Poverty and debt

Unlike pawnbrokers who exchanged cash for a pledge, moneylenders advance cash without security. Working-class families usually borrowed only small cash sums and the lender had to decide what risk the debt carried. If the debt could not be repaid. it would have to be written off. Moneylenders who dealt with large sums could, and did, resort to the courts in the event of default, but for small-scale lenders the cost of legal proceedings was too great to justify the effort.Footnote ⁴ Prior to the Moneylenders Act 1927, activities were regulated by the Moneylenders Act 1900 which instigated a very light regulatory touch.Footnote ⁵ Moneylenders were required to register by paying a stamp duty, though the fee was minimal: only £1 for three years, or 6s 8d (33p) per annum to the licensing authority, the Department of Inland Revenue. Registration involved no examination by the authorities of the character, suitability or financial standing of the applicant. There was little protection for the borrower and no clear steer as to the rate of interest that could be charged, or, indeed, how it should be calculated. If a legal dispute arose, the courts were guided by the term ‘harsh and unconscionable’ in judging whether the demands of the lender were excessive, or not. If the contract was judged ‘harsh and unconscionable’, in other words unreasonable, then the court could rule in the borrower's favour, though this was a very imprecise concept and expensive to pursue in law.

The Pawnbrokers Act 1872 limited pawnbrokers’ advances for a single transaction to £10.Footnote ⁶ If a pawnbroker wanted to make an advance greater than this sum, a moneylender's licence was required and a number felt it worthwhile to become licensed. However, the majority of pawnbrokers normally accepted goods such as clothing or bedding as a pledge on which they might advance sums of £2, or often much less. The astute pawnbroker, who dealt with a large number of pledges, faced only a small risk of making a loss.Footnote ⁷ For those with no goods to pledge and an income gap to address, the local moneylender was often the only option. But moneylenders, especially those who lent to the poor, attracted public opprobrium. The large number of licensed lenders who touted for business and preyed on vulnerable people appalled social commentators. When the debt could not be repaid, the borrowers were subject to violence, harassment and threats to cause shame by revealing their indebtedness to neighbours, or to cause fear by informing husbands of the debt.

A snapshot of indebtedness was provided by an investigation, undertaken in 1909, into the budgets of 40 working-class Liverpool families, 35 of which were headed by casual labourers. The ensuing report, although not a representative sample, revealed the crucial role of the pawnbroker and the moneylender in the lives of casual labourers. As housewives struggled to cope with a fluctuating family income, debt was inevitable and the vast majority of the co-operating families were forced to pledge, or borrow. Indeed, only 9 of the 40 families in the survey neither borrowed nor pledged. However, the report stressed that the move from a pawnbroker to a moneylender was ‘a distinct step downwards’. Moneylenders, who were usually female, charged exorbitant rates of interest; they often used ‘personal terrorism’ to enforce payment and by combining lending with hawking they forced the vulnerable poor further into debt. However, although there was clear evidence of intimidation, a few borrowers maintained that they had experienced generous flexibility from their regular lenders. Nevertheless, the report concluded that although widespread dependence on the pawnbroker and the moneylender by working-class families was inevitable, the former was, by a clear distance, the lesser of two evils.Footnote ⁸

It was common for Liverpool working-class husbands to declare their income at the end of the week and extract their spending money. Wives had to trust their husband's honesty because as the weekly wage was irregular, they could not be certain what had been earned.Footnote ⁹ The husband's spending money usually included allowances for cigarettes, alcohol and betting and many men believed that ‘extras’ from sources such as overtime or tips were part of their personal rather than the family budget.Footnote ¹⁰ Wives were expected to manage the household on the money allocated to them, no matter how meagre it was. Indeed, the wives themselves believed that they should be able to provide prudent management. This was their vocation and if they were successful it was a means of ensuring domestic harmony. However, if they failed and the household plunged into debt, it was clear who was to blame.Footnote ¹¹

Glazeley and Newell argue convincingly that absolute poverty amongst working households in urban Britain was virtually eliminated between 1904 and 1937. The two most significant drivers for this betterment were an increase in real wages of about 30 per cent combined with a reduction by one third in the number of people in the average household during the same period. The authors emphasize that their estimates do not include the households of the unemployed and indeed they specifically mention that the poverty rate on Merseyside was relatively high because of joblessness.Footnote ¹² The propensity amongst Liverpool's poor for large families also made it difficult for them to escape from poverty.

