Hire-Purchase Bill, 1946—Second Stage

Minister for Industry and Commerce (Mr. Lemass)

I move that the Bill be now read a Second Time. This Bill is of a somewhat technical nature and I arranged, on that account, to have an explanatory memorandum circulated with it. The purpose of the Bill is to amend the laws in respect of hire-purchase and sales upon credit and I feel sure that a Bill having that purpose will be approved in principle by the Dáil and any discussion which may take place upon it will be confined to the details of its provisions, which would ordinarily be considered on the Committee Stage.

The purpose of the Bill is to protect the interests of persons who acquire goods under hire-purchase or credit sales agreements and who, owing to their circumstances, may be, as the law stands, subjected to undue difficulty or hardship and may be unable to protect their own interests. It is not proposed to interfere, and I think the House will agree it is not desirable that it should interfere, with the legitimate activities of owners and finance companies in the sphere of hire-purchase, as their activities, in general, serve a useful purpose by enabling persons of modest means to obtain the earlier use of furniture, bicycles and similar commodities, than would otherwise be possible for them. Moreover, in so far as hire-purchase and credit sale arrangements facilitate the acquisition of motor lorries, machinery and other industrial equipment, they encourage commercial and industrial expansion, particularly by small-scale concerns.

Transactions of that kind, hire-purchase and credit sale transactions, had been increasing steadily in volume in this country, as in other countries, in the years prior to the outbreak of the war. In 1938 the value of goods which were acquired under such agreements was approximately £1,500,000 and there is every likelihood that, with the resumption of normal trading facilities, that figure will be exceeded in the future. It is accordingly clear that the hire-purchase system has become an important factor in the social and economic life of the community and that, as such, it is desirable in the community's interests that it should be kept free from abuse, in so far as it can be kept free from abuse, by means of legislation.

Some years ago the position in regard to trading of that character was investigated by an inter-departmental committee, and the report of that committee showed that only a small number of complaints had been received from aggrieved persons and that, generally, there was no evidence that there have developed so far, in this country, any widespread abuses in the hire-purchase system. Nevertheless, the existing law in regard to hire-purchase is unsatisfactory in many respects and there have been some instances in which traders had availed themselves of the unsatisfactory nature of the law to take unfair advantage of persons buying goods by these methods. The Bill, which is designed to prevent wrongs in the future rather than cure wrongs which have already occurred, is being introduced to make sure that serious abuses do not develop in the future. I should add that the expansion of the hire-purchase system has created similar problems in other countries, and in passing this Bill we will be keeping abreast of the practice elsewhere.

The object of the Bill is, as I have said, the protection of persons who, owing to their circumstances, are not in a position to protect themselves. It is not intended to interfere with the hire-purchase business to any greater extent than is necessary to achieve that purpose. The scope of the Bill is, accordingly, limited to cases where the hire-purchase or credit sale price does not exceed £100. It is assumed that persons in a position to acquire goods of a value in excess of £100 should be able to look after their own interests.

One of the unsatisfactory features of hire-purchase agreements, at the moment, is that the person who acquires goods by that means frequently has no idea of the cost to him of the hire-purchase facilities, and he is only aware of the fact that, by paying instalments over a certain period, he will acquire the ownership of the goods. A person may, in that manner, be induced to pay more for hire-purchase facilities than he would agree to if he had a full knowledge of the facts. The Bill seeks to remedy that position by providing that the hirer of goods will be furnished, prior to the making of an agreement by him, with information as to the cost price of the goods as distinct from the hire-purchase price. The same arrangement will apply in respect to credit sales exceeding £5 in value.

Hire-purchase agreements are at present covered by the law of contract, and a person hiring goods, who wishes to return them to the owner, may find that under a minimum payment clause in the agreement, he has contracted to pay the greater part of the total hire-purchase price, whether he continues to hire all the goods or not. The Bill seeks to remedy that position, by enabling the hirer of the goods, if he has taken reasonable care of them, to terminate a hire-purchase agreement before a final payment is made, and to return the goods, by giving written notice and paying half of the total purchase price, or paying the amount due at the time of the termination of the agreement, whichever sum is the greater. Payment of at least half the total hire-purchase price affords reasonable compensation to the owner of the goods, who is also entitled to receive any installation cost that may have been incurred. In order to ensure that no person, through ignorance of the law, will be prevailed upon to forgo the right to return the goods, it is provided in the Bill that any agreement containing a contracting-out clause will be void.

A common feature of hire-purchase agreements is a clause giving the owner of the goods the right to enter the premises of the hirer of the goods, and to seize the goods without further ado in the event of the hirer defaulting in payment. The effect of such a clause is, that a person who has paid a considerable proportion of the cost of the goods may, owing to inability to pay an instalment, lose possession of all the goods without obtaining any credit for what he has paid. It is unavoidable from time to time that persons obtaining goods by the hire-purchase system should, owing to temporary financial troubles, have to return goods, but that is a different matter from permitting a trader to seize all the goods without compensation, merely because an instalment was not paid.

The Bill provides that any clause in an agreement providing for the entry of the owner on to a hirer's premises to seize goods is void, and further, that where one-third of the hire-purchase price is paid, the owner can regain possession of the goods, even if there has been default in the payment of instalments, only through the court. Where an application for the recovery of the goods comes before the court the court will have power, if it thinks fit, to postpone the return of the goods, in order to enable the due amount to be paid, or to transfer ownership of part of the goods to the hirer, and to return the remainder to the owner. It is also provided that where there is more than one agreement, appropriation of the instalments by an owner, in such a way as to deprive the hirer of his rights under each separate agreement, is prevented.

