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MIONTUAIRISC NA FINNEACHTA(Minutes of Evidence)Déardaoin, 11adh Mhí na Nodlag, 1930.Thursday, 11th December, 1930.The Committee sat at 11.30 a.m.
DEPUTY J. WOLFE in the Chair. Mr. C. A. Jackson-Jellie called and further examined by the Chairman.1250. Is there anything you wish to add to the statement you made to the Committee when here on the last day?—I think the statements I have sent in cover the ground very fully. The examples I gave may require a little elucidation— their exact purport, I mean. 1251. What is your opinion as to limiting the amount of loans—putting on a minimum loan below which the moneylender could not go?—I did not deal with that. In my own mind it should never be less than £1. 1252. You will agree that the greater number of abuses occur in the case of very small amounts?—It would be a natural sequence, I think. 1253. The difficulty is, are you going to get rid of the small ones altogether?—I am afraid that is not possible, human nature being what it is. 1254. Necessarily in the case of these small loans, in order to make the business pay the interest must be higher?—It must be considerably higher. 1255. Putting on a maximum rate of interest might have the effect of getting rid of these small loans?—It might. 1256. You were good enough to suggest to us 50 per cent.?—I suggested that that is about the lowest that would be economic in the circumstances outlined here. 1257. And in the case of such small loans of £1 would you think 50 per cent. would not be economic?—It would require very great care and facility to collect your debt. 1258. In other words, if the moneylender is engaged in lending sums of £1 he is not likely to become very rich on 50 per cent. interest?—He is not; he could quite as easily go down hill. 1259. Are you aware at all of the effects of the Moneylenders Bill in England, of which the one before the Dáil is practically a copy?—I have no personal knowledge of it. 1260. Someone has suggested—I do not know whether it was before this Committee or not—that 48 per cent. had the effect in England of knocking the very small man out?—I would say that is bound to happen. 1261. You say that would be so also in this country?—I am quite sure it would. 1262. And without fixing the minimum loan the same result may be achieved by the rate of interest fixed—Absolutely. 1263. Deputy Briscoe.—I do not quite agree with the contention that 50 per cent. is going to knock the small man absolutely out. Witness.—Fifty per cent. per annum? Deputy Briscoe.—Yes. Witness.—I am afraid so. 1264. On what do you base that statement?—What does 50 per cent. per annum mean? It means that to any given sum you must add 20 per cent., and you must not seek repayment earlier than spread over a period of forty weeks. 1265. Deputy Little.—What do you mean by adding 20 per cent?—Assuming the loan is £20, you add £4. We will assume £24 was repayable in forty weeks. The nominal rate of interest on the Bill would be 51 per cent. per annum. Deputy Briscoe. 1266. Would not you agree, from your own knowledge of the various kinds of moneylenders—you have to deal with small and large—where a man deals in large sums, say at 48 per cent. or 50 per cent., that the percentage is the same, but that the business itself is different. Where the big man might work handsomely at 48 per cent. or 50 per cent. the small man would not work out so handsomely, because his expenses on the small loans would be different from the expenses on the big loans?—The expenses of the big man are less, so also are his bad debts. He is not in a position to dictate the same terms. These men in the bigger way will safeguard themselves; they will approximate more to the bank position. In a great many cases the small men have not the ability or the training to do this. 1267. Certain sections of the Bill deal with the method of transacting business and they apply to the small as well as to the big loans?—It would appear so. 1268. That being the case, it would be just as easy for the small man in dealing with the regulations laid down in the Bill to protect himself. In a sense he has only protection under the Bill for collecting?—That may appear on first sight, but I do not think he would do the same volume of business. 1269. How do you arrive at that?—He would be slow to take on new customers or to extend the old. 1270. Does it not amount to this, that the small man whom you have in mind is the man with very small capital, and unless he is able to charge a very enhanced rate of interest and get a very frequent turnover he would not thrive at all; but if the man with a big capital were to do a small business it would make no difference to him?—That is quite right. The man with the big interest and the very risky debts has only a struggling chance. If you cut down that interest below the economic point he must go under. 