Only a minority of Merseyside workers experienced good times during the inter-war years and amongst them were some registered dock workers whose average real wages rose by 70 per cent between 1913 and 1930. Not all registered dockers experienced this good fortune and there was a very wide spread in weekly wages along the river front.Footnote ¹³ However, from 1921 registered dockers were eligible for statutory unemployment relief if they were engaged for no more than three days during a working week. Dock workers were able to exploit the unemployment insurance system more than any other industrial group by ensuring that they were only hired for three days work with the certain knowledge that they would receive benefits for the remainder of the week.Footnote ¹⁴ In 1929, about three-quarters of registered dockers claimed unemployment benefit.Footnote ¹⁵ If we look at the Merseyside labour force as a whole, however, unemployment, casual labour and low wages ensured widespread misery.

In 1932, one out of every three insured men, and one out of every seven insured women in Liverpool was unemployed. More than 70 per cent of the unemployment amongst insured workers was concentrated into three industrial groups: shipping and related industries; transport and distribution; and building. Liverpool's economy was heavily reliant on the prosperity of its port that, in turn, depended on a flourishing international trade for the provision of full-time jobs. In 1932, 44 per cent of the insured labour force in shipping was unemployed. When men were at sea, the shipping companies made weekly payments to their wives, which, in 1931, averaged £1 5s (£1.25p). This sum, approximately two-thirds of the seaman's wage, was inadequate to support a family in the absence of the husband, and inevitably debts were run up.Footnote ¹⁶

Unemployment and the financial roller coaster caused by casual employment, forced many families to develop survival strategies. Casual male workers used slack time to try painting and decorating; they offered to do odd jobs, or even become bookies runners. However, it was women with families who felt most pressure as all items of household expenditure were their responsibility, no matter how low their weekly budget. They had a powerful incentive to earn extra money, or to help each other through local networks. Women would take in lodgers if they had the space, take in laundry or mind children; they would undertake sewing at home, look for work in jam, pickle or sweet factories, clean offices, engage in hawking, or street selling, or become moneylenders. For widows, the divorced or abandoned wives, these economic lifelines were crucial.Footnote ¹⁷ Unfortunately, married women's employment in Liverpool was lowly paid, part-time and insecure.Footnote ¹⁸ Local networks, often family based, were essential for practical and emotional support.Footnote ¹⁹ The advantages of living close to relatives who could offer assistance, such as child minding, meals or even emergency accommodation, had clear advantages. However, survival strategies, even when vigorously pursued, could not remove the necessity of a visit to the pawnshop, or to the moneylender. Given their household managerial responsibilities, it was inevitable that women accumulated debts and would do so without the knowledge of their husbands.Footnote ²⁰

In June 1920, Dorothy Clarissa Keeling was persuaded by Eleanor Rathbone to move to Liverpool and take up the offer of a joint appointment as secretary of the newly formed Personal Service Committee and head of the Victoria Settlement Office of Friendly Help.Footnote ²¹ Her annual salary was £250. Aged 37 in 1920, she was formidable, intelligent and strong minded with vision which enabled her to overcome her natural shyness.Footnote ²² Like her mentor Eleanor Rathbone, and many of the women who dominated the social work profession in Liverpool, she never married. Keeling responded vigorously to the social challenges evident in Liverpool, a city which in her words, displayed ‘great wealth and devastating poverty’.Footnote ²³ It was, however, the work of the Personal Service Committee of the Liverpool Council of Voluntary Aid, to give it its full title, which caught her imagination and gradually absorbed her energies. In February 1922, the unwieldy constitution of the committee was replaced by a more efficient set of rules and its name was changed to the Personal Service Society (PSS).Footnote ²⁴

It was not long before moneylenders attracted the attention of the PSS. A meeting of the PSS General Committee, held during October 1923, expressed the unanimous view that steps should be taken to combat the ‘evils’ that resulted from the actions of ‘exploitive’ moneylenders. There was widespread support for a name and shame policy that would lead to the prosecution of aggressive lenders and have their misdeeds reported in the press. The Moneylenders Act (1900) was denounced as unfit for purpose. These Liverpool social workers called for the imposition of a fixed rate of interest, a reduction in the number of lenders and a requirement that all lenders should be forced to file a bond at the time of registration. A decision was also taken to establish a PSS Loan Fund that would offer an alternative lending facility to selected needy clients.Footnote ²⁵ Attitudes towards moneylenders had hardened since the publication of the 1909 Report, though there is no evidence that working-class indebtedness had become a bigger problem.Footnote ²⁶ The stage was set for a battle between Liverpool's mostly female middle-class social workers, and small-scale moneylenders most of whom were working-class women. The majority of the borrowers that social workers strove to protect were also female and working class.

