Is it worth while entering on a discussion of the Report Stage of this Bill at this hour?
Central Bank Bill, 1942—Recommittal.
We can deal with hire purchase.
The Minister for Finance is anxious to utilise every moment possible on this Bill.
I understand that the Minister desires to recommit Section 58 and amendment No. 61 to the Schedule, i.e., the amendment dealing with parity.
The Minister for Finance has down amendment No. 56, which deals with the powers in respect of licensed bankers' clearances. I wonder whether, in view of the rather new matter involved in that amendment, he would agree to have the proposed new section discussed in Committee? My amendment, No. 57, covers more or less the same ground.
I do not agree with the Deputy that it is entirely new matter. It deals with a subject that was dealt with in the Bill. Admittedly, it is a considerable extension, but I do not think there is a case for recommittal.
It is not for me to say, but for the Minister.
I would urge on the Minister that it is a very important matter. There has not been a Committee discussion of this in the direct form in which it now appears. I think everybody will realise that it is an important matter, and that it would be more satisfactory to deal with the various aspects of it if the House went into Committee.
I would like to support that. All along we have been told that many of these sections were merely put in in case they are wanted, and that probably they never will be wanted. But now the powers are being taken and that is a very considerable extension of the principle.
I think there is hardly a Bill that has gone through the House which has got such discussion in the Committee Stage as this Bill has got, even including the subject which is dealt with in the two amendments, my own amendment and that of Deputy Mulcahy. I very reluctantly agreed to have any part of the Bill recommitted, but we did not have the discussion that Deputies were entitled to have on the question of parity. That is a very important matter and I quite agree that the House should have every opportunity of discussing it. I do not see, however, that we can go back on the other matters.
I suggest to the Minister that he has been assisted very much by the House in getting so far even along the road as to put down the amendment in his name in the form in which it is. Now that the Minister's reluctance in a particular way has been overcome, I think both the Minister and ourselves might like to expend a little on it and that we could very conveniently, and perhaps with even less loss of time and greater achievement, discuss the matter in Committee.
The Minister says that this Bill had very ample discussion in Committee, and undoubtedly it had. But when a Bill on Report Stage has 61 amendments down to it, it looks as if there had been some slight alteration in the Bill between the Committee and the Report Stage. In fact, I almost think that a case could be made for recommitting the whole Bill.
I think the Taoiseach will find it impossible to sit in the House and listen to the discussion of this new section without going into Committee himself and, of course, when he goes into Committee we all go; we did before.
Is the position to be that when on the Schedule amendment No. 61 will be recommitted?
Yes, that deals with the question of parity with sterling.
In other words, there is not to be a recommittal stage first to deal with amendment No. 61?
It may be done now. I do not know whether the Minister is recommitting Section 58.
I promised Deputy Dillon, who raised the question just before we finished the Committee Stage, to facilitate him. He asked specially that Section 58 should be recommitted. Deputy Norton asked that the whole discussion on his amendment on parity——
I withdrew my amendment to facilitate the passage of the Bill through Committee on the assurance that it would be recommitted.
I am willing to recommit it.
Are we to have the Recommittal Stage now on Section 58 and amendment No. 61 before we come to the Report Stage?
Yes, in order to avoid going in and out of Committee. Deputy McGilligan might consider whether amendment No. 11 might not be discussed with amendment No. 61. It seems to be related to it, if my interpretation is correct. In fact, I do not see how it could be moved if parity stands.
At the same time, I think the matter which Deputy Norton is referring to might be left and there could be still power theoretically given to the bank to vary the rate of exchange from time to time. I do not think that they are entirely in conflict.
If there are other points involved the Deputy may raise them later.
I take it Deputy McGilligan wants to leave the right to determine the rate with the directors.
In default of anything else, yes. I should like the bank to be in control.
Bill recommitted for the consideration of Section 58 and amendment No. 61.
SECTION 58.
Question proposed: "That Section 58 stand part of the Bill."
