Seanad Éireann debate -
Wednesday, 12 Jun 1946

Vol. 31 No. 24

Hire-Purchase Bill, 1946—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Industry and Commerce (Mr. Lemass)

The purpose of this Bill is to protect the interests of that section of the community which acquires goods under hire-purchase or credit sale agreements. It is not desirable, as I am sure the Seanad will agree, and it is not proposed in the Bill, to interfere with the legitimate activities of traders and finance companies in the field of hire-purchase, but it is desirable to prevent the development of possible abuses. The hire-purchase system serves a useful purpose in enabling persons of modest means to acquire and to obtain the use of, earlier than would otherwise be possible, such articles as furniture, bicycles, radio sets and the like.

In so far as they assist in the acquisition of motor vehicles, machinery and other types of plant, hire-purchase facilities encourage commercial and industrial expansion, particularly by smaller concerns. Before the war, hire-purchase and credit sale transactions had in this country and in other countries been increasing steadily in volume, and in 1938 goods to the value of £1,500,000 were acquired under hire-purchase agreements, and there is every likelihood, when the supply position is again normal, that that figure will be exceeded in future.

The hire-purchase system has become an important factor in the social and economic life of the country and as such, it must in the community's interest, be kept free from abuses, in so far as that can be achieved by legislation. While a number of complaints have been received from aggrieved persons, there is no evidence so far that any widespread abuses in the hire-purchase system have developed in this country. Nevertheless, the existing law is unsatisfactory in certain respects and this Bill is designed to prevent abuses in the future rather than to cure abuses which have already occurred.

I should add that the expansion of the hire-purchase system has created similar problems in other countries, and in the enactment of these proposals, we will be keeping abreast with the practice already established in other countries. One of the unsatisfactory features of the manner in which hire-purchase transactions are carried on 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 for a certain period he will eventually acquire the ownership of the goods.

A person may, because of that lack of knowledge of the cost of hire-purchase facilities, be induced to pay more for these facilities than he would agree to if he had full knowledge of the facts. The Bill seeks to remedy that position by providing that the person entering into a hire-purchase contract as a hirer of goods, will be furnished, prior to the making of the agreement, with information as to the cash price of the goods as distinct from the hire-purchase price. That arrangement will also apply in respect of credit sales exceeding £5 in value. Hire-purchase agreements are at present covered by the law of contract, and a hirer who wishes to return the goods to the owner may find that under a minimum payment clause in the agreement which he has signed, he has contracted to pay the greater part of the total hire-purchase price of the goods whether he continues the hiring of the goods or not. The Bill proposes 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 the final payment is made and to return the goods to the trader from whom he obtained them by giving written notice and paying half the total purchase price on the amount due at the time of the termination of the transaction, whichever is the greater.

The payment of at least half the total purchase price affords reasonable compensation to the owner of the goods, the trader with whom the transaction was made, who is also under the Bill, entitled to recover any installation costs incurred by him in the deal. To ensure that no person through ignorance of the law, will be prevailed upon to forgo the right of returning the goods, it is provided in the Bill that any agreement containing a contracting-out clause will be void.

A common feature in hire-purchase agreements is a clause giving the owner of the goods, that is to say, the trader, by whom the goods are hired, the right to enter the hirer's premises and to seize the goods without further ado in the event of the hirer defaulting in the payment of the instalment. The effect of such a clause is that the person who has paid a considerable portion of the cost of the goods may, owing to his inability to pay an instalment, lose possession of all the goods without obtaining any credit for what he has paid.

It is presumably unavoidable that from time to time persons who have obtained goods on the hire-purchase system, should, owing to financial troubles, have to return the goods, but that is a different matter from permitting a trader to seize all the goods without compensation merely because an instalment is not paid. The Bill provides that any clause in a hire-purchase agreement providing for the entry of an owner on a hirer's premises to seize goods is void, and further, where one-third of the hire-purchase price is paid, the owner of the goods can regain possession only through the court. Where an application for recovery comes before the court it 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 the ownership of part of the goods to the hirer and return the remainder of the goods to the owner.

Where there is more than one agreement entered into by the same person, the Bill provides against the appropriation of instalments paid by the hirer under all the agreements in such a way as to deprive the hirer of the goods of his special rights under each separate agreement. Another possible 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 traders with an opportunity to dispose of inferior quality goods to persons in such circumstances buying them under hire-purchase arrangements, who when they find that the goods are unsatisfactory may also discover that the agreement they signed 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 warranties, quality and the like will apply to hire-purchase transactions as to ordinary, commercial transactions for cash. The Bill also aims at reducing law costs by providing that proceedings for the recovery of goods may be instituted in any district court if the hire-purchase price does not exceed £25. At present, proceedings cannot be taken in the district courts save in the Dublin area. It is proposed that Section 53 of the Courts of Justice Act, 1936, shall not apply in certain cases, thereby securing that proceedings in the district court against the hirer must be taken in the district in which the hirer lives or does business.