The PSS Loan Fund was formed in November 1924 with a modest capital of £100. In spite of two further contributions amounting to £150, the fund was close to exhaustion in August 1925. By 1927, private contributions had increased the capital sum to £947, with a further £102 held in reserve to be distributed to special cases. Annual interest charges were always low; initially 5 per cent on secured and 9 per cent on unsecured loans. In addition, there was an administrative charge of 6d (2.5p) on each loan payable when the loan was made. All other overhead expenses were met by the PSS. After a year, the distinction between secured and unsecured loans was discontinued.Footnote ²⁷

It is not surprising that the PSS was inundated with applications (over 500 in the first year of operation). All serious applicants were interviewed on their need for a loan, how the money would be spent and if the repayment schedule could be managed. The requests were considered by a case committee that met at least once, but sometimes twice, each week and comprised two experienced social workers, a solicitor, a barrister and two accountants. The case committee decided whether to award a loan, or to redirect the application to an appropriate public or private welfare source, or to reject the request. The fund advanced sums ranging from £1 to £20 and the money provided an important means of support for individuals struggling to achieve a degree of self-reliance. For example, loans helped women to buy the outfits that they needed to go into service and enabled men to resume their work as ships’ stewards after a period of unemployment when their uniforms had been sold. The PSS Annual Report (1925) proclaimed that the loans performed another vital function. They assisted those ‘who are in danger of becoming the victims of unscrupulous moneylenders and those already in the net’. Indeed, in the first eight months of its existence, the fund received 166 applications, 36 per cent of which were successful and 13 per cent enabled the recipients to clear their obligations to moneylenders.Footnote ²⁸

Keeling gained an insight into the effects of indebtedness after assuming the chairmanship of the Moneylending Committee, which was appointed by the Liverpool Women's Citizens Association. In 1924, she organized a survey of licensed moneylenders covering both Liverpool and Birkenhead. By checking and recording the names and addresses of all licensed moneylenders in Liverpool and in Birkenhead, Keeling and her colleagues discovered that there were 1,380 registered lenders, 80 per cent of whom were women.Footnote ²⁹ The study quantified what had long been common knowledge: that women dominated small-scale street lending.

What particularly exercised Keeling, however, was not merely the large number of licence holders but that the usual rate of interest charged by women lenders was one penny (0.42p) in each shilling (5p) borrowed per week. According to a horrified Keeling, this was an annual rate of 433 per cent and clearly extortionate.Footnote ³⁰ Moreover, sometimes rates of two pence for every shilling, or even higher could be charged on loans if the lender felt that the borrower was a high risk. A charge of one halfpenny (0.02p) was normally imposed for late payment. Keeling's sense of outrage intensified when she observed that these lenders were all acting lawfully. Indeed, she found few examples of unlicensed lending. For their part, the borrowers were unimpressed with the universal condemnation by social workers of moneylenders’ charges. To them, the issue was simple: it cost a penny to borrow a shilling for a week and that did not seem unreasonable. Moreover, they borrowed for very short periods, sometimes just for a week, so an annualized calculation was not one that borrowers found realistic. Another common arrangement saw the borrower receive 17s 6d (87.5p) after agreeing to a repayment schedule of 1 shilling per week for 20 weeks. Taking the interest payment upfront was normal practice and was of considerable benefit to street lenders operating with small capital sums.

Miss A.R. Caton, a close colleague of Keeling, was honorary secretary of the Liverpool Women's Citizen's Association. She claimed that the ‘evil’ of moneylending had spread to such an extent that one in three Merseyside wives and mothers in ‘the very poor class’ were in the grasp of moneylenders who were of the same class as, or even neighbours of, the borrowers themselves. Many of these women were also hawkers who sold used clothing and fish in addition to lending money. Caton detailed the complex financial tangles that engulfed many women who borrowed without fully understanding the implications of the debts – burdens of which their husbands were blissfully unaware.Footnote ³¹ Caught between bullying moneylenders and terrified of the reaction of their spouses, these women endured a miserable existence. Caton's account was not considered an exaggeration.