Another source of abuse in regard to hire-purchase agreements is that the anxiety of persons in poorer circumstances to avail themselves of hire-purchase facilities provides an opportunity for owners to dispose of inferior quality goods to such persons who, when they find the goods are unsatisfactory, may also discover that the hire-purchase agreements into which they entered, precludes them from suing the owner of the goods for breach of warranty. There are sections in the Bill which provide that the same conditions as to warranty, quality, and the like, will apply to hire-purchase transactions as to ordinary commercial transactions. These are the main provisions of the Bill and, with regard to them, I feel sure there will be little difference of opinion amongst Deputies.

Some Deputies may think that the legislation should go further, but I ask them to keep in mind that, while it is desirable to eliminate the possibility of abuse arising out of hire-purchase agreements, it is also, from the social and economic point of view, desirable to facilitate and to ensure the continuance of commercial transactions of that nature. I should also point out that the Bill aims at reducing law costs, by providing that proceedings for recovery of goods may be instituted in any district court, provided the hire-purchase price does not exceed £25. At present such proceedings cannot be taken in the district court, except in the Dublin area. I have dealt with the main provisions of the Bill, the need for which I assume will be generally accepted, and I recommend it to the Dáil.

Mr. McGilligan

Will the Minister say in what respect this Bill differs from similar legislation elsewhere?

Mr. Lemass

In very few respects.

Mr. McGilligan

There is no substantial difference?

Mr. Lemass

Minor differences.

Mr. Coogan

This Bill is a replica the English Act of 1938. The only difference is that in the English Act there are three limits, £50 in the case of hire-purchase of motor cars, £500 for the purchase of live stock, and £100 in the case of other transactions. I think all Parties agree on the principle of the Bill, that it is unobjectionable, and that it is long overdue.

In 1937, a commission on hire-purchase was set up by the Government, and amongst its recommendations was that hire-purchase in this country largely partook of the nature of money lending, that it was not so muchbona fide hire-purchase business as a cloak for the activities of money lenders. In that respect it is essential that the House should be careful to ensure that whatever is done now will leave no loophole to money lenders to hide their activities behind the framework of a Bill of this kind. The Commission also recommended that property bought by way of hire-purchase should become, as from the date of the payment of the first instalment, the property of the purchaser.

As Deputies will appreciate, the real difficulty about hire-purchase up to now has been that property never came into the ownership of the purchaser until every penny of the purchase price had been paid. Cases of considerable hardship arose under that heading. There is, for example, in England, a recorded case of a gentleman who entered into a hire-purchase agreement for the purchase of a piano. He paid £57 by way of instalments. He became unemployed around the period when the last instalment was due and found himself in the position that, under the existing law, he had to return the piano and was held to be liable for the balance of £3. It was to get rid of abuses of that kind that the Bill of 1938 was passed in England.

There were other cases of people in poor circumstances who bought furniture on this system. If they had paid £19 10s. 0d. in respect of a purchase price of £20 and then defaulted through no fault of their own—by reason perhaps of unemployment—in the payment of the last 10/-, the owner could enter the house almost by force and seize the furniture. The purchaser again is in the position of having to forfeit the furniture and of being still liable for the balance of 10/-. The courts in England, in order to get over that hardship in the law, generally decreed that the balance be paid by instalments of 1d. per month or a ¼d. per week. I do not know if any cases of that kind cropped up here or came to the notice of the commission.

The commission, in addition, recommended that the cash price, in addition to the hire-purchase price, of the article being purchased should be plainly marked, and the Bill carries out the recommendation of the commission in that respect, but in addition to having the cash price and the hire-purchase price marked, I submit that the interest should be clearly set out, so that the purchaser will appreciate not only that he has £x to pay, if he pays cash, and £y, if he buys on the hire-purchase system, but that he is paying by way of interest, so much per cent. in order that the doubtful nature of the bargain he may be making may be brought as forcibly as possible to his notice.

The third recommendation put forward by the commission was that the Government should set up some supervision by way of inspection of hire-purchase shops, of traders engaged in this system of hire-purchase. That was, of course, essential, having regard particularly to the peculiar nature of the transaction. Invariably, these gentlemen engaged in this system of business at that time sold articles of doubtful quality, and, by a species of very persuasive business methods, they were able to foist these articles sometimes on unwilling housewives in the absence of their husbands. The husband, as a result, found himself in the position that he had a dud article in the house for which his wife had signed an agreement in his absence and that he had no option but to pay for the dud article. That was not the only unsatisfactory feature of the transaction, because, if the husband defaulted in the payment of an instalment, the article was promptly seized and sold to the next housewife, and then seized again after a short period, and so it went on. Very often, one article went through eight or ten of these transactions.

It is to curb abuses of that kind that this Bill is introduced, and my concern is to ensure that by whatever measures we are taking now we will curb once and for all the activities of these gentlemen. The Bill goes a certain distance towards restricting their activities in insisting that the agreement shall be in writing and, not only in writing, but signed by the hirer himself. These agreements are very detailed and certain parts of them are set out in block letters which the prospective hirer can very easily read. These are generally the parts that are set out to induce the hirer to buy. The really vital parts which are going to catch him are printed in such small lettering that very often one would require a microscope to read them, and for that reason many people sign these agreements without really knowing what they are signing, and very often even a skilled lawyer would find it very difficult to know what exactly was the nature of the agreement.