I have some questions to put to find out what is the necessity for this section or why it is considered desirable. I do understand that the Banking Commission reported on this matter and did say that they thought the extension of the hire purchase system raised two issues; one technical, the terms on which the commercial banks were prepared to finance the whole transaction; and the second the social matter, whether it is right to allow people to mortgage their incomes over a certain period ahead. I should like to hear the present Minister for Finance on that matter seeing that he has mortgaged the finances of the State over a considerable period and resorted to borrowing in an open way as against ordinary commitments. I do not think we can regard as other than a delusion raised in this House that we are paying for an Army. While we may be paying for able-bodied men to serve in certain military ways instead of otherwise, we are not providing anything like the munitions or military equipment for any war which may hit us. But the pretence that this budgetary arrangement was forced upon us by a war situation I can only describe as I have phrased it. In these circumstances, I say the Minister has decided that he will mortgage ahead the resources of the State. It would be rather interesting to hear his apologia for what is in this Bill. I should like to hear whether he clasps the bible of the Banking Commission to his breast and says: “There it is; I accept it,” or whether he has any sufficient reason of his own.
However little Deputy McGilligan may think of the advice of the Banking Commission on the subject, it is a useful thing to have set down in black and white the opinion of a body such as the Banking Commission on the subject of hire purchase. Hire purchase is a business of recent growth; very recent growth here, but not so recent in other places. I regard the system as a legitimate way of extending credit, but it is one that is open to abuses. If we are to believe all we hear, abuses have been common in the countries where hire purchase has been largely in operation. In the United States and to some extent in England, people have mortgaged their weekly or annual incomes several times over by entering into hire-purchase arrangements of all kinds. Furniture, wireless sets, motor cars and even more perishable items have been bought on the hire-purchase system.
All we are asking in this Bill is to have power given to the board of the central bank to ask for information about the business of hire purchase in this country so that a body of evidence can be got together, in case the hire-purchase system in this country might develop in such a way as to be a source of danger to the economy of the State as a whole, and perhaps more particularly to a large number of our citizens. There is, I suggest, no proper comparison between the danger that might arise through overdevelopment of the hire-purchase system in certain directions or abuses being developed in the system and the State arranging to borrow for certain of its current commitments. After all, whatever borrowing we are doing this year or have done last year is a very small proportion of the State's annual Budget. In the cases I speak of, where the annual income of some citizens has been mortgaged several times over, danger might arise out of the hire-purchase system. But there is, in fact, no comparison. There is no risk or danger so far as any borrowing the State has done up to the present is concerned, even borrowing a certain proportion to carry on the State's activities over the year. There is no risk to the future of the State, or else the risk is infinitesimal, really no risk at all. There is no comparison between that and the risks that might be run, with grave danger to themselves, by the citizens, through abuse of the hire-purchase system. We are asking that the central bank board be given authority to seek information from the firms using the hire-purchase system so as to keep a watch and guard over that system, in order that it will not be a danger to the citizens or the State in the future.
This seems to be a rather extraordinary section as it is introduced here. We could all agree with what the Minister has said about the hire-purchase system. I think we could all agree about abuses of the hire-purchase system. That system was brought to a very high pitch in America and it precipitated a crisis. It is very doubtful as to how far people ought to be encouraged to go in for mortgaging their future income. That is all very well in times of prosperity, but when people get thrown out of employment and have to meet instalments on the hire-purchase system, these instalments become an absolutely crushing burden. I think there are very few instances in which you could pay for anything as you go along and more or less make out that it is not an increase of your liabilities. Perhaps, a bicycle is one of the few things on which a person presumably would save tram or bus fares to go against their instalments.
I should like to come down to Section 58. We are talking about the central bank and apparently this is to control the activities of somebody who is engaged in the hire-purchase system. Let us describe as C either a person or a firm or a company. Presumably these persons, if they were in a very big way, might have the finance themselves, but if they were not, they would get their funds from some insurance company or, perhaps, from some individual, whom we will describe as B. C carries on business and will probably have a banking account with one of the associated banks, and I will call that A.