1271. I have given this matter careful consideration. I have had chats with various people in the business and I have come to the conclusion where people are making a case to have a higher rate of interest for the smaller loans it is not so much the interest that is worrying them as their own shortage of capital to engage in the business. Do you agree with that? —Off-hand, I am afraid I could not. Very often there is a shortage of capital. There is no security. I regard the prime factor as security for repayment of the debt. 1272. There are some men lending small sums who have a big clientele. As far as I can gather, they would be quite happy to have 48 per cent.?—Quite. 1273. It is only the man with small capital who is the difficulty?—It is dictated by shortage of capital. 1274. That is one factor?—It emerges from that. It is based on the fact, I think, of slender capital. I am putting that as a virtual example. There is no security. He does not put it as far as your proposition, simply recoupment for the small capital. It is a safeguard for the conduct of the business in that particular way. 1275. I would like to be quite clear on this. The small man, if he were to get 50 per cent., would not have an economic rate?—I would say, if the small man got 50 per cent. per annum and was able to collect his money as and when due, he would have at least a sporting chance. 1276. Would you put it this way? Under the Bill, where the moneylender gets certain protection he has not got now, if he were to get 48 per cent., or we will says 50 per cent., he has an extra guarantee in the shape of security. Where money is borrowed and where the lender is to have the husband’s signature, is he not going to have increased business at a lower rate?—It may follow. 1277. I am stating that it will follow, because at present they are paying up to 100 per cent. and 130 per cent.?—More. 1278. It is keeping a lot of people from borrowing. If there is to be protection and a certain rate you will have people borrowing, because they have protection as well as the lender?—We are going to have the further point of additional expenses, and we must have an increase to get back to our former economic position before we begin to make any progress. 1279. I am not clear on that. I would like, if possible, to be converted to that point of view, but I do not think it would be possible. I believe that in exchange for the protection that the Bill will afford the lender, and also the increased business he is going to have as a result of the business being closed, to a certain extent, to poachers, that the extra expense of putting things on a business footing, by having records and proper returns, is going to work to his advantage?—It will eventually, after he has got over the present peak. 1280. You do not suggest that legislation should be enacted to help people to get to a certain point?—I do not. 1281. Deputy Little.—In your experience, is it owing to the risks taken that bad debts occur?—In most cases. 1282. If that is so, would it not be more advisable for moneylenders to take less risks?—They will have to do so under the new conditions. 1283. The more the interest is cut down the less risks they can take?—There are other factors. You come to the point where it is not worth while doing business at all. 1284. Do you not think it would be advisable in a great many cases if the moneylender did not make any loan?—In a great many cases they would be better off, as far as results go, where the amount might not be repaid, or where people would be slow in doing so. Take a case where repayment is to be made in forty weeks. If every second payment was missed the rate of interest comes down 25 per cent., and that would not pay. 1285. Would not that teach the moneylender not to give a loan to that sort of person?—It is very difficult to discriminate. 1286. Would not the moneylender get to know the type of person who was getting loans—for instance, those who might be getting it, possibly for gambling purposes, or “to blow it”?—All the time you have got to be a judge of human nature. I would like if you would allow Mr. Handleman to tell you about an incident that occurred during the past few weeks. 1287. Deputy Briscoe.—Where a borrower misses making a repayment off the loan, instead of being paid in forty weeks it would be eighty weeks?—The moneylender can add interest now; before he could not. 1288. He is entitled to a full percentage of interest irrespective of the time, so that there is extra protection given to the lender?—Yes. 1289. Deputy Little.—Some moneylenders give loans on good security and charge as low as 10 per cent.?—Yes. 1290. And they welcome that?—Yes. 1291. You will agree that is the kind of business that is most sound?—Perfectly sound, as far as human nature goes. 1292. There are types of people who are themselves the best security but who might not have the kind of security that the banks would take?—Yes. 1293. That is the type of person who would be best served by a moneylender? —Quite. 1294. They would not be affected if the rate of interest was fixed at 20 per cent.? —No. Deputy G. Wolfe. 1295. If the rate of interest was 48 per cent. or 50 per cent., beyond which it could not go, do you not think that you would have a better and more reliable class of client to deal with?—It might tend to work down to that, probably after twelve months. 