These agreements were very skilfully drawn up by large multiple concerns, generally trading on a nation, or perhaps a continent wide basis, and they had the benefit of the most expert lawyers and were so devised that there was no escape at any time for the hirer. We want to ensure that in approaching this problem we leave no backdoor open by means of which these gentlemen can drive a coach and four through this measure and resort to some system of renting, as apart from hiring or selling articles on the basis of a credit sale.

On that point, I should like to see some limit of time—say, two to three years—prescribed for transactions of this nature. There is a recorded case in England of a lady who bought a perambulator on the instalment system. When she came to pay her last instalment to the hire-purchase firm, the gentleman in charge of the shop said: "How is the baby?" and the smiling mother answered: "She is being married to-morrow." That type of thing should not be allowed to continue, because it is prolonging the risk for the hirer, and a working man who may be subject to some system of casual employment may find himself in a position in which he has to face long gaps of unemployment during which he may default in an instalment through no fault of his own. There should be some limit of time to these transactions.

With regard to the limit set out in the Bill, the limit prescribed in the 1938 Act was £50 for the hire-purchase of motor cars. To my mind, that seemed ridiculous because it did not in any sense enable the artisan or the small earner—the wage earner or small-salary earner—to purchase a car on the hire-purchase system. I think it only right that these people who feel that they can find the money should have the same rights as any other class. The limit of £50 was admittedly not intended to reach these people, while it did of course provide amply for the case of the poor person who bought a limited quantity of furniture on this system. I suggest that, having regard to the different purchasing power of £100 to-day as compared with £100 in 1938, we should consider a higher limit.

I took the trouble to go through the Second Reading debate on the Bill in the British House of Commons, and I find that the person responsible for the Bill, Miss Ellen Wilkinson, recommended a limit of £100 then, because the County Court jurisdiction limit in cases of that kind was £100. That was the reason she gave for the limit of £100—the reason of course being that she wanted to keep cases of this kind within the ambit of the County Court for the purposes of costs. Now our limit in the Circuit Court is £300; and I would respectfully recommend that should be the limit in this Bill. It would enable the Bill to cover the type of case I have mentioned, namely, the hire-purchase system for the purchase of motor cars by the lower salaried and wage earning classes. £100 to-day will buy very little more than perhaps a wireless set and a few chairs. I think that where young people are setting up home and when it is now no longer questionable that these people should have the right to furnish their homes out of income as distinct from capital we should raise this limit and encourage them to buy under this system. Most people to-day in the middle classes are buying their furniture, household requisites, and amenities of all kinds by way of this eystem. So far as the system has gone on the other side a County Court judge has declared that the only thing that is not now saleable by way of hire purchase is a coffin. Every article of every class in Great Britain is available under this system. I think therefore that there is a good case for extending the limit of £100. I would go even further and say that once we accept the principle of hire purchase there is no reason why there should be any limit so long as the proper safeguards are provided by the law. One member in the debate on the English Bill went so far as to suggest that this principle of hire purchase should be extended to enable prospective tenants to purchase their own homes by way of hire purchase, subject of course to a mortgage. I notice Deputy O'Connor smiling when I make that suggestion. But I do make it in all seriousness. It is sound in principle—and perhaps sounder—and a better security for the lender if you extend the principle to house purchase as distinct from a depreciating asset such as a motor car. I am not saying that that view met with any support on the other side but it was certainly expressed. I advance it here not because I advocate the extension of that principle to the purchase of houses but merely in support of the argument for the raising of the limit from £100 to the jurisdiction limit of the Circuit Court.

The other ground upon which I advocate that extension is because money to-day has deteriorated so much in purchasing power as compared with 1938. £100 in 1938 would be represented to-day by something over £200 in purchasing power. I am not quite clear as to whether the Bill extends to all classes of hire-purchase. The Act applies to every hire-purchase or credit sale agreement, the purchase price or total purchase price not exceeding £100. I want to ask the Minister if that includes hire-purchase agreements with such bodies as the Electricity Supply Board and the Gas Company? Would they be included within its scope? They have a system whereby they hire out certain apparatus during the hiring period, which is generally indefinite and they undertake responsibility not only to repair the article hired out but also to replace it. Poor people who avail of this arrangement in regard to household articles, such as electric kettles, electric cookers, electric irons and so on pay year after year for these articles but never own them. I am not quite clear as to whether or not we should construe this to include such bodies within the scope of this Bill, if for no other reason than the one I have already advanced, namely, the unscrupulous element in the hire-purchase trade.

I am sure that element exists here as elsewhere and that it may seek the loophole to get around this Act and induce people to rent these articles. If a system of that kind were allowed to grow up under a hire-purchase trade —I do not think for a moment that the Electricity Supply Board or the Gas Company would resort to unscrupulous methods—I feel then that we would have to come back again to this House for legislation to restrict activities of that kind. I do not want to go through the whole Bill as outlined by the Minister. The provisions which amounted to forcible entry by agents of the hire-purchase system is now checked. That is a very desirable decision and I do not need to comment upon it further. They are, as I have already indicated, those set out in the 1938 Act and they are well known to anybody who has any experience of these matters.