We now come to the central bank. The central bank wants to inquire into the activities of C. Apparently they serve him with a notice or something like that. I should like to suggest that this is absolutely foreign to the business of the central bank, though it might be proper for some Government Department, the Department of Justice, perhaps. I should hesitate to suggest a commission or anything like that, because it might go on too long. Without casting any aspersions on the directors or the governors of the central bank, I should like to suggest that they are not the people necessarily qualified to make an investigation into business as carried on by some member of the community. Are they going to summon A, B or C before them and ask them for all the particulars of the business carried on? Are they going to check up on that? Why confine this investigation by the central bank to hire purchase? Why not in future, if they turned out satisfactory, turn them on to commissions?
Or examining your overdraft.
Or mortgages.
Why should they not inquire into how a publican conducts his house in the suburbs of Dublin? Perhaps they might be able to form a separate investigation department and then the central bank might be able to get you a wife, a divorce or anything else you might like to entrust to that bank, or it might become your executor or go security for you. This, to my mind, is a most extraordinary section and it introduces into banking something that is absolutely foreign to the idea of an ordinary bank, not to speak of a central bank. This is something that somebody skilled in investigation ought to probe into or, if there were undesirable activities, I suggest that the Minister for Justice would be the proper person to get into it. But why you should hand this job over to a bank—and presumably the public will have to pay the cost of this bank—is more than I can understand. Here is a whole lot of private detective work or investigation that is going to be conducted by a bank at the expense of the community. You are giving them power to summon people who may be three degrees away from the actual person whose business they are investigating. In the investigation of hire-purchase transactions they would have to get the person who provided the capital and probably the banker who kept the account of the firm.
It is a most extraordinary section, altogether foreign to the business of a central bank. It takes away from their dignity. They are to become private detective agents when they set about the investigation of certain matters, and I do not know if, from time to time, they could not have additional duties placed upon them. I might suggest that they could inquire into the conduct of licensed public houses or something else. I think it is an extraordinary section.
It may appear to be very extraordinary to the Deputy, but we are certainly not as far advanced in the development of a scheme of hire purchase as they are in some other countries.
A good deal of it is going on through.
I think there is a good deal of it going on, but I do not know exactly to what extent.
Especially among the poor sections.
A crisis was reached in the United States and, on that account, the Federal Reserve Bank was given the power that Deputy Dockrell thinks so extraordinary. That power was given to the Federal Reserve Bank of the United States because the system was so widespread, so many abuses had developed and so much money was involved that the reactions on the economics and on the finances of the country were so great that they believed something would have to be done to control the further development of the hire-purchase system. I do not suggest that we here have arrived at a situation in any way comparable. We have not. There is no danger that I know of, even remotely within sight, to the State or to the finances of this country arising out of the development of the hire-purchase system, but it is a system that is not always altogether advantageous to the individuals and certainly not always advantageous to the community as a whole—not always. It is a system the development of which, I think, it would be wise to supervise and watch over. I do not suggest that any firm engaged in that business in this country has been a party to abuses of any kind. At least, if there have been abuses, they have not been brought to my notice.
It is done very silently.
That may be. I do not know a great deal about it. I see advertisements in the papers offering goods for sale on that system and I think, from the names of the firms I have seen advertising, they are firms of high standing who would do business in a way creditable to themselves and to the community, so far as I know. But it may develop here—it would take a long time to develop to the extent to which it has developed in the United States—and all we are asking is power for somebody to keep an eye on it and watch over it and see that it will not develop to the disadvantage of the economic and financial position of the State as a whole.
We are giving the work of investigating it to people who, I expect, will be skilled in investigation of financial matters, namely, the board of the central bank. One of the things I am hoping for as a result of the setting up of the central bank is that they will investigate everything relating to finance, currency and credit in this country and that any statistics that any Deputy or anybody else in the country would wish to have relating to finance, currency and credit will be available and will be gathered together and published from time to time by the board of the central bank, and that they will keep watch for the State and for the Government over all developments of that kind. That is one of the kinds of work that I expect the board of the central bank would do and would do more efficiently than anybody else.
You would not make them an examiner of pawnbrokers at the same time? It is the same thing as the extension of credit, really.
I should be very happy to examine the suggestion.
I hope the board will thank you for examining it.