1296. The small people, as far as I can see, might lose?—They would have a very difficult time. A lot would depend upon themselves whether they would emerge or not. I am satisfied some of them would adapt themselves to the new circumstances. If they did not they are bound to go. There are a good many things to be carried out under the Bill. 1297. If the small man knew that he had to pay 48 per cent. interest he would hesitate before asking for a loan?—To a great extent that is so, but you will not get rid of the innate gambling instinct. It is really gambling. 1298. Deputy Briscoe.—Deputy Wolfe is referring to the borrower as distinct from the lender?—I agree. Deputy Little. 1299. You make a distinction between the nominal rate of interest and the effective rate. You put it this way in your précis of evidence: “Let us assume that a person borrows £15 and contracts to pay back £22 10s. in fifteen weekly payments of 30/- each; the rate per cent. per annum calculated in the terms of the First Schedule to the Bill would seem to be 325 per cent.” Applied to this specific instance, it would be for each weekly payment of £1 10s., £1 to principal account and 10/- to interest?—Yes. 1300. How can you depart from that principle? What do you mean when you mention 1s. 2d. subsequently as an effective rate?—The effective rate is that set out in the example that follows on the next page showing the two allocations of interest. I think you can follow from that that in all these cases of contract the amount will have to be set out, because there would be awkward difficulty when a man comes along and wants to renew his bill or get a new loan and pay up the existing one, and wants credit for the interest. 1301. Would you not accept the principle that where a sum of £15 is borrowed for fifteen weeks, you allocate £1 for each week—you must divide the principal into even sums over the period? —I do not mind that, provided there is machinery for correctly calculating the interest to be allowed in case of earlier repayment. If a man pays at the end of ten weeks there should be an alternative arrangement calculated on the true basis. 1302. What do you call a true basis?— The example sets that out. I take 1/3 per £ per week. In the first week there is nothing taken off for interest or repayment. In the second week there is £1 10s. received. The example on page 2 is explanatory of the whole thing. 1303. Deputy Briscoe.—What would the percentage be per annum?—It would be 284 per cent. Each week we drop the 1/3 per £, and in the last week he pays 1/3 on the balance outstanding. Under the other arrangement he would be paying more interest than the balance of the loan, and that would seem to be absurd. 1304. If a man repays sooner than he arranges to, does not the payment of this interest automatically wipe itself out?—I figured on the parties going before a magistrate. The magistrate will find that if a man is coming to the end of his payments he will have to allow him far more interest that is being charged. In other words, the man is benefiting at the moneylender’s expense. Deputy Cooney. 1305. Have you any knowledge of abuses occurring?—I do not come across those things beyond what I hear or read. 1306. I presume you read the published reports of the sittings of this Committee? —I did. 1307. Are you satisfied that abuses have occurred?—I am satisfied there are black sheep in every flock, but beyond that I have nothing definite. 1308. You have not formed any opinion as to the cause of these abuses?—The cause might be described by a lot of words. Some people would use the term “rapacity.” If a man places undue pressure on a borrower and threatens him in an illegal manner or tries to form a ring of other moneylenders so as to squeeze him out—all those things are totally wrong in any walk of life. 1309. Do you agree that abuses have occurred with small men?—They are bound to occur there. They do not occur with men who borrow £100, £200 or £300 or even down to £50; they are very likely to occur there. 1310. In reply to a question as to what percentage the profession would require in order to carry on, you said that fifty per cent. would be sufficient, judging from the different factors operating here as compared with England?—Yes. I had in mind the collection of debts under legal process. Instalment orders are given, and it is left to the debtor’s sweet will whether they are carried out or not. It might mean incurring additional expense, and I do not think a lender would go that far, because it would scarcely be worth a button doing so. I understand that in the case of England the instalments must be paid into Court by the debtor. That is a different process. 1311. If that were applied here, what would the position be?—It would be beneficial not only to those in a moneylending business, but to every other trade. 1312. If it were in force here, what interest do you suggest?—I would not reduce fifty per cent. for the small loans. I am looking at it from the aspect that they will have certain facilities, and it is up to themselves to use them. I would like to see the other method such as operates in England adopted here, not particularly for moneylenders, but for all classes of traders. 