I do not know if it would be desirable to consider adding to the powers of the court the right to vary agreements if the court was satisfied that such agreements were likely to create undue hardship upon the hirer or that they were unconscionable in their extent. Having regard to the fact that the commission which investigated this matter in 1937 came to the conclusion that the hire purchase system as then prevailing was a cloak for the activities of money lenders, I again want to emphasise to the House the need for closing every possible door to this type of unscrupulous activity carried on under the guise of hire purchase. We may have to put down amendments on the Committee Stage to tighten up certain aspects of the Bill as regards the jurisdiction which is being conferred upon the District Court. I am not quite clear as to whether the provision as set out will work in favour of the hirer—"The District Court shall have jurisdiction in any action by the owner of goods let under a hire-purchase agreement to enforce a right to recover possession of the goods from the hirer where the hire purchase price does not exceed £25." What I have in mind is the possibility that if this is allowed to stand as at present expressed it may mean that it would be possible for the hire purchase firm to take action in the Dublin District Court and compel a hirer perhaps to come from the country to defend his action. The English Act prescribes that jurisdiction shall be in the court where the hirer resides or carries on his business or where he resided or carried on his business at the time of the payment of the last instalment and it may be necessary to set out more clearly the jurisdiction of the District Court so as to prevent a hardship of that kind arising, because, quite obviously, if a country hirer had to come to Dublin to defend his suit, in nine cases out of ten there would be no appearance. We, on this side of the House, endorse the Bill and we may have something more to say on Committee Stage.

Mr. Blowick

This Bill will meet with the approval of practically every Deputy. There is, however, the point referred to by Deputy Coogan with regard to the limitation of £100. I cannot see any reason why there should be that limit. I have in mind people who purchase farm machinery and lorries who make very good livelihood out of it. I should like to see them protected. I have seldom come across a case where there was seizure of goods because of failure to pay instalments, but occasionally one hears of a person who may go into a business and be caught up in this kind of thing. He may have half or more than half the purchase price paid when there may be failure to pay. I should like to see such persons protected, at least by resort to court action such as is set out in other parts of the Bill. There is a limit of £100, if I have read the Bill properly. I should like that to be extended to £400 or £500. I do not see any reason why it should not be. Young people, particularly in rural districts, may wish to invest in the purchase of tractors or lorries. I do not see that there would be anything wrong in protecting them by this Bill. Now is the time to do that. I do not understand why there should be a limit of £100. That may protect those who buy a motor bicycle or a second-hand car. Otherwise, I like the Bill. I like its general trend.

Many people consider that hire-purchase, in any shape or form, is bad. They would prefer to be without a thing if they could not buy it outright. Cases occurred in the past where people bought motor cars on the hire-purchase system and, having contributed practically the full purchase price, they failed, through ill-health or accident or some unforeseen cause, to meet the full liability and the goods were seized and their money was lost: there was no refund. Apart from the limitation of £100, I think the Bill is an excellent one and I am sure the Minister will see his way to increase that limit to £400. £100 may be a useful figure for people in the city or town but it would be very necessary to cover the case of people in rural districts who may start a business in which they would find very lucrative employment but which they could not start if the hire-purchase system was not available. These people should be protected.

Mr. O'Connor

I come across many cases in business where hardships are caused by the operation of hire purchase agreements. I think most of the cases I have come across would be dealt with by this Bill and that the hardships and grievances that arose will be to a great extent cured by this Bill. I was rather disappointed, however, to note that the Bill is limited to cases where the total price is under £100. Other Deputies have referred to that point and suggested that the limit should be increased. I would go further and suggest that there should be no limit at all. I say this Bill is a good Bill. It protects the interests of people who take goods on hire-purchase and at the same time it is reasonably fair to the people who sell the goods on these terms. While it is a good Bill, I cannot see any reason why anybody should be excluded from it. At least some of the provisions should apply to all hire-purchase agreements. Take for instance the provision which forbids the agent of the seller to enter the premises where the goods are, for the purpose of seizing them. Surely that provision should apply to every hire-purchase agreement without any limit whatever. I intend to say more on that on Committee Stage but I would suggest to the Minister that, as the Bill is a good Bill, everybody should get the benefit of it no matter what price they are prepared to pay for the goods. I would like to see in the Bill some provision to limit the extra amount that could be charged over the cash price in the hire-purchase price. Deputy Coogan referred to hire-purchase as being something akin to money-lending. With that I agree. Under the Moneylenders Act there is a limit on the rate of interest which may be charged on a loan but we have here no limit on the extra amount that may be charged over the cash price because the purchaser is paying the price in instalments. I am sure that matter was considered by the Minister and his officials and there must be some reason for the omission of that limit. I would ask the Minister to agree with that as I consider there should be some restriction. No matter what competition there may be there will still be people who will charge excessive rates of interest, as moneylenders do, and I think some limit should be placed upon them in this way.

I would have thought that it might have been possible to apply the same principles of mortgage to goods as already apply to land. The principle is, once a mortgage always a mortgage, so that the mortgagee never gets the right to take possession of the land; he merely gets a right to have it sold and if he gets more for it on the sale than is due to him under the mortgage he must hand it back to the mortgagor. There is no such provision in this Bill in regard to the hiring of goods, which is really the same thing as the mortgage of goods. I do not know if it would be possible to work out any provision like that, that when the goods would be seized there would be an obligation put on the owner to sell the goods and if he realised anything more than was due under the hire-purchase to give the excess to the party who had hired the goods. Subject to a few suggestions I will make on Committee Stage, I want to congratulate the Minister on bringing in the Bill. I think he has made a fine effort to do justice to all sides, and that is not an easy thing to do.