The regulation of moneylending

In 1925 a Joint Select Committee of the Houses of Lords and Commons, chaired by Lord Justice Charles Darling, was established to consider a Moneylenders Bill that had been under parliamentary scrutiny for some time. Of the 26 witnesses who were called to give evidence to the committee only one, Dorothy Keeling, was female. Moreover, as no working-class borrowers were called, Keeling was one of a minority of witnesses who had experience of street moneylending. Her prominence in this national debate was a tribute both to the energetic way in which she had examined the social costs of licensed moneylending in Liverpool and the publicity her efforts had generated. PSS colleagues were confident that the public would soon agree with them that ‘[P]robably no other social evil inflicts greater distress and mental agony’ than moneylending.Footnote ³² This powerful condemnation from an informed source presents a vivid picture of the loathing that this form of usury generated.

Keeling gave her evidence on 19 June 1925 and used the opportunity to publicize what she believed were the current ‘money lending evils’.Footnote ³³ These included the exorbitant rate of interest charged, the unsatisfactory method of licensing lenders and the vague nature of the agreements between borrowers and lenders. Keeling vigorously attacked lenders who operated from their own homes offering to lend small cash sums at high rates of interest. A sharp reduction in their numbers was a matter of urgency according to her and she illustrated her points forcefully by drawing on the findings of her Liverpool and Birkenhead survey and her wide experience of dealing with the results of indebtedness. It was a crisp and cogent attack on the morality of street lending. Her impressive investigative work gave Keeling an authority that was also evident when she responded to the questions raised by committee members. The loan market, she asserted, was driven by Liverpool's high unemployment rate and dependence on casual labour, an unhappy state of affairs neither she nor the committee could alter. Keeling recognized that poverty forced people to borrow but she stressed the need to protect the borrower.

Keeling called for an increase in the annual moneylenders’ licence fee to £10, the introduction of a maximum annual rate of interest on unsecured loans of 60 per cent and 15 per cent on secured loans, and for lenders to make a declaration of their financial circumstances. She presented committee members, already hostile to small-scale lenders, with empirical justification for their views and her verbal assault was reported in both the national and local press.Footnote ³⁴ Shortly after giving her evidence, she was physically attacked, for the only time in her career, in a Liverpool back street by an irate moneylender.Footnote ³⁵

Keeling's testimony made a deep impression on committee members and they frequently referred to it as they questioned other witnesses. Captain Robert Gee, for example, concluded that Liverpool could be considered as ‘one of the black spots in usury’.Footnote ³⁶ Several witnesses confirmed the existence of predatory female lenders and emphasized the dangers of working-class debt. Many examples of weekly loan rates of two pence or more for each shilling borrowed, far in excess of rates which caused Keeling such concern, were quoted. Colonel Watts-Morgan was in no doubt that women offering small loans were ‘sapping the root of our social life. It is a curse.’Footnote ³⁷ There was general agreement that a steep rise in the registration fee was needed to ‘cleanse the profession’ by driving most of the small lenders out of business.Footnote ³⁸ Witnesses revealed a variety of loan and repayment arrangements. For example, one lender explained that he advanced £5 to borrowers repayable at 2s (10p) in the £ per week over a 12-week period. He claimed that this represented an interest rate of 20 per cent but the committee countered that it was an annual rate of 160 per cent.Footnote ³⁹ Evidently, there was considerable confusion concerning the calculation of interest rates, and even experienced accountants would produce different answers when asked to perform this task.Footnote ⁴⁰

The joint committee's report was published in July 1925 but further debate and amendments in both Houses meant that the bill did not become law until 29 July 1927. The Moneylenders Act 1927 became operative on 1 January 1928. Many parliamentarians shared the sense of moral outrage about moneylending that the joint committee revealed and commentators often qualified the noun ‘moneylender’ with the accompanying adjective ‘evil’.Footnote ⁴¹ Melanie Tebbutt makes an interesting comparison between the status of the small-scale lender with that of the back-street abortionist. The lender was despised but this was contempt expressed from a distance as the needy one day might require the lender's services.Footnote ⁴² The affluent, who never needed to borrow from moneylenders, were especially scornful. Larger-scale lenders were often denounced as ‘Shylocks’ who lured young professionals into debt. As O’Connell observes, there is more than a mere whiff of anti-Semitism in the comments of members of the joint committee.Footnote ⁴³ In particular, the conviction was that central or eastern European lenders who, in order to disguise their nationality, chose to trade under an assumed British name, were behaving in a deceitful manner.Footnote ⁴⁴