The same degree of examination would not be necessary, I think, in the case of the pawnbrokers as in this case because, in the case of pawnbrokers, the bailor must have a title to the goods stored with the pawnbroker; in this case it is quite the opposite—the goods are stored with the purchaser. The Minister has not, I think, dealt with what is the really dangerous trend in connection with the development of the hire purchase system. An American business man, at the hight of the boom in America, in 1928, told me that he was not at all easy in his mind regarding the remarkable prosperity which America was enjoying at that time. He said the reason for it was the expansion there in respect of almost every article of household use, including, perhaps, the house the man lived in, of the purchase of goods on the hire-purchase system and, as the system spreads from expert salesmanship, so the industrial expansion was also occasioned through a sort of rush. It was necessary for firms who were producing goods to sell them. They sold what they could for cash and what it was not possible to sell for cash they sold by the development of the hire-purchase system. The industrial expansion was beyond the needs of the country. That was the real danger.
That has not occurred here. What has occurred here is the expansion of the hire-purchase system by outside firms bringing in manufactured goods. In quite a number of instances they have been of particular use. For example, sewing machines can be purchased on that system and it is certainly an advantage to a seamstress to be able to purchase a sewing machine on the system if she has not the ready cash. From my experience of it and from what I have been told I say that, while there have been the abuses that have been mentioned by Deputy Hickey and others, with regard to the system generally, the really dangerous feature in it is where it would effect an expansion in our industrial output which might reach a peak where it would not be possible to get a sufficient number of consumers to buy the goods, and then, as occasionally happens in those countries where there is very big industrial expansion for a period, there would come a depression and some of those who had bought goods on the hire-purchase system would lose their employment and there would then be thrown on the market unmarketable goods, reducing the value of the goods that were there and discounting any prospect of the sale of the industrial output of the ordinary factories and industries. That is the very real danger.
The Banking Commission does not deal much with that point. It rather deals with the financial considerations and the banking considerations. It would have been much better if they had some information—and surely it ought to have been possible for them to have got it from America—on this point. It is rather a pity that, having gone this far with regard to this development, which is a minor one to my mind, they did not go further and inquire into the operations of moneylenders. We have passed a Bill here in the last few years allowing moneylenders to charge, I think it is, 39 per cent. From the information conveyed to me, there is scarcely any greater abuse in this country than moneylending of that sort and it would be a great matter if it were stopped. Some of those who borrow in that way can never get out of debt.
That is so.
And they are plunged from one extreme to another.
That is so.
The heart-rending stories one hears about it are very disturbing and if the Minister, on resubmitting this matter on Report, would include a section authorising the central bank to inquire into that sphere of activity in this country it would be a very good business. I have always suggested to people who were anxious to borrow and to pay these sums by way of interest that they should not do it, that they could not afford to pay the interest, that it was beyond the capacity of anybody to pay 39 per cent. unless there is a speculation, and we ought to discount speculations of that sort in this country. It is not part of our being but, unfortunately, when people such as we, who are conservative, get into that, we do not know when to stop. It is a very dangerous tendency.
So far as the hire-purchase system is concerned, I would suggest that, in the course of their investigations, the board should concern themselves with cases in which individual purchasers negotiate for the purchase of a large number of articles for their households under this system. One might regard instances of this kind as similar to a case in which a person consumes a quantity of whiskey. After the first libation, he feels improved, but if he proceeds to consume 10 or 12 glasses, he will not be able to stand them. Similarly, if all the articles needed in the household are purchased on the hire-purchase system there is real danger. I think that, while this clause as it stands gives power to inquire into the activities of individual firms, it would be well if it were possible, without giving it the character of an inquisition, to ascertain how far particular houses are stocked with goods acquired on the hire-purchase system.
Having some knowledge of the manner in which people have been stung by individuals who lend them money, as well as by traders who give out furniture on hire purchase, I welcome this section in the Bill. I know of most distressing cases in which men who had the responsibility of maintaining large families had recourse to moneylenders. I have known of a case where a man borrowed £5 and before he could get anything at all he had to pay £1 in interest, leaving him only a net sum of £4. That has happened in several instances. I have seen cases where unfortunate men, to meet necessities arising from sickness or death in their families, went to moneylenders for a loan of £3, but all they got was £2 8s. I remember on one occasion in order to test this thing out, giving the money to a man who had borrowed a certain amount from a moneylender on which he would have to pay 24/- and telling him to return the amount which he had borrowed to the moneylender immediately. He took it back to the man from whom he got the money, but that man refused to accept it on the ground that he would lose the interest on the money borrowed. The result was that the unfortunate borrower had to go on paying interest over several months.