Mr. M. O'Sullivan

Since this Bill affords protection where none already exists, it is obviously to be welcomed, but in my opinion it does not go far enough to check the abuses which are said to be associated with this particular system. The Minister indicated the main effects of the Bill, and I think they are worth underlining. They are that the cost price and the hire-purchase figures will have to be in future clearly indicated; that the owner may not enter the premises and seize at will, that he may not easily recover possession even in default of payment when one-third of the cost has been paid; that the hirer can cancel his contract when half the purchase price has been paid; there is protection of the courts in certain circumstances, and the Bill aims at lower costs of litigation in the District Courts, which has been referred to, and there is a form of protection in so far as the quality of the goods is concerned. Like the other speakers, the first defect I find in the Bill is the limitation of the price which will be necessary to protect the purchaser, namely, the figure of £100. I think that figure is an arbitrary figure, and is possibly merely taken from the British Bill of 1938. We had better get the background of that Bill, which was sponsored by Miss Ellen Wilkinson in a rather unfriendly Parliament so far as she was concerned, because she was lucky in the draw in the ballot for Private Bills.

In the course of the Committee Stage Miss Wilkinson had to forgo a lot of the things that she introduced into the Bill in order to ensure that the main principle of her Bill would be preserved. I believe that this was one. Apart altogether from her troubles in connection with that Bill, the fact remains that, since this Bill is obviously framed on the same lines, £100 to-day bears no relation so far as the cost of household goods is concerned to £100 in 1938. I agree that something can be said for removing the ceiling altogether. But at least a very good case can be made for raising the ceiling of £100 so far as any couple buying a suite of furniture at present are concerned. Most of that money would now go on a suite of furniture to equip one bedroom. Apart from the question of the jurisdiction of the Circuit Court extending to £300, there are merits in the case for raising the figure to £300, or removing the figure of £100 altogether. That is a matter we can discuss in Committee.

The other defect I see in the Bill— here again we have the background of the 1938 British Bill—is where an individual wants to cancel his contract, having paid a certain number of premiums. I believe that one of the things on which Miss Wilkinson was exceedingly keen was to enable the purchaser to cancel his contract after one-third of the payments had been made. Vested interests were, however, arrayed against here in the Committee Stage and she finally had to give way. It was put up to her that an individual might purchase a bicycle in June on the hire purchase system, run that bicycle to death, and then give it back in September; in other words, that the advantage would be in favour of the hirer as against the owner. On that she gave way, as her main desire was to preserve the principle of the Bill. She had eventually to agree to one-half of the payments. I think that in connection with certain articles which would not suffer great depreciation we should permit a hirer to void his contract after one-third of the payments had been made. That is also a matter which we can discuss in Committee, perhaps with good results.

I must confess I do not share Deputy Coogan's optimism with regard to what I call the kernel of this whole matter, that is, on the question of the display of the cost-price figure and the hire-purchase figure. It sounds very nice, but in actual practice something else occurs. If my information is correct, a number of these firms operating this system work on a basis of 100 per cent. profit and, therefore, the addition of 2½ or 5 per cent. for interest under the extended payment system, which may seem reasonable, is in fact entirely deceptive, because these firms are exclusively engaged in the hire-purchase business and their cash sales are negligible. Therefore they base their whole business on this hire-purchase system, building it up on a 100 per cent. profit basis. The clause in this Bill which is intended to be valuable and to indicate to the unwary purchaser what the cost price is and what the hire-purchase price is and, by a simple sum in arithmetic, what eventually it will cost the individual, is not going to work out as expected.

The root cause of a good deal of the trouble in connection with this matter is that some of these people are charged exorbitant prices, very often for inferior goods. I understand there are cases where suites of furniture are palmed off as walnut or mahogany which in reality are made of ordinary plain wood with a veneer of the more valuable kinds of wood. Therefore the individual, in my opinion, is doubly "rooked," because he is paying an exorbitant price on the one hand and getting an inferior article on the other hand. One solution for that is a form of licensing of firms for the carrying out of this particular type of business under which they would be subject to State-imposed conditions, and if these conditions were violated at any time they would be put out of business. This business is now getting to a serious stage and the main point is to ensure that the public will be protected. The other course would be to ensure that the purchaser would have the right to apply to the Prices Section of the Minister's Department to ascertain what is a fair profit so far as these people are concerned. If the figure of 100 per cent. profit is correct, the House will agree that is exorbitant. It is obviously going to impose a burden on the purchasers which they cannot continue to bear.

I understand also that some of these firms indulge in very objectionable practices which amount almost to intimidation so far as certain hirers are concerned. If the hirer fails to make a series of payments, I understand it is not an uncommon practice to have a telegram sent to that individual stating that a van will call next day to collect the goods. One can readily appreciate what the effect would be on people residing in certain localities if such a van arrived. Their credit would be immediately ruined. I am informed that such a practice is in operation.

