MONEY-LENDING. In primitive societies the taking of interest for the loan of goods or services rendered, in transactions between members of the same community, was unknown. All that was expected was the return of similar goods or services. With the substitution of money for corn and cattle, this idea that ad vantage must not be taken of the necessities of one's kindred still prevailed, and it was adopted in Europe by the Church. Thus in England it was unlawful at common law for a Christian to take interest on money lent, a prohibition enforced by various medi aeval enactments on usury (q.v.).
In 1897 a select committee of the House of Commons, after an exhaustive enquiry adopted the proposal originally made by the present writer that the equitable doctrine of uncon scionable bargains with heirs and reversioners should be applied to all money-lending transactions. This proposal, with further provisions, was embodied in the Money-Lenders Act 190o. By this statute, although there is no restriction upon the rate of in terest, where proceedings are taken by a money-lender for the re covery of money lent or the enforcement of any agreement or se curity, and there is evidence that the interest charged is ex cessive or that the amounts charged for expenses, enquiries, fines, bonus, premium, renewals or any other charges are excessive, and that in either case the transaction is harsh and unconscion able or is otherwise such that a court of equity would give relief, the court may re-open the transaction and take an account be tween the money-lender and the person sued, and may, notwith standing any statement or settlement of account or any agreement purporting to close previous dealings and create a new obligation, re-open any account and relieve the borrower from payment of any sum in excess of the sum adjudged by the court to be fairly due, as the court, having regard to the risk and all the circum stances, may adjudge to be reasonable; and if any such excess has been paid or allowed in account by the debtor, may order the creditor to repay it, and may set aside or revise any security or agreement, and if the money-lender has parted with the security may order him to indemnify the borrower.
A money-lender is defined as a person whose business is that of money-lending, or who advertises or announces himself or holds himself out in any way as carrying on that business, but does not include a pawnbroker, a friendly society, a body corporate em powered by special act of parliament to lend money, a banker or a body corporate exempted by order of the Board of Trade.
By the Money-Lenders Act 1927 ss. 2 and 3 of the Money Lenders Act 190o are repealed and the whole of the Money Lenders Act 1911. Every money-lender must now take out annu ally, whether carrying on business alone or as a partner in a firm, an excise licence in respect of every address at which he carries on business. Such licence must show the money-lender's author ized name and authorized address or addresses. Such name and address means those under which a money-lender is authorized by a certificate to carry on the business of money-lending. The name must be his true name. The duty on an excise licence is £15. The certificate, which is only granted upon evidence of good character, capability and responsibility, may be granted by a petty sessional court. If refused there is an appeal to quarter sessions. The money-lender's name must be stated on all documents issued by him. Restrictions are also imposed on money-lending advertise ments and the employment of touts is prohibited. No contract is enforceable unless a note or memorandum is signed by the bor rower, and a copy thereof given to him. Such note must contain full particulars of the loan. Compound interest is prohibited, and the rate of interest may not be increased by reason of any de fault in payment. Upon request the money-lender must supply to the borrower information as to the state of the loan. Where the interest exceeds the rate of 48% the court, unless the contrary is proved, shall presume that the interest charged is excessive and the transaction harsh and unconscionable. A charge for expenses in negotiating a loan is made illegal. Proceedings for the recovery of money lent must be brought within 12 months from the date on which the cause of action accrued The act applies to Scotland but not to Northern Ireland.