The Bill is not a long one and I assume that the Seanad, like the Dáil, will find little difficulty in approving of it in principle. It is probable that effective discussion of its provisions will take place in Committee, when the various sections can be considered and debated separately. The change in legislation which the Bill proposes has already been effected in the law in other countries and it is, I think, desirable that it should now be made here. Although hire-purchase transactions declined considerably in volume during the war years because of scarcities, it is to be assumed that they will return to pre-war dimensions, at least, and, probably, exceed pre-war dimensions when the period of scarcity ends. As I have said, the evidence available does not indicate the existence of widespread abuses here, but we cannot ignore the fact that widespread abuses are possible and did develop in other countries. It is desirable that we should take the necessary legislative steps to prevent such abuses from developing and that is what this Bill is designed to do. We must, however, ensure that, in taking steps to prevent abuses, we do not, at the same time, create conditions which would make it impossible for hire-purchase trading to be carried on. Hire-purchase trading is, I think, recognised to have social and economic advantages—and this Bill has been framed with the dual purpose of preventing possible abuses while, at the same time, facilitating the development of legitimate trade in that form. I recommend the Bill to the Seanad and I feel sure that, when we come to discuss its provisions in detail in Committee, it will be found that the sections are reasonably adequate to deal with known abuses and that the enactment of the measure will tend to put this form of trading on a better basis and enable it to develop without any bad consequences.

Mr. Douglas

I agree with virtually everything the Minister has said with regard to this Bill. Speaking generally, I think that it is a good Bill. It is not a Bill the discussion of which on Second Reading would serve any conceivable object. The principle of the Bill will, probably, meet with approval from every side of the House. The details of the measure are not of such a nature as could be dealt with in general terms. In Committee, I shall raise a few points, but they are minor points which I do not propose to refer to now.

I have had a limited experience of hire-purchase trading. I disliked it and it was only after I was definitely convinced that, properly handled, it served the community, I agreed to it at all. Most traders would prefer to sell for cash and have done with the transaction. Hire purchase adds to the trader's troubles and, if there had not been a genuine public demand, I do not think that it would have been adopted. It should be borne in mind that it is not suited to every class of trading. I have been informed that some traders have been proposing to sell articles of clothing on 12 months' hire purchase. I think that that is bad and will, inevitably, lead to trouble. If they are ladies' goods, the wearer may get tired of them or may not like the colour. In the nature of things, those goods cannot be returned. The provisions of this Bill, which would, probably, be excellent as applied to a radio set, might be extremely unsuitable if applied to a lady's dress or a pair of shoes. I mention that as illustrative of the fact that, no matter how much you try to foresee conditions in matters of this kind, you will not be able to meet all the difficulties. If applied to articles such as I have mentioned, hire purchase might be extremely unsatisfactory and traders are to be found in every country who are prepared to go in for such innovations if they see that they can make money out of them.

There is no doubt that this is a class of trading which is open to abuse from both sides. In my experience, the worst difficulties did not arise in the case of people with low incomes. One is just as likely to meet with serious abuses in the case of people with plenty of money who could pay for the goods if they so desired. The abuses, from the point of view of the trader, are well known. The worst abuse was tempting people to go beyond their means and to enter into another agreement before the first agreement was completed, so that the unfortunate hire purchaser never got out of debt. I am extremely glad that that abuse is to be made impossible under this Bill. That was, probably, the worst abuse which was inclined to develop here and it was extensive in Great Britain. Most of the provisions of this Bill have been in operation in Great Britain for some time. I made inquiries and I found that they had created no difficulties there. I know that the Bill is not identical with the English Act but it is similar to it. I think that we should take advantage of the experience of Great Britain, where it is available, in these matters, because conditions are very much alike in the two countries.

There is another abuse which this Bill will not abate and which it may aggravate. A hirer who knows that he should get an agreement over a long period, because of the small amounts he can afford to pay, enters into a 12 months' agreement because the rate is cheaper, and then proceeds to extend it to 18 months. The trader is almost helpless in that case, and I am not sure that he will not be more helpless when this Bill comes into operation. That is a point I may raise in Committee. Speaking generally, I think that all classes of traders who wish to do a bona fide trade will welcome this Bill. When I refer to a “bona fide trade”, I mean a trade in which the trader wishes to sell at the cash price and, in the case of hire-purchase, merely wants an addition to cover the expense involved. If there were a large number of defaulters, if a large proportion of customers were to take advantage of the provision for return of their goods even after six months, what would happen would be that the net cost of hire purchase would rise and, as is always the case, the good payer would pay for the bad payer. I do not know that anything can be done by legislation to avoid that. I welcome the Bill which, I think, is one to be dealt with on Committee Stage.