The Bill provides for a certain warranty so far as goods are concerned. I think there is a slight flaw in that respect, because the Bill does not say who is to decide as between the owner and the hirer if there is a dispute regarding the quality of the goods. There is an extensive business being carried on by advertisement and some of these firms do a very big business in the country. The Bill provides that it will be quite sufficient if the goods are selected from a catalogue. The safest thing to do would be to have an inspection—as the Bill requires in one section —of the goods to ensure they are of the right quality but when taking it from an advertisement or a catalogue there is no safeguard as to what ultimately will be the type of goods the individual will receive.

I am of opinion that this is a good Bill in certain respects. It affords protection where it is very badly needed, but it could go much further and remove abuses associated with this particular business. It is obvious that this business is growing at the present time. As to whether it is good or bad for the community as a whole, I am not in a position to say. I can imagine it would serve its purpose all right if you had on the one hand a reputable trader who would be satisfied with a reasonable margin of profit and on the other hand an individual in a position to assess his own commitments and obligations and, over and above all, his capacity to pay. Unfortunately, the reverse obtains in a good many cases. This Bill will aim to protect the gullible public or, as the Minister says, the individuals who have to be protected from themselves.

The centrepiece of my observations would rest around the question of the control of the existing prices of such firms, particularly those engaged in the manufacture of furniture. If my figures are correct, I think the House will agree that those prices are exorbitant.

Mr. Anthony

My first comment, on reading the Bill and the notes that accompanied it, was: "Better late than never." I must congratulate the Minister on the introduction of this measure, which I must consider too long delayed. Even in its present form, the Bill is a tremendous advance on much of the social legislation over a period of years. Comment has been made frequently in the Press, from the pulpit and from various platforms regarding this traffic known as the hire-purchase system and the cruelties and hardships inflicted on very poor people—and even on people in moderate circumstances—on account of the methods by which the toll is collected from the hirers. In some cases, it has been so abominable that I have wondered why some Government at some time had not taken the matter in hand.

I do not believe in retrospective legislation and have registered my protest in this House and outside it against retrospective legislation, but I am just wondering if a case that has come under my notice in the past few weeks—since the objects of this measure reached the public through the Press—has caused something in the nature of a stampede amongst several of those people in the trade. I received a letter within the last couple of weeks which tells of the wife of a soldier, serving in our national Army during the emergency, who bought a sewing-machine on the hire-purchase system on the 7th November, 1944. She paid £1 down, according to the agreement, and £1 a month and had paid £9 in all on the machine, which was hired out to her for the sum of £17. Thus, she had paid £1 more than one-half of the original price, for a second-hand sewing-machine. Her husband became ill—and, as the Minister is aware, an Army man going sick has to suffer certain reductions in his pay—and during that period she fell into arrears with these instalments. A member of the hiring firm visited her house, accompanied by a man with a hand truck. He said he called for the usual instalments and she handed him 10/- on account. The other man went into one of the apartments and dismantled the machine. He took the head off and carted it away. The woman was told to call down to the office and she would be interviewed by the manager. When she did so, the manager handed back the 10/- and told her he no longer had anything to say to her, as they had withdrawn the machine from hire. She is thus at the loss of this £9.

I know that such cases would be safeguarded under this Bill. I said I did not believe in retrospective legislation, but if there could be a case made for it, this is one of the hundreds of cases. No doubt, many such instances will be related during the debate on the Committee Stage of this measure and they may influence the Minister to yield in some respects to the case put up by Deputy O'Sullivan.

I, too, may have some amendments to suggest, and from what I know and from what I feel is manifested particularly in this measure, I believe the Minister will give due consideration to any suggestions made by way of amendment. If he is not able to accept the amendments as printed, probably he will go some way to meet the opinions of those Deputies who are in a position, through their daily contact with the people, to give him examples of the hardships that occur. I know that the Minister, through his officials and through members of his Party, has also such information. I feel certain that many Deputies like Deputy O'Sullivan and myself will have something to say on the Committee Stage, when perhaps the Minister will hear of other cases worse in their details than the one I have just related. I am very pleased indeed that the Minister has introduced this legislation. As I say, it is better late than never.

Mr. Cogan

When a Bill of this kind for which there is general approval is introduced here, there are almost invariably demands that it should go much further than it does. Personally, I would be inclined to be rather cautions about urging the Minister to extend the Bill much beyond its present provisions. It would be better to see how it operates and, if we find it does not cover all the cases of hardship, it might be amended in a year or two. This Bill is a complete innovation so far as this country is concerned and it will require some study, to see how it will operate and particularly to see whether there is any method by which its provisions can be evaded. That is the most important consideration, as I am sure no Deputy would like to see a coach and four driven through any of the Bill's provisions.

I am anxious to know if the Bill applies to firms which finance credit purchase of machinery and implements, such as motors, lorries, tractors and so on. There are financial firms which do not actually sell the goods but which provide the necessary finance for hire-purchase arrangements. As far as I know, there have not been very many or very serious complaints in regard to the operations of such firms.

In many cases, as Deputy Blowick pointed out, their operations have been beneficial to certain people. I, personally, have known men who purchased tractors, threshing sets, lorries and other farm and agricultural machinery through such firms, and who have made good as a result of these transactions, completely clearing off the entire debt out of profits made with the machinery. I think that such firms can discharge a useful and beneficial function.

