforward and as easily understandable as possible.
The Bill will introduce some new safeguards to deal with particular abuses. The great majority of hire-purchase and other credit instalment business is already conducted in a proper way, to the benefit of all parties, and to much of this business the passage of the Bill may bring little practical change. However, there have been cases in the past, as we all know, in which hire-purchase transactions have resulted in hardship to consumers. I am confident that the changes in the law which the Bill will make will deal with circumstances of that kind, and I therefore commend it to the House.
Will my hon. Friend deal with the question which I raised regarding the disclosure of other hire-purchase commitments by people at the time of entering into hire-purchase transactions?
My first reaction to my hon. Friend's proposal is that it would not be a suitable one for the Bill. It should rather be a matter for the hire-purchase finance houses themselves to be a little more careful about those to whom they choose to afford their facilities. However, if my hon. Friend cares to give me more detailed proposals, I shall examine them with the care that his opinion always deserves.
have no wish to detain the House, but there are one or two points affecting Scotland which could be clarified a little more than they have been so far before we give the Bill a Second Reading. Perhaps the Solicitor-General for Scotland, who has listened to most of the debate, may be able to help. There is no intention on my part or on the part of my hon. Friends representing Scottish constituencies to make the passage of the Bill difficult. We welcome it. Our complaint, which was raised earlier and which I repeat now is that the Clause and Schedule dealing with Scotland, which are a Bill in themselves, ought properly to go before the Scottish Grand Committee. I hope that this point will be heeded and that we shall have an opportunity of dealing with it in our Committee. We have already shown that we can deal with these matters expeditiously.
Hire-purchase abuses have been particularly rampant in Scotland over a good many years. I agree that the Credit Sale Agreements (Scotland) Act, 1961, which was introduced by the late hon. Member for Fife, East achieved certain very valuable results. I welcomed it. If I say that we have pushed for a very long time for this kind of legislation, I am sure that the hon. and learned Gentleman will think that I am not claiming too much.
I take, first, the question of guarantors. I wonder how much the Government are aware of the abuses which have been practised. I am convinced that many people sign documents which make them guarantors thinking, and, indeed, being so informed, that they are doing no more than witnessing a signature. Quite a number of people, whom I have believed, have told me this. They have, as they thought, witnessed a signature but have then found that they were committing themselves irrevocably to meeting an obligation. This was a particularly harsh obligation as it was exercised until quite recently in Scotland inasmuch as it was not merely an obligation to meet the cost of a given article but was an obligation to meet a given sum of money, described as a credit, sometimes as much as £200 or more, which could be drawn upon, partly repaid and drawn upon again, the guarantor, in truth, guaranteeing this sum of money virtually for all time. Some very tragic cases in the operation of the system have been brought to my notice and the notice of my hon. Friends.
There may be circumstances in which it is desirable all round that someone should act as guarantor, but I am doubtful whether it is sufficient to give such people a document telling them what their position is. I have some of these documents here. I find great difficulty in understanding them. They call for very close attention and very many people are incapable of understanding them. I am prepared to accept that under the Bill there will be greater clarity in matters of this kind, but I believe that we must do very much more than is proposed in the Bill if we
are to ge
As my hon. Friend the Member for Fife, West (Mr. W. Hamilton) said, these matters are taken beyond the grave. I had a case in which no sooner had a man died than the widow received from a company a statement saying that: it regretted his death but that it proposed to insist on the guarantor meeting the obligation. It is written into these documents that these obligations go beyond death. This is surely taking the matter much too far. We know about slick salesmanship and pressure salesmanship, and so on, and that in many cases, although not always, people are induced to enter into these transactions and are then told, Get somebody to witness your signature". The signature is witnessed and the fellow next door, quite unsuspecting, finds himself saddled with an obligation.
We had a case in Scotland in which the hirer who had undertaken an obligation, finding himself deeply in debt, cleared out of Scotland and came South and the guarantor was left to carry the burden by, perhaps, having his wages stopped week after week. Often when a man's wages are stopped he loses his job because the firm will not put up with this kind of thing.
We must as far as we possibly can protect people from themselves. People will do foolish things. It is not enough to say that they should understand the law. We should do our utmost to protect people from this kind of thing. I am not saying that there should be no guarantor in any circumstances. We must ensure that there is strong protection against this type of abuse. If a firm sells goods, why should it not assure itself of the creditworthiness of the person to whom the goods are sold? People who are fairly well off and who go into a furniture dealer's shop to buy a suite of furniture are not normally called upon to produce guarantors. They are trusted, although there are probably more bad debts among such people than among the people to whom I am referring.
A firm should accept much more responsibility in finding out whether the person to whom it is selling or hiring goods can meet the obligations which he is undertaking. To get rid of the guarantor of small sums of money would at least go very much further than the Bill goes. I ask the Solicitor-General for Scotland to tell us that the Government intend to put an end to the abuse which goes on in Scotland.