Mr. O'Dea

I do not wish to refer to the good points of the Bill. There are just one or two small criticisms I would like to make on it. It gives a certain amount of protection to the hirer but I do not know if it gives him quite enough protection. There is a provision there that the owner must tell the hirer what the cash price of the article is before he enters into the agreement, and also that he must put in the agreement the cash price as well as the price to be paid in instalments. I doubt if that is a sufficient protection, for this reason: people who indulge in hiring out goods or selling goods by instalments always mark their goods at higher prices than they would be sold at in shops that sell for cash. There is also the practice that people who sell furniture and other goods very often mark the prices higher than those they really sell them at. They are very often sold at a much lower price than the price marked, and if a man goes into a shop where the prices are marked on the articles it is not necessary for the vendor to tell him what the price is because he will see it marked on the article. I do not think there is sufficient protection there.

I would like that a judge hearing cases of that kind would have power to inquire as to whether the price for which the article was sold was a reasonable price, whether the cash price or instalment price was reasonable and if the judge came to the conclusion that the man was overcharged that he would have power to reduce the price to that at which the article could be procured in another establishment. There are other minor points on which I will probably move amendments if I think it necessary. I am glad the Minister thinks that the hirer can be sued in his own district, but I am not sure that the Bill is sufficiently definite on that. Under the ordinary law of contract the debtor is sued where the contract is made and I do not know that the repeal of that section of the 1936 Act would be sufficient to guarantee that the hirer may be sued in his own district. I will look into that point before the Committee Stage. Otherwise I think the Bill is a very good one.

When I saw the provisions about further transactions I was hoping that the Bill would contain a provision which would prevent the vendor from hiring out to the same man a different article while any sum was due on the original purchase. That is where all the trouble arises, particularly when you have people who come around the country canvassing people to purchase. They get the purchasers into a net and the purchasers find that in a certain time some instalment is due but it cannot be paid. Then the vendors say: "We will give you more time" and they will sell them another article for a certain price and make the instalments so much. The unfortunate farmer or his wife will buy a second or even a third article and then find they are not able to pay any of the instalments at all. I was hoping that some provision would be made that would prevent that multiplication of purchases because it is one method by which the small purchaser can be involved to his destruction.

Hire purchase of course is really a method of lending money at exorbitant interest. There is no doubt about it and I am glad that there is to be some supervision through this Bill anyway. There are other abuses however carried on in another way. I know there is a certain organisation established in this country and while they do not sell goods they give tickets for the purchase of 5/- or £1 worth of goods. First of all the fee to become a member of the organisation is 3/6 and after you pay the 3/6 you get a book of five tickets at £1 each. You are then entitled to go into certain shops and buy £1 worth of goods. The ticket is sent to the company, but the company do not pay £1 to the shopkeeper. They only pay 15/- or 16/- and that debt has to be paid at the rate of 1/- per week for each £1. I think that works out at 66 per cent. There may be other companies like that who lend money so that goods can be purchased, purchased really on the hire-purchase system and I wonder if anything can be done in respect of transactions like that.

That may be wandering outside the provisions of the Bill, but I am merely throwing out the suggestion that it might be considered because there are difficulties in the way of people who get goods under hire purchase in relation to the payment of instalments, etc. I would like to see a bank established in this country which would completely wipe out the money lender. I believe that if such a bank was established the amount of free money that would be given in this country for its establishment would astonish people. There are numerous people willing to pay in hundreds and thousands of pounds never expecting to get a penny of it back in order to take people out of the clutches of money lenders. If you had a bank established in that way it would prevent some of these lending companies from getting people into difficulties.

Professor Fearon

I have not very much to say on this Bill, but I would like enlightenment on Section 2. The section states: "This Act shall apply in relation to every hire purchase or credit sale agreement not being" so and so and so and so. Does that apply, for example, to the purchase of houses by hire-purchase arrangement? Or does it apply to borrowing money? Does it, for example, apply to that curious form of activity, the burial society? It seems to me from the reading of the Bill that it could be applied to all of these and if it was applied to all or any one of these it is going to involve all sorts of complications in subsequent legal proceedings.

That is all I want to say on that at this stage and I do not want to develop it further now except to say that anyone who has followed the history of this Bill in the Lower House and who has studied it and who is a person well disposed towards humanity must be glad of this measure. Anyone who knows of the misfortunes of people who suffer from hire purchase abuses due to the operations of people who are prepared to deliver goods in a perfectly plain van and remove them from the purchaser's house again in a perfectly plain van, must welcome this measure. I would like enlightenment however as to its application to the three cases I have mentioned.

