Clause 1. — (Extension of Application of Hire-Purchase Act 1938.)

Part of Orders of the Day — HIRE-PURCHASE (No. 2) BILL [Lords] – in the House of Commons at 12:00 am on 24th June 1964.

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Dr. Bennett:

I confess to having considerable sympathy with the Amendment. We have hire-purchase legislation before the House at a moment of considerable crisis within the industry, particularly in the matter to which the Amendment would apply. We have recently seen a "running amok", or the early stages of "running amok", in the hire-purchase business. It was well summed up in an article in the Financial Times on 9th June, which began: It must be counted a matter for great regret that the Ford Motor Co's. bid to establish itself in the hire purchase business is largely taking the form of offering to pay commissions to motor dealers for introducing transactions that are materially in excess of the ceiling set by the Finance Houses Association code. Later the article reads: …there can be little doubt that when the council of the Finance Houses Association meets shortly to discuss what should be done to counter this threat, there will be a good deal of support for the proposal that such competition should be answered in the only way in which it can be effectively answered in the short run—by suspending the commissions code so that Ford can be beaten at its own game". This is a most terrifying prospect, and I am most alarmed by it. I think that we should all like to see the abolition of, or the limiting of this kick-back. The motor dealer does not do too badly. He names his own profit on the sale of the car. I think that it is nearly always cars which we have in mind in these matters. Why should he claim a percentage of the extra hire-purchase charges which he can obtain by persuading a customer to take something on hire-purchase instead of paying cash?

This is a deplorable affair, and it is our duty to try to abolish or limit this kind of thing. I know that the difficulties are great. I have a sneaking suspicion that my hon. Friend the Parliamentary Secretary regards it as impossible, because one argument which can be used is that if they cannot get their extra second commission that way, they can stick a bit on the price. But it would be a form of direct competition in selling cars if it were put on the price.

I feel that we have a duty to try to check this practice. At the moment people in this country are being subjected to a price war in commissions, a sort of auction sale by which the highest bidders will get the prize and the highest commissions to the motor dealers will secure the hire-purchase business from them. I therefore think that we have a desperate duty to try to do something to check this practice.

The trouble is that, as far as I can see, the business done, particularly the motor-car business, is through these dealers, and it is the dealers who introduce the business to the finance houses. I do not see how the finance house trade can advertise directly to the customer that their charges are lower than the other chap's. It would be a good thing, except that the attempts to advertise in this way would be much too diffuse. But there ought to be some way of making known to the public the extent of the commission which the hirer must pay to the motor dealer. It should be made public that the companies which give least commission to the motor dealer are those which in the end charge the hirer least. This is a consumer protection Bill, and this is the kind of provision which we need in consumer protection. I am strongly of the opinion that we ought to abolish, or at best diminish, these commissions. That is why I think that there is a great deal to be said for the Amendment, which tries to do a most important job.