1313. Do you favour the principle of a maximum charge of interest?—Do you mean for small loans? 1314. Is the position in England that a person can arrange whatever rate of interest he desires, and when the case comes into Court, if they are able to show the security was not very strong, they might be justified in charging over that rate?—That is the position. There have been recent decisions on that point. In one case ninety per cent. was allowed, although the Act said 48 per cent. 1315. Deputy Little.—If you were to fix the standard rate at 20 per cent., the Judge would have discretion to allow a greater interest?—Yes, if he considered the securities very shaky. 1316. Deputy Cooney.—I think you said the fixing of 50 per cent. as a rate of interest would cut out the small lender? —I said it would cut out a lot of them. Some of them would survive if they were able to adapt themselves to the new conditions. I am aware a lot will not be able to do so, and they will automatically drop out. 1317. Would that be for the general good of the community?—I do not know. Sometimes with the small borrowers one pound or two pounds mean a little fortune. It would be a great hardship for them if the source of supply were cut off. It is far better that it would be under control. 1318. You stated that instalments are paid into Court in England?—Yes. In this country at the moment all Mrs. Murphy or Mrs. McCaffrey has to do is to ask for the money and get it. Under the new conditions a man would have to think before parting with the money; he would have to weigh up things very carefully, and the money would not be given around in such a prodigal fashion. 1319. Do you agree that in this country it is more easy to collect?—Yes, and I have referred to the fact that the innate honesty of the people is greater. But that does not get you anywhere with persons in tight corners seeking the line of least resistance. Those people would have one or two rooms, and would have very little for repayment. Their honesty would be only a matter of circumstance. They may wish to be honest, but it is not possible for them. 1320. It is more difficult to collect in England than in this country?—Yes; they have more innate honesty here. Apart from that, it is easier because the Court helps. 1321. In England it is much easier for the borrower to disappear from one place to another?—Quite. 1322. Deputy Little.—If the rate of interest on £15 was fixed at 50 per cent. the amount to be paid in interest in the first week would be 12/6, and for the last week it would be 4d.?—Roughly, it would be like that. 1323. Chairman.—In your evidence on the last day did you refer to the difficulty of enforcing instalment orders in this country?—I did. 1324. You were speaking then in comparison with conditions elsewhere?—Yes. 1325. Have you before you the provisions of the Enforcement of Law Act?— No. 1326. Do you not know now that since that Act was passed it has been availed of very largely in this country, and it gives the creditor a procedure which was more adaptable and workable than the English procedure?—To what extent? 1327. In the sense that a man can be sent to jail if you get an order. Say that you get an order for payment by instalments. If he fails to pay one instalment he goes to jail for a period of three months, with the condition that he does not come out until he pays the entire debt?—I referred to that. In the matter of small loans that would hardly be a workable solution. It would be a very expensive business. 1328. It gives the creditor a very drastic remedy?—Yes, but that is quite different from the medium way of payment into the Court. The responsibility is cast on a person to proceed to the Court every week or month with the money, and the moral effect of that is very good. 1329. If a man gets an instalment order there is nothing to prevent a creditor going in to pay the solicitor?—That is a very different matter from having to go to Court with it. The moral effect is very different. That is the highest form of pressure you could bring on them. Mr. Hyman Handelman called and further examined, said:1330. I can give you cases where a person is applying for a loan. You hand him an application form in which he is asked to mention if he has had any loans elsewhere, and he says he has not. In some cases you find that that man has transactions with eight or ten other people. What are you to do then? Chairman. 1331. In that case I suggest that when the moneylender finds a statement of that sort in the application, the next thing you will find is that he is threatening the man with criminal proceedings, and in that way he puts on the screw. Do you not think so?—One does not always do that. 1332. But we have had instances here of lots of people being threatened in that way. I take it you disapprove of that? —I do. 1333. I know you disapprove of it, but do you not say that their getting these borrowers to make those statements helps them later on to put on the screw on the borrower?