Professor Johnston

There is not very much I would like to say on the Bill except to say that I welcome it. I think, in fact, the Bill carries out one of the minor recommendations of the Banking Commission and one about which there cannot be very much controversy. The clause in the Bill which requires that the owner should clearly state the cash price as well as the hire-purchase price is I think an admirable one. Any vendor with that knowledge and bearing in mind the rate at which the payment of principal and interest would take place could, with the help of a little arithmetic, calculate the rate at which he was borrowing the money to pay for the goods.

The whole system of hire purchase seems to involve the principle of the purchaser borrowing from the hirer the capital sum needed to pay for the goods and the repayment of that capital sum with interest, spread in equal instalments over a period of 12 months or more. The hirer, on the other hand, may possibly finance the transaction himself or may be in touch with a financial institution or bank and may in turn borrow from that institution the money which ultimately finances the whole proceedings. One of my principal objections to the practice of hire purchase is that the effective rate of interest at which the money is borrowed is concealed from all except the most acute and mathematically-minded purchasers.

The usual form of procedure is that an article which you might acquire for £100 in cash is offered to you on the hire-purchase system for 5 per cent. more, spread over 12 months. It looks like borrowing £100 at 5 per cent., but in actual fact the purchaser only has the use of the equivalent of £100 for half the period in question and is, therefore, paying 5 per cent. on £100 for six months, which is equivalent to 10 per cent. per annum over the whole £100. I do not know if the Bill specifically provides for that form of deception, but if it does it should be made clear what the effective rate per annum is at which the purchasers are borrowing the money.

While I admit there are certain things, such as the more expensive forms of consumer goods, like pianos, wireless sets and motor cars, to which it is legitimate to apply the principle of hire purchase, I think it is not a system of purchasing which ought to be encouraged. It would be a serious thing if it developed out of proportion to the other ways in which goods are bought and sold. One of the causes of the disequilibrium in American economy before the collapse in 1929 was that people were paying far too great a proportion of their total incomes in the gradual payments for these goods. The Banking Commission rightly pointed out that, in times of comparative prosperity, people are inclined to enter into commitments which they are quite unable to fulfil in times of adversity. Those financial strata of society which are not so wise are entitled to protection. Those people are capable of entering into commitments which, in view of general circumstances, are not financially sound.

Therefore, while not interfering too much with the freedom of individuals, even to make mistakes, it would be in accordance with the best public policy that we should lean against this kind of thing as far as possible. It has reference to many aspects of the public welfare, not only the welfare of individuals who make unwise commitments of this kind, but also from the point of view of our economy as a whole. If, during a general depression, too large a section of the working classes is committed to paying monthly instalments for pianos and what not and then there is not enough left to provide the necessities of life, that is bad for the workers and bad for the producers of those necessities of life, and causes a general disturbance and dislocation of the whole economy. While we ought to facilitate reasonable and equitable forms of hire purchase, it is desirable that legislation should issue a warning against over-indulgence in this kind of luxury.

Apparently, the fact that, under the existing system, 10 per cent. or more is quite a usual rate of interest for the money that buys these goods is not commented on or appreciated as widely as it ought to be. We hear a lot about extortion under the banking system, when the banks charge 5 per cent. to creditworthy borrowers. In this particular instance, the banks are probably acting as wholesalers of credit and the hiring firms are acting as retailers and peddle that credit at a much higher rate. I would rather see people who can do so go to the banks and obtain the money there at 5 per cent., in order to buy these goods, than be paying the higher rates of interest to the hire-purchase firms.

Mr. Duffy

I welcome the introduction of this Bill. One may have doubts as to whether the principle of instalment buying is good or not, but there can be no question that, if it is carried on under conditions which are patently dishonest, it will have ruinous consequences on a very large section of the people. In the past, not only in this country but in very many countries in which the system operates, there have been unscrupulous vendors who have taken advantage of the cupidity of their customers to do serious damage to the homes of those who had recourse to instalment buying. It would be wrong, however, to suggest that everybody engaged in this trade is dishonest. In the main, the traders who have adopted this method of facilitating their customers are perfectly honest and fair and not unreasonable in their charges.

One might question the whole principle of instalment buying, since it is a pledging of the future by people with limited means. Admittedly, it has been a boon to those starting life with limited cash resources and who are obliged to furnish a home for themselves and their families. They could not have done so with any degree of comfort, if it were not for the fact that they were enabled to pledge their future.