In advocating the raising of the limit to £100 it would be well to consider whether the raising of the limit might not have the effect of preventing such firms from carrying on a business which is beneficial. It has been said by various Deputies that this is a good Bill and that, therefore, it should not, even if the limit is raised or if there is no limit at all, affect anybody who wishes to carry on business in a proper way, but we all know that regulations are irksome and if a private firm is carrying on a type of business which is beneficial to the public and which is not an injury or a hardship to anyone, it is undesirable to limit its operations by regulations. As a matter of fact, State regulations should be applied only when they are necessary. On the other hand, while I see that it might be desirable to have some limit such as is provided in the Bill, it might be, perhaps, raised somewhat and I think that in the initial stages of the Bill's operations, there should be some limit. There is a tendency at the present time, if I may say so, to molly-coddle the citizen in every possible way and to take the view that the ordinary citizen is incapable of managing his own business. I think that is a tendency that should not be encouraged. I think the State and the Government in the past few years have been too much inclined to take the view that citizens are incapable of doing their own business. There are, of course, evils which must be guarded against, and I think this Bill makes a reasonable attempt to guard against them. For that reason I recommend it to the House. There may be some minor amendments required but certainly the Bill should be carefully studied in the Committee Stage to see if there are any loopholes by which its provisions can be evaded.

Mr. Lemass

Deputy Coogan said that this Bill bears a close similarity to the British Hire Purchase Act of 1938. That is correct. The Bill differs from the British Act only in certain details of scope and phraseology. The recommendation made by the interDepartmental Committee, which examined this question, was that legislation similar to the British legislation should be enacted here. In the framing of this Bill, we had the great advantage of reports on the operations of the legislation in Great Britain and, I may say also, the advice of people who were familiar with the operations of the British Act.

I think it desirable that we should not experiment too freely in this field. One cannot accurately forecast the effects of legislation of this kind, and it is necessary to keep in mind in that regard that provisions which might unduly restrict the operation of hire-purchase arrangements might have serious economic consequences. Some abuses there have been in the hire-purchase system but, on the whole, the system has been beneficial to the people and the imposition of undue restrictions or the taking of unreasonable powers of supervision may tend to kill it with serious repercussions, not merely on the country's trade and commerce, but upon the facilities available to people in the lower walks of life. The investigation made by our committee showed that there was very little evidence of abuse of the hire-purchase system in this country. We knew from reports published by other Governments that abuses had developed elsewhere, and it was reasonable to assume that similar abuses might appear here. It was decided, therefore, to introduce legislation in advance of the appearance of these abuses rather than wait until the need for legislation became more obvious.

On the whole, the operation of the hire-purchase system has been beneficial. It is carried on in the main by reputable firms who would not resort to undesirable practices. I should say that it is likely that a very high proportion of the total number of bicycles sold in this country are sold through hire-purchase arrangements. A large number of people are able to obtain bicycles, because of the existence of hire-purchase facilities, who could not otherwise accumulate the purchase price. The same might be said of wireless sets. Many people have been able to raise their standard of living by reason of the development of this method of trading. We should not unnecessarily impose restrictions on it which might unduly check it, unless it is clear that these restrictions are necessary to eliminate real abuses.

Deputies have urged that the limit fixed by this Bill on the value of goods to which it applies should be raised and that further powers of control should be taken. Deputy Coogan suggested that we should have powers of inspection of trading establishments where hire-purchase transactions are entered into. Deputy O'Sullivan went further and asked that we should have power to license traders engaged in this form of business and to avail of that power to withdraw such licences and put such traders out of business when evidence becomes available that abuses have taken place.

I should like Deputies before putting down amendments of that character in Committee to consider the point of view expressed by Deputy Cogan. That point of view has, I think, tended to be obscured in the discussion by emphasis on the possibility of abuses. I notice that very many Deputies, while expressing themselves as being perturbed at the general extension of the State's powers of supervision and control of industrial and commercial activities, still urge a further extension of the State's control and supervision in specific instances. The particular point of view that I want the House to consider is whether it is desirable that the State should go further than is proposed in this Bill in supervising, controlling and restricting this form of business.

We were doing something here which runs contrary to the main stream of established practice. In the past the State's attitude towards commercial agreements freely entered into by citizens has been merely passive and confined to providing safeguards against fraud. Our whole legal system affecting commercial transactions is based on the principle that the buyer of goods must protect himself. Deputy Coogan will remember the Latin phrasecaveat emptor, let the buyer beware. Ordinarily the State could take the position that people buying goods under hire-purchase agreements or any other method must protect themselves, see that they get good value for their money, and that they do not enter into agreements which are unfavourable to them. We decided we could depart from the principle of caveat emptor in respect of classes of persons who, experience has shown, will not always, under hire-purchase agreements, protect themselves. How far should we go in that regard?

Mr. Anthony

Can we not protect ourselves from usury, and is not this but a form of usury?

Mr. Lemass

Certainly, but the Deputy, for instance, can go into a bank and borrow money and the State does not interfere. If he makes a mistake in relation to the amount he borrows, or in relation to the amount of interest he must pay, that is his own business. A person may buy a motor car or a threshing set or a house under a hire-purchase or a credit purchase agreement. It is his business to see that he makes a good bargain, that he knows all about his obligation, and that he is not entering into commitments that he will not be able to meet.

Mr. Anthony

Do we not fix a definite rate of interest that must be charged?

