The Sun.
London, England, 1841-01-11 00:00:00

MONEY MARKET and CITY NEWS

(FRIDAY EVENING.)
CHRONICLE.—This was the first day for the pay-
ment of the dividends to the public, but the business done
in the English funds was not to the extent usual on such
occasions. We attribute this in some measure to the seve-
rity of the weather, and the intense cold of the morning
having prevented many people from leaving their homes.
The numerous cases reported at the Police-offices re-
garding the operations of loan and discount societies, have
induced us to make some inquiry into the nature and ex-
tent of these establishments in the metropolis. Loan socie-
ties were legalised under provisions of an Act 5 and 6
William IV. ; but this was so loosely drawn up. that it
was found necessary for the protection of the industrious
classes to repeal it, and to place these societies under the
3d and 4th Victoria, cap. 110, which is now the regulating
statute. Under the Act of William, 250 to 300 socie-
ties had their laws enrolled by the proper officer.
Under that of Victoria, the number certified does not.
much exceed 50 ; and it is believed that several of
these are not in operation. The only loan societies pro-
perly so called, are those enrolled under the Act of Vic.
toria. There are, however, in the metropolis and else-
where, a great number of societies calling themselves loan
societies, which are under no law whatever, and which
take advantage of the necessities of the working classes,
by exacting exorbitant sums for their advances. We be
lieve there are as many as 150 such discount companies in
the metropolis, who derive enormous profits by such means,
while the number enrolled under the statute, does
not much exceed thirty or forty. The " loan societies,"
enrolled under the statute, advance SUM 3 of 51., 101.,
or 151., and they are entitled to twelve per cent.
The amount of interest allowed by the Act is, say
6e. for each 51. advanced, to be repaid by weekly
instalments of 2s. for each 51. No charge is al-
lowed towards expense of office, or any fine in case
of default. No charge for letters written to the sureties
to inform them of their liability ; and the whole business
of the office is paid for by Is. 6d., which each applicant
has to pay to the clerk at the time of application, receiving
in return form of application and book of rules. Should
a person apply for a 15/. loan, the society would require
three securities who must all be diligently inquired into,
for which Is. 6d. is charged. The conditions on which
the business is managed will be better understood, how-
ever, from the following account, which we take from a
hand-bill now in circulation by a loan society in Hounds.
ditch, with a capital stated at 12,5001., which says :
" This society is established pursuant to the provisions
of the act, for the purpose of assisting the middle and
working classes, by granting loans of 51. 101 and 151. and
receiving it back by weekly instalments of 2s. fur 51. ; 4s.
for 10/. ; and 6s. for 15/. ; the first repayment to be
made on the eleventh day after the loan is granted. The
security required is one respectable housekeeper, of twelve
months' standing, for a loan of 5/. ; and two respectable
housekeepers, for a loan of 101. or 151. The interest
charged at the time of granting a loan of twelve months,
is:6s. for 5/. ; 12s. for 101 ; and 18s. for 151., with Is, 6d.
for form of application, costa of inquiry, book of rules, and
all business connected with the granting and re-payment
of a loan, and no further charge is made under any pre-
tence whatever. The trustees of this society being de-
termined to conform strictly to the provisions of the Act of
Parliament, and the intentions of the Legislature, in pas-
sing it, for the better protection of borrowers from extor-
tion, think they will be doing a service to the public, in
cautioning them against societies, falsely called loan
societies, but which not being enrolled under the above
Act, are, in fact, discount societies, under no law what-
ever 1"

The officers of the " loan societies" cannot indorse their
bills granted for loans to third parties ; they must hold
them themselves, and receive payment from the borrowers
and their sureties. The case is different with the discount
companies, who re-discount their bills; and, although they
profess in their printed rules to charge only 10 per cer:t
for loans, yet they exact such terms a; they can squeeze
slit of their needy borrowers. If a person wishes to em-
ploy a loan society, he may at once know whether he has
applied to an office enrolled under the statute, because
their bills are exempt from stamp duty, while the discount
companies must use the proper stamp. Then the
latter are obliged to evade the usury laws, which declare
it to be illegal to charge more than 5 per cent.
on sums of 101. and under. For this purpose
they refuse to loan sums for less than 101. ss. ; but
if a person wishes to borrow Si. only they pro
fess to lend him 101. 55., and charge discount
on that sum, they (the lenders) immediately receiving hack
51. We have drawn out a rough comparative statement
of the terms on which a loan of 151. would be advanced
by a loan society enrolled under the Act of Victoria, and
that on which it would be given by the discount companies.
The result is as follows :

151. Loan—under Loan Society, regulated by the Act
Victoria for twelve months and weekly instalments of 63 ;
Charge for form £0 0 0
Book of Rules
Inquiry ( without regard to distance or number
of persons)
Bill stamp (free by the Act) 0 0 0
Discount, 6 per cent.
Secretary's fee