This Bill is not a new experiment. To all intents and purposes, it is a carbon copy of a Bill which was enacted in Great Britain in 1938. As far as I remember the British Act became law on the 29th July, 1938, and came into force on the 1st January, 1939. Owing to the war, however, there has not been much chance of judging the operations of the Act in Great Britain, because immediately after the outbreak of war there was an Act in Britain known as the Courts Emergency Powers Act which prohibited seizures and limited the activities of traders, even of those permitted by the Act. Consequently, it is not possible to say how far the Act has been successful in Great Britain, or what effect it has had on hire purchase or instalment buying.

With regard to the abuses of the system, I think it is well known that there are certain types of traders who employ tally men, or agents, some of them the most unscrupulous in their habits, to induce people to buy goods which, in fact, the purchasers did not need and should never have bought. People have been induced to buy radios and gramophones, and I am informed to buy pianos which were not necessary in the circumstances of the families concerned at prices substantially above the prices at which these goods could have been bought if they were purchased for cash.

The Minister has already referred to the methods by which these hire-purchase agreements were enforced. There was the power, exercised sometimes in a very unsatisfactory manner, of seizing the goods and taking them back after a very substantial sum had been paid in respect of the hire-purchase agreement. It must always be borne in mind that goods sold under the hire-purchase system still belong to the traders until the last instalment has been discharged. Consequently, he has the right, and it is a right which is exercised to seize these goods in default of payments.

So far as Dublin is concerned, a certain amount of difficulty arose out of the fact that the traders selling the goods were not the financiers of the system at all. I was very much surprised some years ago when a friend of mine entered into a contract with a very reputable firm in Dublin to buy certain household goods, the cost of which ran into £200 or £300. I found that the agreement that he was asked to sign was not a contract between himself and the trader, but a contract with a London finance corporation. In case of default, the agreement would be enforced not by the trader selling the goods, a very prominent Dublin firm, but by a London finance corporation. The effect of that is limited now, to a very substantial extent, in the Bill.

Someone mentioned, I think it was Senator O'Dea, the dangers of a long term agreement. Well, I think it must be obvious to anybody that it is a very risky thing for a person undertaking to buy a considerable quantity of goods without ready cash to meet the purchase, to enter into a contract covering, say, three years. In view of the fact that so many things may occur during that period, it is hard to say in advance how the obligations of the contract would be met three years hence. I remember reading recently a reference by a newspaper to one of these sales which had a long life. The story went like this: a young man went into a store and said to the cashier, "I want to pay the last instalment on the perambulator." The smiling cashier handed him his receipts and asked, "How is the baby", and the reply was, "Oh, I am feeling fine, thank you."

Reference has been made by Senator Johnston to the rate of interest represented in hire-purchase contracts. He drew attention, very properly, to the fact that the rate of interest is concealed, but I am afraid it is concealed to a much greater extent than has been suspected by Senator Johnston. Some years ago I examined a contract which was being made for the purchase of furniture in a certain Dublin warehouse. The rate of interest appeared small at first sight, but, on working it out, I came to the conclusion that, in fact, the effective rate of interest over the whole period was 38 per cent. But that is not the whole story. In most houses specialising in hire-purchase trading, the cash price itself marked on the article is a bogus price.

It is not the cash price which would be effective in a non-hire purchase concern. I will endeavour to give the House one instance of that from a personal experience. Some 12 months ago, I was walking down a Dublin street in company with a craftsman working in a Dublin furniture factory. We stood at a particular window to examine articles of furniture offered for sale in what might commonly be described as a hire-purchase agreement house. These are the figures which were brought to my notice by the craftsman who, as it happened, had made the furniture. We were looking at a suite of furniture, the cash price of which was £40. That is to say, the cash price marked in the hire-purchase premises was £40. The craftsman who made the furniture informed me that the ex-factory price of that suite of furniture was £18. It was sold by the manufacturer for £18 to houses engaged in hire purchase and houses which were not engaging in hire purchase, and on further investigation I discovered that the cash price in the non-hire-purchase firm was £30. So, here, we have the picture, the factory price of a suite of furniture, £18; the retail price in a shop doing a cash business only £30 and the cash price in a firm engaging extensively in hire purchase, £40.

But, bought under a hire-purchase agreement, the price is 25/- a month for three years, working out at £45. It would appear therefore that what the customer was actually paying to the hire-purchase firm was £5 for the use of £40 worth of credit, spread over a period of three years. What, in fact, he was paying was a profit of £15 more to the hire-purchase firm than he would have paid to a cash price firm in respect of a commodity the factory price of which was £18.