Mr. Lemass

The Deputy is discussing quite a different matter. I think he should let me proceed to discuss hire-purchase agreements. Investigation has shown that certain classes of persons do not, in fact, take measures to protect themselves, and hire-purchase agreements and credit-sale agreements have been entered into which are unfair to the buyer of the goods and of which the buyer of the goods is not fully aware until an agreement is operated against him. For that class of person it is reasonable for the State to enact protective legislation. That was what was done in relation to money lending; that is what is being done here. But, when we go beyond that class and consider the man buying a motor lorry costing £500, £600 or £700, or a man buying a house or a threshing set, is it not reasonable to expect that such a man will carefully read the agreement he signs, or will get legal advice if he requires it, and protect his own interest? Is it necessary that the State should extend the sphere of its operations to cast its protection over transactions of that kind or take any power of supervision or impose restrictions of the type which this Bill proposes to put into force in relation to smaller scale transactions?

We can discuss these matters fully in Committee if amendments are put down, but I ask Deputies to consider that point of view. While a case can be made for putting upon the State the obligation to eliminate abuses of all kinds and protect persons against the possibility of making mistakes which are detrimental to their interests, there is another point of view which should not be lost sight of, and that is, that ordinarily it is desirable that citizens should protect themselves in commercial transactions into which they enter voluntarily and that the State should not intervene in such transactions unless there is good reason for it. We think there is good reason for the State imposing those restrictions in respect of hire-purchase agreements for the sale of goods of limited value to persons concerned with such purchases. We do not think there is a similar case for imposing these restrictions upon sales of property or goods of much higher valuation, where the people concerned are well able, or should be well able, to protect themselves.

Deputy Coogan asked if the measure relates to goods such as gas cookers hired by gas companies. It does not. This Bill relates only to goods sold either on hire-purchase agreements or credit-sale agreements. If a gas company hires a gas cooker, there is no sale. In fact, the practice has grown up of hiring wireless sets. A person gets a wireless set and pays half a crown a week hirage. At no time is it his property. It remains the property of the firm which hires it to him. I do not think there is any abuse in relation to transactions of that kind. The type of abuse with which this Bill is concerned cannot arise. The person gets the wireless set, pays half a crown and can terminate the agreement any time he likes. He is under no continuing commitment.

I am not aware there is any evidence which would justify an action by the State to control transactions of that nature. The answer to Deputy Coogan's question is that this Bill does not apply to hirage contracts of that kind. It applies only to sales, whether hire-purchase transactions or ordinary credit-sale arrangements.

The provision in relation to the District Court certainly is not intended to make it possible for the transfer of cases to the Dublin District Court. It is intended to give every District Court jurisdiction in cases of this kind where the value of the goods is £25 or less.

Mr. Coogan

I suggest the Minister should set it out in the Bill.

Mr. Lemass

I do not think that is necessary. I feel sure there are rules of court which regulate matters of that character, and I doubt if it is possible for a party to a transaction in Donegal to take proceedings arising out of that transaction in the Dublin District Court area. I would not like to express an opinion on that matter because I do not profess to be familiar with the rules of court, but the only purpose of the section in the Bill is to give the District Courts throughout the country the same jurisdiction in relation to these transactions as the Dublin District Courts now have.

Mr. Coogan

I merely want to guard against the possibility of a firm being able to take proceedings in Dublin against a man in Donegal. I want to make sure that that cannot happen.

Mr. Lemass

The present situation is that the District Courts outside Dublin could not deal with these cases. We are extending their jurisdiction and the new procedure will help to keep down any legal costs that may arise. Deputy Martin O'Sullivan queried the provision which requires the payment of half the purchase price on the termination of the contract by the hirer. I think that provision is reasonable. We must take into account not merely the interest of the hirer of the goods but also the interest of the seller of the goods. When the seller has parted with the goods to the hirer he is not merely taking the risk of loss on the transaction; he is also depriving himself of the possibility of selling these goods to somebody else. I do not think it is unreasonable to require that the hirer, if he desires to terminate the transaction, should be under obligation to pay to the seller half the purchase price.

That is the provision in the British legislation. I feel that on merit the provision is sound. Hire-purchase arrangements are made in relation to various classes of goods. It has frequently been said that a new motor car loses one-third of its value when the buyer drives it home. The mere fact that it has been sold and used on one occasion by the buyer reduces its resale value. The same is possibly true of wireless sets, vacuum cleaners and other commodities. It certainly would be true of the volumes of books, histories and so forth, which were the commodities mainly concerned with hire-purchase agreements when this system of trading began to develop, and it is not an unreasonable protection for the seller to oblige the hirer to keep his contract or suffer the loss of half the purchase price if he desires to terminate the contract before that amount has been paid.

Deputy Anthony referred to the cruelty and hardship that has been inflicted under the hire-purchase system but he will, I am sure, agree with me, that many advantages have been conferred, and that we should not allow legislation to go further than the minimum extent necessary to prevent the possibility of abuse, while facilitating the transaction of business on that basis which helps many people. The Bill is not one which will be contested in principle in the Dáil. Most of the matters raised in the discussion can be raised again, and no doubt will be raised in Committee, when we can consider them more fully. I conclude by urging Deputies, when considering amendments to the Bill, not to proceed along the lines of extending its scope or powers of the State to interfere in transactions of this kind. I think it is a good rule to confine the restrictions suggested by the Bill, and the power of supervision over such transactions by the Government, to the narrowest limit necessary to prevent the possibility of abuse.

Dáil Éireann debate -
Wednesday, 1 May 1946