—I do not know that many of them do it. 1334. You may take it that a good many of them will do it, and they consider it quite fair?—It would be considered fair because the man has put in a false statement. As far as this Bill is concerned, we welcome it for one particular reason, and that is that it will do away with the women who go hawking from door to door lending 1/- for threepence or £1 for 3/4. It will help to do away with that class which is causing the whole trouble. 1335. The greater percentage of it?— Fully 90 per cent of it. I come across it in my own clients. I have taken them out of the hands of these women and paid the debts due to these women. 1336. You think that the woman hawker could not continue in business if there were a fixed minimum rate of 50 per cent.?—She could not carry on at 100 per cent. That type of person could not carry on at 100 per cent. In fact, under this Bill that sort of woman hawker would not carry on at all, because that woman will not register and she will do nothing. 1337. For example, if a rate of 50 per cent. were fixed, that will do indirectly what is not done directly in the Bill— drive out the woman hawker?—It would. 1338. And you agree that that would be for the benefit of the community?—Yes. 1339. And for the moneylending trade itself?—Yes, but I say this, that if you cut this Bill below 50 per cent. it will throw out a lot of people who are doing a fair and legitimate business, men who treat their customers in a fair and legitimate manner. 1340. Passing from the rate per cent. for a moment, do you agree that it would be an essential matter, putting it from the public point of view, that the man who borrows should be told what rate of interest he pays for it?—It would. 1341. In many cases he is not told the rate per cent. and he does not appreciate what he is paying?—In most cases he does not care what he pays so long as he gets the loan. 1342. But in fact he does not know?— He does not know. 1343. And does not appreciate what he is paying?—Well, he is not told. 1344. He does not in fact know?—He is told that he is charged 4/- or 5/- or 3/- for the loan. 1345. In many cases he would get a very decided shock if he knew the rate per cent. he was paying?—He might, but if you look at the risk that is taken with a client the matter looks different. The man would not be shocked. I have been speaking to a few English moneylenders who are over here, and when the thing was pointed out to them, when they saw the rates that are being charged here, they were quite amazed that the lenders would be so foolish as to give money to people without any security. You often get a client who has neither furniture nor anything else, but you do know that there is an honest trait in him. 1346. You could have told that English lender that our people are more honest, and that by reason of that you are able to carry on here at a profit which would not enable you to carry on in another country?—Yes. Deputy Little. 1347. Are you aware that there are English moneylenders lending money here through agents. They insist on a very detailed description of the man’s means—what money is coming into the family. Are you aware that those agents sometimes do not tell the truth about the matter?—I could not tell you. I do not know their practice at all. I know they advertise, but I do not know how they do their business. I know they have agents here. I would imagine, however, that English moneylenders who advertise here and keep agents here do not do the very small trade at all. 1348. In the cases I speak of, the business is in small sums?—Well, you would have to do a very large and a very huge business to make it pay. Deputy Briscoe. 1349. Do you not agree, Mr. Handelman, that a huge business might mean a big turnover without any one of the transactions being a large one?—They could not do a big turnover in that way. They could not do a big turnover with the ordinary lender here in Dublin, unless they did business in big sums. 1350. What do you call big sums?— Anything from £50 to £1,000. 1351. You would not say that they would do a business ranging between £10 and £25?—They might be doing some business like that, but I am not conversant with their practice. 1352. I have a case which will prove that they do that sort of business?—Well, I cannot speak of their business. I am not conversant with it. 1353. You have not borrowed from them?—No. Deputy Cooney. 1354. You told us you have been in conversation with a number of English moneylenders?—I have. 1355. From your contact with them, have you any reason to think that their position is improved or worsened as a result of the operations of the English Act? —In England it is different. It is business people who are doing a very small type of business. 1356. Are not those who have remained in business in a better position now than they were prior to the passing of the Act?—No. Their position is just the same, because they always had the protection of the Court whether the interest was big or small. 1357. Deputy G. Wolfe.—You mean the unregistered moneylenders?—No, they have been eliminated. 1358. Deputy Briscoe.