These aspects of the problem are not dealt with in the Bill, and I am not sure whether they can be dealt with in a Bill of this kind. Reading the debates in the Dáil, I gathered, however, that the Minister has in mind the introduction of other legislation later in the year relating to price fixing, in which, as I understand it, he hopes to make provision for a review of overcharging of the character I have mentioned.

I do not think we ought, therefore, to endeavour in this Bill to make provision for a review of prices as such in respect of hire-purchase agreements, but we ought to urge the Minister when he is introducing the Bill dealing with price fixing to keep in mind especially the conditions under which the cash price is marked on goods sold to hire-purchase customers.

There is one more matter I want to mention—it has been referred to by another speaker—and that is the requirement of the Bill in relation to the marking of the cash price of the article offered for sale. Under the Bill, the trader is required to mark the cash price unless the goods are sold from a catalogue or something like that, but he is not required to mark either the net or the aggregate hire-purchase price. You go into a trader and you say to him: "What is the cash price of this suite of furniture?" He says: "It is £40." He does not tell you, and he is not obliged to tell you, the total sum you will be required to pay if the goods are purchased under a hire-purchase agreement. He will tell you that he is selling them on the basis of 25/- a month for three years. Of course, if you take out your pencil and are fairly accurate with figures, you will discover the total sum you are required to pay, but I think an obligation should be inserted in the Bill requiring the trader to tell the customer not only the cash price of the goods, but the aggregate hire purchase —that is, the totality of the hire-purchase instalments.

There is nothing else, I think, I require to say at this stage because, in the main, this is a Bill which can best be considered in Committee. I would like to say this that the House ought, so far as it can, give a warning to the public that this Bill is, in fact, no safeguard for the person who makes a foolish contract. The man who enters a shop with a song in his heart and without a penny in his pocket to buy a suite of furniture or a piano which he does not want, will have no protection if he fails in his instalments. The goods must still be returned at a great loss to him or he will suffer other hardships. One difficulty arises in that connection in regard to the case of the person who has paid a substantial sum in respect of an article purchased under a hire-purchase agreement. If he has paid a certain sum, he is entitled to keep part of the goods—at least the court is permitted to order that part of the goods will remain with the hirer. That may be simple enough, in the case of, let us say, a bedroom suite, but it is not quite so simple where one article only is concerned, let us say, a piano or a motor car. There is not much use in telling the hirer he can keep a part of the piano, because a part would not be any use to him, and neither would a part of a motor car be any use to a hirer, so that this provision is effective only where the commodity purchased consists of a variety of articles which can be split up in the event of failure to carry out the contract.

Mr. Foran

Like everyone who has spoken up to now, I welcome the Bill but it does not go far enough to deal with this evil of hire purchase which is eating into our economic system. Hire purchase will grow and will flourish so long as the cost of living is beyond the average income of the wage earners and the middle-class people of the country. I can visualise a very serious development of hire purchase in the country and this effort in a small way to control or regulate, or in short, to protect people against themselves is to be commended. Hire purchase has got into the hands of ruthless, unscrupulous and brutal people in the country. You have only to read the evening paper to see the appeals that are made every day to the most gullible section of the community, newly-weds or about-to-be-weds.

You see inducements to them to come in and equip themselves with furniture and incur expenses far beyond their present means, or beyond anything they are likely to have in the immediate future. Senator Johnston put the thing very properly when he said that people are induced to go in and take on the hire-purchase system grand pianos, costly radios and gramophones that they could never possibly afford and maintain themselves in reasonable comfort and pay the instalments required to keep these things. It has a very serious effect on the health of people if they incur liabilities for the discharge of which they must sacrifice nourishment. I have no respect for the banking system but, compared with the rates charged under hire purchase, the rates of the banks are generous to a degree. I have no belief in this alleged benefit to the community of hire purchase. I think that the system is responsible for a great deal of harm. The amount of good it does is much out-weighed by the evil and harm which it creates. All sorts of devices have been developed to induce people to enter into these arrangements. Some persons go around from house to house with what is known as a purchase cheque. The recipient of these cheques is handed over to a trader who agrees to cash the cheque and give the issuer of it a rake-off in the shape of a percentage and commission. I do not know whether or not these things were investigated prior to the introduction of the Bill. In my opinion, this hire-purchase arrangement, so far as it applies to furniture and equipment for the home, is a menace. It should be curtailed, regulated and controlled and, so far as this Bill moves in that direction, I welcome it but I do not think that it goes far enough.