These are things I should like to see investigated in order, if possible, to prevent these abuses. It is not always the working man who is the victim of such abuses. I know citizens in a fairly good way in life who, in order to provide a home for themselves and to get married, go to a bank to obtain assistance to buy houses. They then have to go elsewhere to obtain accommodation to acquire furniture and eventually they generally purchase it on the hire-purchase system. I agree with Deputy Cosgrave that sometimes one hears the most heart-rending stories from people who have been exploited by certain parties who lend out money or give out furniture on the hire-purchase system. I think it is not beyond the dignity of the board of the central bank to investigate abuses of that kind and to stop them.
They have nothing to do with stopping them.
If it is well known, and if facilities are given to the board to investigate these abuses, that will have the effect of lessening the abuses.
This is an investigation.
In corporation housing areas where 600 or 800 houses have been erected, I can see a number of gentlemen every Monday morning persecuting people who have acquired furniture on the hire-purchase system or who have borrowed money from moneylenders. I think it is not necessary for me to labour the point that many abuses have arisen out of these systems. I do not believe it is beyond the dignity of the banks to take steps to ensure that these abuses will be stopped; I therefore welcome this section.
May I spend the last few minutes before the adjournment in calling the Minister's attention to a pernicious aspect of the hire-purchase system that is evident in this city? Certain firms or traders give out furniture under a hire-purchase agreement. They get the purchaser to sign an agreement in which the purchaser acknowledges that, until the debt is cleared off, the goods so purchased are in fact the property of the seller.
That is a normal condition.
Quite. That may be a bona fide arrangement within the law but let us take a typical case. Mrs. Murphy wants to buy some type of kitchen furniture. She goes to one of these firms—I do not say these are good class firms—and buys £10 worth of domestic furniture. After she has £8 paid by instalments a salesman from this firm calls on her and says: “Mrs. Murphy, we have never had such a customer as you before. You have been exceedingly prompt in your payments; we are impressed with your solvency and your sense of financial rectitude, and we should like to facilitate you in any further way we can. Is there anything else that you would require in the way of furniture?” Feeling at this stage rather exalted by this high appreciation of her financial integrity, Mrs. Murphy says she would like something else, and she proceeds to give an order for another £10 worth of furniture. Remember she has already paid 80 per cent. off of the original £10, plus interest. She gets the second lot of furniture in due course and another agreement is presented to her to sign.
When the second agreement is presented, Mrs. Murphy finds that her liability under the first transaction is associated with her liability under the second transaction. She discovers that although she has paid £8 off the first debt, the whole transaction is amalgamated in such a way that although she has paid £8 on the first transaction, the firm has a lien on £20 worth of goods, as security on the balance of £2 outstanding on the first transaction and £10 on the second transaction. Of course a firm trading on a basis of that kind is getting from Mrs. Murphy not merely a guarantee of the ownership of the entire goods but in addition a deposit from Mrs. Murphy of £8. That is financial and commercial sharp practice, and while it is not the function of the central bank to remedy social abuses of that kind, I can assure the Minister that pernicious practices of that kind persist in this city and that poor people principally are the victims of them. What frequently happens is that Mrs. Murphy's husband loses his employment. There is perhaps default in the payment of some instalments whereupon the firm will seize the whole £20 worth of goods in satisfaction of a debt of £10 on the second transaction and a balance of £2 on the first. Instances of abuses of that kind are well known. It may not be the Minister's job or the job of the central bank to remedy these abuses. It is probably the function of the Department of Justice, but it is a type of activity which should be stopped by the Government. Without waiting for the central bank to investigate it, the Government should institute an inquiry into this matter themselves with a view to remedying that type of abuse.
I move to report progress.
Progress reported; Committee to sit again.
The Dáil adjourned at 9.30 p.m. until Friday, 10th July, at 10.30 a.m.