Parliament favoured a significant reduction in the number of lenders, although there was no collective view on what the total should be. To help achieve this end, the cost of the annual licence fee was sharply increased from 6s 8d (33p) to £15 (over 4,300 per cent) and the responsibility for licence registration was transferred from the Board of Inland Revenue to the Commissioners of Customs and Excise.Footnote ⁴⁵ Each licence was tied to a single address, compelling lenders to purchase additional licences for every address from which they traded. Moreover, every licence had to be taken out in the true name of the applicant. The employment of agents to tout for business and the distribution of unsolicited circulars or advertisements was prohibited. Licensed pawnbrokers who wished to engage in moneylending paid a reduced annual fee of £7 10s (£7.50p).Footnote ⁴⁶ The licensing period for moneylenders ran from 1 August to 31 July.

The joint committee considered the imposition of low annual interest rates ranging from 10 to 15 per cent. However, lenders argued that given the lack of security in their loans, and the risk of unrecoverable debts, interest rates below 60 per cent would render their businesses unprofitable.Footnote ⁴⁷ Lenders also opposed the proposal that rates on small loans should be capped at a much lower level than larger advances on the basis that administrative costs were proportionately greater for small loans, and that lenders would have a vested interest in trying to persuade clients to take out a larger loan than was needed. Finally, an unacceptably low interest ceiling on small loans would reduce the number of legitimate lenders and force working-class borrowers to turn towards loan sharks.

Taking these objections on board, legislators chose not to set a maximum rate of interest on loans. Instead, 48 per cent was identified as the threshold where lending could become ‘harsh and unconscionable’. However, the act stipulated that only simple interest, calculated on an annual basis, could be used for interest rate calculations; the use of compound interest was made illegal. Borrowers were additionally protected by the ruling that when a default occurred, the lender could only charge simple interest from the date of the default until the time of repayment. In fact, 48 per cent became the standard rate for most lenders and for the benefit of both lenders and borrowers tables were produced to show exactly the repayments schedule using simple interest. Parliament did not impose a maximum rate of interest on loans: 48 per cent was the point at which the interest rate could be challenged. If the lender could show that the borrower represented a particularly high risk, and that the repayment details had been fully explained, a court might rule that a charge in excess of 48 per cent could be justified.Footnote ⁴⁸ However, it was also possible for a court to decide that, under some circumstances, 48 per cent was an excessive charge. Once the act was in place, £1.00 borrowed for one week incurred a 2d (0.83p) interest charge; if borrowed for one month the cost was 9 1/2d (4p); the cost for six months was 4s 9d (24p). Previously, £1.00 borrowed for a week at one penny in each shilling would have cost 1s 8d (8.4p). In other words, borrowing costs were sharply reduced.

Borrowers also benefited from the transparency which followed from the adoption of simple interest rate calculations. At last they knew exactly how much was needed to repay over the time period of the debt. It is unclear why parliament concluded that 48 per cent was an appropriate level for moneylending operations. It is probable that politicians believed that 48 per cent was the lowest figure they could reasonably impose on the industry without driving it underground entirely. To the casual observer, however, 48 per cent might seem an unacceptably high rate of return for the lender. Could it be justified?

An examination of the PSS Loan Fund illustrates some of the problems faced by lenders. By late 1927, when the fund had been in operation for three years, 403 loans had been made. Of the £2,110 that had been advanced to borrowers, only £250 (12 per cent) had been repaid from 113 individuals, and 39 borrowers had almost been repaid in full. However, 11 debts, representing just 1 per cent, had been written off and 17 debtors had vanished without trace. In an extraordinary admission, the PSS reported that legal proceedings had been taken against delinquent payers in 94 instances. Proceedings were sometimes limited to a solicitor's letter but the ultimate sanction of a court appearance was also applied.Footnote ⁴⁹ Legal action was costly and it is unlikely that the PSS would have been able to resort to law as frequently had it not been able to call upon voluntary contributions from case committee members and some Liverpool legal practices. All PSS clients who were in default on a loan which carried a very low interest charge, had been interviewed by experienced officials. They had been chosen with great care but still late payment was apparently common and the default rate high. Street lenders were not able to interview their prospective clients in such a detailed manner, and nor could they use the law to threaten tardy payers. Interest charges had to compensate them fully for the real risks that they took. Under the circumstances, 48 per cent was not unreasonable.