Mr. Sweetman

I want to deal with only two points which are more properly Committee points. By dealing with them now, we may avoid difficulty later. In Section 8, there is a provision by virtue of which the hirer is bound to give notice to the owner of the whereabouts of the goods. I suggest that there should be a further provision—that the hirer should not be entitled to move the goods out of the jurisdiction without the consent of the owner. It will not be of very much assistance to the owner of the goods if he is informed that they have already passed out of the jurisdiction of the courts. The second point I want to make has reference to residence. It is difficult sometimes to find the residence of the hirer. A hire-purchase agreement is made when the hirer is in a particular residence. Later he defaults and, when the owner tries to collect from the residence, as given in the agreement, he finds that the hirer has gone away and cannot be found. I can see that there would be some difficulty in dealing with that point. The goods might, of their essence, be such as would be movable—for instance, a motor car. It would not be possible to provide that the hirer should give notice of a change in the position of the goods. But there should be some method by which the hirer would give notice before removal from the address in the possession of the owner. With the general provisions of the Bill, I think we are all in agreement. We agree that steps should be taken to remedy the civil of unscrupulous owners of goods working on the foibles of our people to get them to undertake on the "never never" system contracts which they will find it difficult to fulfil except at the expense of providing in a proper way for their families. While I am wholeheartedly in agreement with preventing that excess, I do not subscribe to the general denunciation of all those who deal in hire purchase, such as that in which Senator O'Dea engaged. There are good and bad firms——

Mr. O'Dea

On a point of correction, I do not think that I referred to every person who hires goods. I referred to certain people.

Mr. Sweetman

I am delighted to hear of Senator O'Dea's reform.

Mr. O'Dea

I have not reformed.

Mr. Sweetman

I am sure that that is what the Senator meant to say. There are good and bad firms and it should be our aim to limit the excesses of the bad and to ensure that facilities will be provided in a way which will be of assistance to the community without incurring risk of excess.

Mr. Lemass

I find myself completely in disagreement with the view expressed by Senator Foran, that the development of hire-purchase trading is an unmitigated evil. People can, of course, make mistakes and enter into commitments which they cannot carry through, and get into difficulties. But, subject to the elimination of possible abuses, as proposed in this Bill, I think that hire-purchase trading has useful social consequences. A very large number of people in this country and other countries have been able to raise their standard of living by reason of the existence of hire-purchase facilities. It is, I think, a feature of a developing economy and is, generally, most active in times of prosperity, not in times of depression. I should say that a very large number of individuals in this country, because of hire-purchase facilities, own bicycles, radio sets and other equipment which they could not otherwise have acquired. Of course, as Senator Johnston said, a bank will lend money on cheaper terms. That may be theoretically true but, in practice, it is not of much use. The average domestic servant in Dublin who buys a bicycle on the hire-purchase system would not get accommodation from a bank if she went there to borrow the price of a bicycle. While one could contemplate the development of finance houses which might give accommodation of that kind, the fact is that that accommodation does not exist. Where that form of financial assistance has tended to develop, abuses have been associated with it also. We are not proposing to stop the system of hire-purchase trading but we impose upon it certain restrictions which will prevent the development of the type of abuse which experience has shown we might expect. We do not propose to go further than that. We do not propose to give persons who buy goods on the hire-purchase system a greater measure of legal protection than that which the person who buys goods for cash now enjoys. Any person entering into a commercial transaction is expected to protect himself. When Senator O'Dea talks about goods being sold at unreasonable prices the point he makes there is not a peculiarity that exists in relation to the hire-purchase trade alone. A person who buys for cash may pay more than the value of the goods, too.

The hire-purchase trade is a feature of normal trading conditions. It tends to disappear when goods are scarce and to expand when goods are plentiful, and when competition between traders results in the adoption of every method to increase the sale of goods. I do not think there is any obligation upon us to take everybody by the hand when they are buying anything, to see that they do not make mistakes, to see that they do not pay too much for goods or that they do not buy goods that they do not want, or which they cannot afford. We must allow for the exercise of a certain amount of individual judgment and it is one of the consequences of individual judgment that mistakes will be made. We can, however, prevent people from being defrauded by the misrepresentation of goods as to their quality. We can prevent them from entering into unfair agreements and ensure that they will appreciate what they are doing. That is what this legislation is designed to achieve but I do not think it is necessary that we should go any further than that.

I disagree with Senator Sweetman that we should place an obligation in law on the hirers of goods to maintain the goods under their control, or keep them in the country, or make their address known to the owner of the goods. In respect of these matters the owner of the goods will protect himself. He will have, in the agreement he makes with the hirer of the goods, whatever clauses he thinks are necessary in his own interest and there is nothing in this Bill which prevents him from having such clauses or which renders them void if they are so inserted. It is, however, proposed in the Bill that if he puts in the agreement a clause under which the person signing it contracts-out from the protection of the legislation that that clause is void. If he puts in the agreement a minimum payment clause, that is also void, but in respect of these other matters it is a normal feature of hire-purchase agreements to contain clauses which give the trader all the protection he requires. It is the trader's own job to protect his interests in the agreements.