—I know this: that a Dublin moneylender has paid as high as £40,000 for the purchase of a moneylending business in Glasgow, in spite of the English Act operating there. You have heard of that, that a Dublin moneylender did buy a large practice in Glasgow?—I have heard that, but I was not there to see what was paid. 1359. That would prove that, in spite of the English Act, it has paid a Dublin moneylender to invest a big sum of money to buy that particular Glasgow practice? —Yes. 1360. Deputy Little.—Would not that point to this, that the standard rate of interest in England might be fixed lower than 48 per cent. without doing any harm?—No, it has been pointed out to me that the rate of 48 per cent. has left only those with big capital remaining in the business. 1361. Deputy Cooney.—Is not that, in your opinion, for the good of the general community?—No, because if an ordinary working man now wants to get a loan of £2 or £3 he finds it difficult to get that loan, and that is unfair to him. 1362. Do you not think that the big men will facilitate him?—Not under 48 per cent. 1363. Deputy Little.—Do you not think that loans to working men should not be a matter of trade at all, but that they should be worked through some institutions which would assist the man without putting it on a profit-making basis at all?—At the present moment you have institutions here who are supposed to be doing business at a very low rate of interest, but who are simply covered with a veil in this way, that if the figures were gone into, it would be found, if all their charges and fines were taken into account, they are charging more than the ordinary moneylender. He may be charging 4/-, 5/- or 6/-, and these institutions charging only 1/-, but when the fines are taken into account it may be found that the charges are higher in the case of these institutions. 1364. Do you recognise that the new Bill will eliminate the fines?—It will not interfere with these institutions. I may be wrong, but I think that if you go through these institutions’ books that these people incorporated under some Act are actually charging more. 1365. Deputy Cooney.—What class have you in mind?—They are institutions registered under some Act. I do not know the name of the Act. 1366. Deputy Briscoe.—He is right there. Certain societies were left out inasmuch as they were borrowers amongst themselves. Each borrower was a member of the society and participated in the profits of the society. I think they are something like what is called Tontine societies. Mr. Handelman.—The borrower there had also to get security? Mr. Briscoe.—Yes. 1367. Deputy Little.—Do you think that we ought to deal with that?—I am not here to tell you what to deal with. 1368. Chairman.—There is a section omitted from this Bill which is in the English Act. It has led to some confusion as regards these societies. I understand that Deputy Little put down an amendment to restore that section. Deputy Little.—My recollection on that matter is not very clear. I thought it was dealing with another matter-with the question of fees to be paid. Chairman.—Oh, no. That section is in the English Act. There is a reference to it later on in this Bill. 1369. Deputy Cooney.—Is it your contention that the societies are charging more than the average moneylenders?—I have no experience of it myself, but according to what I have heard it is this way: If a man comes in to pay his money at five minutes past eight he has to pay a fine of tenpence. If the door closes at eight, and if he is five minutes late, he has to pay that fine, and the following week he has to pay a fine of 1/8 if he is not in time with his money. This is only what I have seen in books. I am not speaking from my own experience. I have no direct knowledge. 1370. Deputy Briscoe.—You mentioned already that English concerns doing business here only lend large sums. I have here a case of two different firms, and you know them very well?—I do not know English firms registered here who are lending small sums. 1371. The amount is very small, £18, including interest?—That is not so small. 1372. It represents about 500 per cent. It is £18 for £10. Here is another case. Do you know this concern?—No, I do not think that they advertise here. 1373. They are an English firm who do an extensive business here. They are both small amounts?—So far as we lenders here are concerned, you can wipe out the English lenders. 1374. It is the intention in the Bill, I understand, to allow money to be lent only by residents in the Saorstát?—I am glad to hear that. These are all English lenders. 1375. We have some cases of local lenders also. Perhaps you would like to see them?—I would like very much to see them, especially as I am in the Association, and I would try to bring these people to book if these allegations are true, but it would only be fair to give these men a chance of denying them. Chairman.—We will give them an opportunity of refuting these statements at a future date. Thank you; your evidence has been of much assistance to us. The Committee adjourned. |
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