As legislators were convinced that many lenders had serious character flaws, a test was introduced which was designed to prevent the most noxious from trading. In order to apply for a moneylender's licence, each applicant was compelled to secure a certificate and the application process was an opportunity for magistrates to weed out undesirable characters. As a first step towards certification as a moneylender, the applicant's full name and address from which the business would operate had to be published in a newspaper to alert any member of the public who might wish to object to the application. The applicant also had to supply the court with a response to a questionnaire which included a demand for full details of any registrations under previous and current Moneylenders Acts, and information on any convictions or disqualifications relating to them.Footnote ⁵⁰

Prospective Liverpool lenders then made an application to the Petty Sessions court and, on a fixed date, appeared in person before a magistrate. Each applicant had to convince the magistrate that the correct procedures had been followed, that their intention to become a licensed lender had been published, that their questionnaire had been satisfactorily completed and that they were fit and proper persons to operate as moneylenders.Footnote ⁵¹ During this examination, there was no attempt to assess the financial standing of the applicant, no probing test of financial competence, or even to ascertain basic ability in numeracy and literacy.Footnote ⁵² This was a character test pure and simple and one that must be passed since the certificate was a prerequisite for a moneylender's licence. The imposition of a character examination was a clear indication of the low esteem in which moneylenders were held and must have acted as a disincentive for many street lenders who doubtless viewed an appearance before a magistrate as intimidating.

Keeling had recommended to the joint committee that an annual registration fee of £10 and a maximum interest rate of 60 per cent on unsecured loans would successfully regulate moneylending. Parliament went much further. The act sharply increased the cost of a moneylender's licence, laid down clear rules regarding interest charges and, with the introduction of the certificate, attempted to cleanse the profession of undesirables. A combination of an increased financial burden and bureaucratic regulation was designed to make life difficult for working-class lenders and to reduce their numbers. One danger of this strategy was that it created a greater incentive for lenders to operate illegally. To counter this possibility, the act introduced a potentially draconian threat: a fine of up to £100 that could be imposed on anyone found guilty of illegal moneylending.

Moneylenders and the community

The process of certification was time consuming and costly and not to be undertaken lightly. The records show that no one who applied for a certificate in Liverpool during the period under examination was rejected which suggests that those who believed that their application might be unsuccessful did not bother to apply. It is not unreasonable to assume that applicants who obtained a certificate would take the next step and pay £15 for a moneylender's licence.

In Table 1, applicants for certificates are divided into three groups.Footnote ⁵³ First, applications from individuals who were acting on behalf of the finance houses that employed them have been isolated. These enterprises had offices usually located in Liverpool's financial quarter, they offered a range of financial services, could advance relatively large loans and were of a sufficient scale to have obtained limited liability status. Second, all the males who were awarded certificates have been identified. Many of these men conducted their moneylending from commercial addresses and their lending was additional to their principal business activities. Of the 66 males who were awarded certificates for 1934–35 and whose occupations are listed in Kelly's Directory, 16 were pawnbrokers, 9 were described as financiers or agents, 6 were drapers and 5 ran furniture stores. In addition, there was a plumber, a coal merchant, a commercial traveller, a grocer, a painter, an engineer and a credit draper. These business activities provided the working capital for lending activities; some of them, for example, pawnbrokers and financial agents, advanced sums greater than many street lenders deemed prudent.Footnote ⁵⁴ For example, workmen would borrow to acquire or replace tools. Such borrowing was an investment from which a stream of income was expected to flow, and was in sharp contrast to borrowing to put food on the table.

Table 1

Moneylenders’ certificates: Liverpool 1934–49

** 30 names and addresses missing from 1947–48 lists.

Source: Liverpool Record Office, 347 MAG/11/1.