My view is that there is a genuine public demand for hire-purchase facilities and, subject to the limitations proposed, the extension of hire-purchase facilities can have desirable social and economic consequences. I do not know whether I should follow Senator Johnston along the road he travelled as to possible repercussions upon the general national economy of the further development of the hire-purchase trade. In so far as the hire-purchase trade is made possible by bank credit then presumably it is in the powers of the banks to prevent an unhealthy development of hire-purchase facilities. What happened in the United States was that banking control of the hire-purchase trade was either improperly used or was inadequate and a situation developed which ultimately contributed to the dimensions of the American financial crash. I do not think there is any obligation on the Government in a Bill of this kind to impose any limitation upon the extent to which hire-purchase trading is engaged in by the community or as to the extent to which the banks may facilitate or assist the hire-purchase trade.

Senator Duffy is not quite correct in saying that this Bill is a copy of the British Bill. As presented to the Seanad, it is considerably wider in its scope than the British legislation. Legislation on these lines was enacted in Britain in 1938 and we had the assistance of people who were familiar with the operation of that legislation in Great Britain in the preparation of this Bill. Of course the experience of the British legislation is incomplete. The outbreak of war led to its virtual suspension and the circumstances of the war were not such as to give a fair picture of the possible effects of the Bill upon the abuses which it was intended to remove.

I do not think it is necessary that we should legislate to prevent people entering into a second hire-purchase transaction while a first one is still incomplete. Apart from the general principle that people must be allowed to use their own judgment in their own interests, the imposition of a limitation of that kind might work very harshly. It may be pointed out that the application of this Bill is not confined to bicycles, wireless sets or suites of furniture. The Bill applies to any class of goods that may be purchased under the hire-purchase system. Many traders buy motor vehicles by that method and ordinary citizens, commercial travellers, for instance, buy motor cars under the hire-purchase system. Indeed, it is not unusual for small industrial firms to buy plant and equipment under hire purchase. All these transactions are covered by the Bill and in many cases to prevent people entering into a second transaction while the first one was still alive would be a very serious limitation of their liberty of action. The Bill does not apply to houses, to money lending, to tontine societies or any of the other transactions to which reference was made or about which queries were addressed to me. As is clear from the definition of a hire-purchase agreement in Section 1, it applies only to agreements concerning sale of goods.

As most Senators have pointed out matters which have to be considered in relation to this Bill are points of detail and they can be discussed more adequately in Committee. I am glad to understand from the speeches made that the principle of the Bill is approved. The only possible objection to the principle of the Bill would be based upon the theory that the buyers of goods under the hire-purchase system should protect themselves and that there is no obligation on the State to enact special legislation for their benefit. That theory has not been advanced either here or in the Dáil. I would have to answer that contention by explaining that however sound it might be in general theory, in practice many people who undertake hire-purchase transactions do not protect themselves and evil social consequences have followed therefrom. We think that it is not unreasonable that the State should legislate for the protection of such citizens. Many people run into transactions for the purchase of bicycles, suites of furniture, etc., without ever reading the agreements they have signed, and it is necessary to ensure that these agreements do not contain provisions which are so unfair to them as eventually to lead to hardship in many cases.

Nevertheless, we must not go too far in the other direction of relieving people entirely from their personal responsibilities, and subject to the provisions of this Bill, it is safe and sound in practice and in theory to require persons buying goods in this manner to satisfy themselves that they are getting good value, that the goods serve the purpose for which they require them and that they are not entering into transactions which they cannot carry through. There were no other points raised to which I wish to refer now. There were some points of detail but I have no doubt they will be raised again in Committee.

Professor Johnston

What about the point concerning showing the effective rate of interest in the agreement.

Mr. Lemass

The proposal is that the trader is required to let the purchaser know the cost of the hire-purchase facilities.

Professor Johnston

That does not show the rate of interest. He has to calculate it.

Mr. Lemass

I do not think that matters much.

Mr. Baxter

How could he calculate it in advance, before he knew what the person was going to pay?

Mr. Lemass

I think it is a sufficient safeguard to require that the person going to buy the goods must be informed what the cash price is and what the hire-purchase price is, so that he will be fully aware of the cost of the hire-purchase facilities in terms of money. I do not think that a mere calculation of the effective rate of interest would give him much further information, as it would be almost unintelligible to most of such buyers.

Professor Johnston

Get the Minister for Education to teach the people more mathematics.

Mr. Lemass

I am not trying to teach mathematics.

Question put and agreed to.

Committee Stage ordered for Wednesday, 26th June.