£0 19 6
So that the borrower receives

Xl5 0 0

No fines on default, nor charges for letters to the Se-
cretary.
FM. Loan—From a Discount Society for twelve months,
and weekly instalment of 6s.:—
Charge for form 0 0 3
B. of rules 0 1 0
Inquiry for two securities, at Is. 61. per mile
(average three miles)
Bill stamp 0 2 6
Discount on bill at 10 per cent 1 10 0
Secretary's fee 0 0 6

1 18 9
So that the borrower receives only l3 1 3

15 0 0

Then he has to pay with each weekly instalment 3d.,
which is It2s. 6d. in the year, provided he makes no de-
fault. But for every default he pays 6d. of a fine to the
S3eiety, and 3d. for each letter of advice written by the
Secretary to himself and sureties.
It will be seen that the terms charged under the Act of
Parliament are very much more favourable than the fees of
the discount companies, and we believe that we have given
the latter in the most advantageous light.
We have conversed with some parties connected with the
loan societies, who say that the terms allowed by the
statute do not afford sufficient profit to enable them to
compete with the discount companies, and that capital is
passing rapidly from them for investment in the latter.
The loan societies were established under the Act of Par-
liament specially for the benefit of the industrious claws,
and it is important to investigate the working of the enact-
ment. The Act of William was so vague that it was no
better than waste paper, and we now find that its substi-
tute has had the effect of depressing the number of legal
societies most seriously, while it has created a large
amount of illicit trade.

This leads to an impression that the provisions of the
Act of Victoria require revision, and that further measures
s!:ould be adopted for the purpose of securing the indus-
trious classes in the benefit of obtaining small loans on
moderate terms. The public do not discriminate between
the good and the bad as respects loan societies. They
confound the legal with the illegal, and taking their opi-
nion of both classes from the last-named, they believe
that the whole of them are a pest to society, and that
they exist upon the misery of the poor. The few gene-
ral remarks which we have made will tend to remove
this error, and to point out the distinction which ex-
ists between the " Loan Societies " properly so called
and the self-styled loan societies, which are, in fact,
discount companies. The first are bound by an Act
of Parliament, which they cannot well disobey. The
others are under no species of legal control, and suck
the very heartblood of the poor. The first class have been
the subject of legislative enactment, and have been legalised
for the special benefit of the industrious classes. The
others go on in defiance of the law, while they ostensibly
profess to be established under its sanction. Some parties
connected with the Loan Societies have sent us a state-
ment of the profit which they receive in lending 5,0001. in
sums of 5/. each. This would require 1,000 borrowers,
and when it is considered that the Act requires them to
keep a journal, a check-book, and ledger, it is plain that
considerable labour must be devoted to the business. They
accordingly put down salaries for two clerks at 751. each,
and two check clerks at 25/. each, with allowances for of.
fice, rent, Scc., whereby they make it appear that the
actual net profit receivable under the Act for the 5,0001.
lent would be only five per cent., or 250/. They
say, to show in a small degree the want of proper re-
muneration felt by all parties connected with loan
societies as at present established, it is calculated that to
lend 5,000/., in 5/. loans, will require 1,000 borrowers;
each borrower has fifty receipts made in his book, the So-
ciety keep a journal, check book, and ledger, in each of
which fifty entries must be made for each borrower: there-
fore, it requires 200 entries for each account ; 1,000 bor-
rowers require 400,600 exclusive of writing letters to de-
faulters and their sureties, which finds constant employment
for two clerks. Profit on 5 000/. provided the whole
amount of repayments is again lent out on the day on
which it is received, and that at no time a balance re-
mains in the bands of the Treasurer, will be, at 12 per
cent. .
Two clerks, at 75/. each
Two check clerks, at 251. each 5O
Rent of offices and gas ..
Printing, account books and stationery,
and casual losses,say 2 per cent. ...... 100

350
Profi,, 5 per cent. on 5,0001 950
-£6OO

It was never intended by the Legislature that these
loan societies should keep an establishment of clerks on
salaries. The charges wider that head, in the above es.
timate, are equal to a capital of ten times the amount.
The, charge of 100/. for printing, &c., and losses, seems
also ohjactionable. The 12 per cent. ought to remunerate
well for the risk and expenses; but while unlimited profits
may he male by the discount societies, it is not likely
that those enrolled under the statute will increase. On
the contrary, they must, in all likelihood, diminish in
number and respectability.

II ERALD.—It will be observed, that Bank Stock with
India and Exchequer Bills have been latterly more
on the risk even than Consols.
In regard to Bank
Stock there has latterly been a disposition to invest in it
from a prevailing belief that the Bank has been less da-
maged, and if likely to be, by the evidence before the Par-
liamentary Committee, than was anticipated; therefore as
a consequence that no Government action hostile to the
Bank need be apprehended, and that on its expiration
the Charter will bo renewed as a matter of course. The
rise in India Stock is of course easily accounted for
by the favourable news from that quarter. Exchequer
Bills are coming naturally into demand, from the pay-