The third group identified were women and were by far the most numerous applicants in Liverpool and elsewhere.Footnote ⁵⁵ In contrast to males, very few women operated from an address that was not their home. In 1934–35, no more than 10 out of 216 female applications provided commercial addresses, some of which are pawnbroker businesses. Of the total number, 11 were listed as shopkeepers, operating alone or with their husbands. It is difficult to obtain information on female certificate holders because the majority lived in courts, or in the narrow terraced streets that commercial city directories ignored. However, where the occupations of husbands can be traced (in 1934–35), many list an unskilled occupation. There were, for example, eight labourers, three riggers, two carters, a ship's scaler, a seaman, a painter, a warehouseman and a coal dealer. This suggests that the family circumstances of these lenders were modest and that a substantial amount of capital was not required to operate as a street lender. It also identifies the close spatial bond between lenders and borrowers who lived in the same or adjacent streets and shopped and worshipped together. There was a fourth and final group, illegal lenders, on whom information is lacking apart from the occasional prosecution.

Even though the Moneylenders Act 1927 was a significant piece of legislation with clearly stated aims, parliament made no attempt to monitor its impact by instituting an annual count of certificates or licences issued. Before 1928, a central register of licensed moneylenders was kept by the Registrar of Companies at Somerset House. After 1928, no information was forwarded to Customs and Excise and, as a result, there is only sketchy national data.Footnote ⁵⁶ During the first six months of 1928, for example, 4,086 licences were issued; between March 1931 and March 1932 the figure was 3,519.Footnote ⁵⁷ It would appear that approximately 10 per cent of the nation's moneylenders were located in Liverpool and that a principal aim of the act, namely a significant reduction in the number of registered lenders, was achieved both in Liverpool and nationally. Although the survey of lenders organized by Dorothy Keeling in 1924 included Birkenhead, and the figures in Table 1 relate to Liverpool only, the overall numbers were drastically reduced after 1927. In the 1924 Keeling survey, women lenders constituted 80 per cent of the total number; in 1934–35, only 65 per cent of the certificates were issued to women. Payment of £15 for an annual licence would not present a finance house or an employed male with a significant financial problem, but it was a considerable sum for a street lender. In addition, the prospect of an annual application for a certificate must have presented a burden even for those with a sound business and impeccable character.

Licensed moneylending was a legitimate activity throughout the United Kingdom but the evidence suggests that lenders were clustered in large cities. None of the respondents in Elizabeth Roberts’ study of working-class women in Barrow, Lancaster and Preston, for example, used moneylenders, though they did borrow from relatives, neighbours and pawnbrokers.Footnote ⁵⁸ The role of women moneylenders was important in all Britain's major cities. In Liverpool, they dominated the trade in street lending and they were an integral part of the same inner-city community that borrowed from them. It is rare to find a female lender operating in the suburbs, or even in the new council housing estates.Footnote ⁵⁹ The lender's local knowledge was crucial as each weighed up the credit worthiness of applicants for cash advances. Close networks were a feature of life in working-class communities where mobility was limited. Many women had no paid employment and daily shopping trips and visits to public laundries provided ample opportunities for an exchange of information that included the availability of credit and the existence of defaulters. The decision facing lenders could be a straightforward one for relatives, regulars or neighbours, or fellow Catholics or Protestants. Those unknown to the lender might produce a paid-up rent book, or some evidence of a husband at work as an indication of an ability to repay. Even receipt of unemployment benefit increased the credit worthiness of the jobless. A call at the home of a moneylender was not a visit where anonymity could be guaranteed and in the courts and back streets everyone knew where the moneylenders lived and why non-family members might call. Visiting a distant lender might ensure privacy but it also ensured that the borrower would be treated with extra caution. A visit to the moneylender was often stigmatizing and oral historians have found that interviewees were often reluctant to discuss these encounters.Footnote ⁶⁰

Most female lenders would be readily available to see prospective borrowers during the day or the evening and be prepared to make an instant decision whether to advance cash. As the majority of the borrowers were women, the interaction between them and female lenders, especially as the request involved a house visit, was easier than if a man had been involved. Lenders needed very small capital sums to fund their activities and it was even possible to function as a lender while in receipt of unemployment benefit.Footnote ⁶¹ Some lenders had the cushion of an income provided by a working husband, or the security of a business, such as a corner shop. Others, for example widows, had a small pension. If there was a regular turnover, then a continuous flow of lending could be maintained. It was, of course, vital to keep bad debts to a minimum and consequently the hardnosed ability to refuse loans and pursue late payers, whether they were friends or relatives, was essential for a successful moneylending business. Tactics for the recovery of debts often included confronting defaulters in public, calling at their homes, informing neighbours and other moneylenders and, eventually, involving their husbands.Footnote ⁶² Street lenders did not use the legal system to recover the sums due to them and women lenders often dealt with bad debts themselves with many quite capable of employing tactics of verbal and even physical aggression. There is no evidence of males being used by Liverpool's female moneylenders to give added force to threats, though it would be unreasonable to assume that it never happened. Nor should we imagine that borrowers escaped unscathed when their husbands became aware of the level of debt that had been incurred.Footnote ⁶³ Lenders, however, had to recognize the inevitability that they would be forced to write off some debt. It was a persistent risk of their trade.