I welcome the fact that we are now so shaping the law that any firm which sells articles on a hire-purchase basis must make known the total amount of the interest charge on an annual basis. This gets rid of the worst abuses of which my hon. Friends have spoken of the 2 per cent. per month compound interest which doubles the cost in three years.
The manager of one of these shops once came to me to say that I was taking away his livelihood because I was exposing this kind of thing. He tried to explain that 2 per cent. compound interest was a very generous rate. I could not get the fellow to understand that even at simple interest rates, 2 per cent. per month was 24 per cent. per annum, and he was a manager who was supposed to explain to people coming into the shops how the scheme worked. It is a very good thing that we are to get rid of that type of statement and are to have an honest statement of interest in terms of so much per annum.
I still have doubt, however, about what are called operational charges. There was a widespread practice of charging not interest but what were called operational charges. Many people did not know that they were being charged interest. It was marked on their books as operational charges. As the law is now to be framed, will operational charges of that sort be cut out? They were, of course, interest charges in a disguised form. I hope that whatever name might be used, this type of practice will not be possible, so that a person knows the initial cost of the article and what it will cost him or her when it is finally bought on a hire-purchase basis. The total cost should be known right away. Possibly, fewer people will buy articles on this basis when they see how much more they are charged for them than if they had bought them the other way.
One of the great difficulties in dealing with the firm of which my hon. Friend the Member for Fife, West (Mr. W. Hamilton) has spoken—Napier's—was that the kind of transaction in which it engaged was not hire purchase or credit sale but was called personal credit. It is true that the law has been changed so that most transactions of this kind have been brought under the category of credit sales. For a long time, however, this firm escaped the law in the sense that it was dealing not in hirer-purchase or credit sale transactions. The firm would say to a person, "We will open what is equivalent to a bank account for you and give you credit up to say, £200. You will be able to draw upon this credit to that amount. You can always pay it back."
My point is not whether that would be regarded properly as a credit sale and come within the law but what would be the position if a finance company—I have in mind the Woodfield Finance Company, which was Napier's under another name—makes credit available to a person, virtually giving a loan on the basis of something like the charges which we have been discussing, and the person then uses that credit note to go to one of the shops to buy an article? This is a point of difficulty and I am in doubt. If the Solicitor-General for Scotland is in doubt tonight, I do not blame him.
Let me put the point as clearly as I can. Suppose that a concern by another name, if it were a finance company, makes credit available to, say, a Mr. White, gives him a note to the effect that he has credit up to a certain amount and then he goes to a certain shop and purchases a television set out the basis of the credit note. But Mr. White is, of course, dealing with a finance company and has to pay it perhaps exorbitant rates of interest on very harsh terms.
This type of transaction may easily arise because the means of operating it exist. Will it be covered by the Bill? I hope that it will. But if it is not, then that is all the more reason why this part of the Bill should be remitted to the Scottish Grand Committee, so that hon. Members with a fair knowledge of this subject can consider means of stopping the abuse.
I ask the indulgence of the House, customarily given to an hon. Member making his first speech in the Chamber.
The Scottish aspects of this Bill which have been raised by a number of hon. Members may be summarised into four groups First, the arguments seeking to ensure that protection for guarantors was adequate; secondly, the feeling that the Bill should adequately deal with the possible activities of the Scottish firm which has been criticised thirdly, the question why the Scottish provisions, under which the purchaser can terminate the transaction by paying up to one-third of the instalments, should be given up in favour of the English provision which, on the face of it appears to be slightly more onerous to the purchaser; fourthly, the question of which Standing Committee should consider the matters affecting Scotland.
I can assure hon. Members that, during the Committee stage, a Scottish Minister will be present when Scottish matters are under discussion and that, consistent with my duties as Law Officer to advise in other Committees, I shall be happy to make myself available when the Committee is discussing the peculiarly Scottish provisions of the Bill.
Several hon. Members made comparisons with the Police Bill, the Scottish provisions of which have just been considered in Committee. The position is quite different, however. The Police Bill preserves almost in its entirety the existing Police (Scotland) Act, 1956, and contains many Scottish applications and provisions. This Bill by contrast repeals a very small body of existing Scottish legislation on this matter contained in Acts with a very small amount of legis
The Molony Committee recommended that the law of Scotland and England should be assimilated on this matter, and so it is apparent that the conditions under which we approach this Bill are very different from those under which we approached the Police Bill. Moreover, the provisions of the Bill are very different in the way they are drafted and are not nearly so unfavourable to Scotland as some hon. Members have indicated.
Anyone wishing to ascertain the new form of the Hire Purchase Act, 1938, in England would require to do some work with scissors, paste and ink in order to apply the provisions of the Bill. But the work has already been done for Scotland by the parliamentary draftsmen by virtue of the third part of Schedule II. I concede that a certain amount of reading to and fro will be necessary to ascertain the remaining Scottish provisions, but a similar amount of reading to and fro will be necessary south of the Border.
With regard to the firm whose activities have been criticised, the position until 1961 was that the credit-sale agreement activities it engaged in had virtually no statutory restrictions, with the exception of those imposed by two temporary Orders which existed during the latter 1950s and under which two successful prosecutions were obtained against the firm. There was only a short gap between the ending of the second of those temporary 13rders and the passing of the 1961 legislation which applied the powers of the Hire Purchase Act, 1938, to Scottish credit-sale agreements. Since then, complaints related to agreements in Scotland have been concerned with those entered into prior to the 1961 legislation. The position will be still further improved for the purchaser in his dealings with this firm and in general over the whole range of this type of trade by the new provisions now to be brought into force.
The position of the guarantors was rightly questioned. Existing Scottish legislation—and the print of the 1932 Act which I have in my hand is very thin—has somewhat scanty provisions relating to guarantors. However, these have been amplified by the present proposals and I can confidently forecast that the effect on guarantors of the activities which have been criticised will be still further reduced.
This is not the time nor the place to go into details, but I will give one example. Clause 17 introduces valuable provisions protecting guarantors which Scotland did not have before. Even where a guarantor is not mentioned as being specifically protected under the Bill, where the Bill provides that an agreement shall be void in certain circumstances, for example, where certain information is not inserted in particular documents to be made available to the purchaser and the principal agreement becomes void, then the guarantor's agreement will fall with it. I mention that to make the point that specific mention of the guarantor being protected is not an end of the matter and that the common law comes in where an agreement is expressed as void.
In those circumstances, I commend the Bill to the House.
I must say, frankly, that the Bill does not deal with a practice which has been attributed to the firm in question and which is that of lending money to clients to enable them to purchase goods from other firms. A Scottish court has ruled that this practice, although it has a resemblance to money lending is not money lending within the terms of the Moneylenders Act, 1900. In so far as this method of trading gives rise to the abuses which have been alleged, it is not a matter for the Bill, which is concerned with the transfer of various kinds of goods under hire-purchase, conditional sale and credit sale agreements.
Moneylending is a separate matter. There is this alleviation to be found in that this method of trading, although a prominent part, is only proportionately a very small part of the activities of this firm. However, I must be frank and say that this activity is outwith the scope of the Bill.
It falls to me to extend to the hon. and learned Gentleman the Solicitor-General for Scotland the congratulations of the House on having survived his maiden speech. He has done it with coolness, clarity and lucidity, terms which we do not always associate with speeches by Scottish Ministers. I sincerely congratulate him on the job that he has done. We could not expect that at this late stage the hon. and learned Gentleman would go over the complicated legislation with which we have later to cope, I hope in the Scottish Standing Committee. However, he did a splendid job in dealing with the background to the Bill, including the problem of guarantors.
I shall not go on to the next part of the customary procedure when following a maiden speech and express the hope that we shall hear the hon. and learned Gentleman often. I know quite well that we shall hear him tomorrow and hear him more than once. We who are members of the permanently sitting Scottish Standing Committee have heard him speak there with considerable help and advantage to that Committee. He comes the last in a long line of Solicitors-General for Scotland and Lords Advocate of his party. When they are not here, we wish that we had them and, as soon as they arrive, we wish that we had not. If he maintains the standard which he has achieved tonight, he will be at least that bit different. I think that the hon. and learned Gentleman was wrong in what he said about the background to the Police Bill and the background to this Bill. The Police Bill followed a Royal Commission Report; this follows the Molony Report.
I am sorry that the Leader of the House is not present. I think that it would be wrong now to embark on questions relating to the actual contents of the Bill. Not that it would matter very much, because Scottish Members have often had the experience of making speeches without the Minister responsible having the courtesy to listen to them. It is perhaps as well that the Parliamentary Secretary to the Board of Trade is present to hear my speech on this Bill, but I shall not give the hon. Gentleman what he really deserves from Scottish Members.
I am concerned about the fact that the Bill does not lay down clearly intelligible Scottish legislation in respect of hire purchase. The Bill contains only two Clauses which are applicable to Scotland—Clauses 21 and 22. Clause 21 extends the principal Act, that is the 1938 English Act, to Scotland, and sets out which of the Scottish Measures are to be amended. Never before have I seen a piece of legislation which incorporates both English and Scottish law in this way.
Clause 21 says that the 1938 Act, as amended by various sections of the Bill, shall extend to Scotland subject to
(a) the modifications set out in Part I of Schedule 2 to this Act, and
(b) the addition of the provisions set out in Part II of the Schedule, being provisions corresponding to the provisions enacted for England and Wales by Sections 2 and 3(1)"—
not of this Bill, not of the 1938 Act, but of the 1954 Act—
and sections 1(3) and (4). 3(4) and (5) and 20(7) of this Act.
In addition, we have Clause 22 which amends the previous law applicable to England and Wales for translation into Scottish law, and Schedule (2) reprints a whole Bill for Scotland. If this Schedule is not considered in the Scottish Standing Committee, it will mean that the Schedule will go in as a whole on the Question that the relevant Clause stand part of the Bill, and we shall not have an opportunity to discuss it in detail. That will result in a legislative farce, and I add my protest to those made by my colleagues.