Unfortunately, neither the borrowers nor the lenders kept diaries to provide details of their negotiations, and there are no oral history recordings that give an insight into a borrowing and lending world that was changing rapidly during the 1930s. However, the accounts that appear in J.P. Dudgeon, Our Liverpool, reflect precisely the recollections of this author whose widowed grandmother, Mrs Mary Fearon, was a licensed moneylender between the 1930s and 1950s, operating from her terraced house in Bootle.Footnote ⁶⁴ Dealing with a steady stream of callers who wanted to borrow or repay loans was a feature of the moneylender's life. Her clients entered the house but usually stood in the hall where transactions took place. Only very rarely was the front room (or parlour) used, and business was never conducted in the living room in front of the family. The lender wore an apron under her skirt with multiple pockets for cash, notebooks and other relevant materials.Footnote ⁶⁵ Constant availability was a very important part of the borrowing/lending relationships which home-based women lenders were able to provide. It was, however, a service of, and in, crisis.

Table 1 shows that the number of licensed moneylenders declined annually throughout the 1930s, a decline that actually gathered pace during World War II. Before the war, however, the contraction in the number of certificates issued to limited liability finance houses is not marked. Conversely, certificates issued to males fell from 66 to 48, while those to females declined steadily by 30 per cent, from 216 to 151. There were very few new entrants to replace them and no upsurge in paid employment to entice women moneylenders away from what had previously been regarded as an attractive financial return. The war years witnessed further sharp erosion. By 1944–45, only 27 males and 47 females held certificates and there was no increase in the number of females during the first few years of peace. During the 20 years since the implementation of the Moneylenders Act 1927, there was a significant contraction in the provision of licensed lending, particularly for the impoverished.

Why did this persistent decline in the number of licensed moneylenders take place? There is no doubt that the financial rate of return to licensed lenders declined substantially after 1927 and the need to obtain a certificate was a disincentive to remain in what had previously been a rewarding trade. After all, one of the principal aims of the 1927 Act was to limit the number and the nature of moneylending. There were, therefore, powerful forces which could explain why the number of licensed lenders declined. Was there also a reduction in the demand for loans because of a marked improvement in the social and economic well-being of the Liverpool poor?

Even a cursory examination of the demand side of the lending equation reveals reasons the market for loans should have remained buoyant until war intervened. When researchers for the Pilgrim Trust visited Liverpool during the 1930s, they were shocked at the level of deprivation they discovered.Footnote ⁶⁶ They found that the incidence of long-term unemployment was similar to that in the depressed coal-mining community in the Rhondda. In Liverpool, the long period jobless were concentrated in the densely packed slums of the inner city. In 1931, the population of Liverpool reached its peak: 846,101.Footnote ⁶⁷ Overcrowding and squalor inevitably gave rise to ill-health which was both a cause and a result of persistent unemployment.Footnote ⁶⁸

A large proportion of its unemployed men were in the youthful 18–35 years age group and, consequently, the Liverpool unemployed had a disproportionately high number of dependants compared to other urban places: for every 100 long-term unemployed men in Liverpool there were 324 dependants. The figure for the Rhondda was 254, and for Deptford 184.Footnote ⁶⁹ Larger families not only created more mouths to feed, they also made it difficult to find space for lodgers, or to accommodate relatives who could share living expenses. A combination of high unemployment amongst young males, the burden of relatively large families and very low wage rates for juveniles explain why there was a gap between family budgets and family needs. Investigators noted many poorly managed homes and concluded that the ‘Liverpool visit left such a deep impression of poverty’.Footnote ⁷⁰ These findings confirmed the picture of intense deprivation that D. Caradog Jones and his team identified in 1934 in their detailed and authoritative three-volume study: The Social Survey of Merseyside.

The vigorous recovery that followed the departure from the gold standard in 1931 was regional rather than national. Foreign trade was no longer a powerful engine of economic growth for the UK economy and consequently Liverpool docks remained depressed. Although the city's economy revived during the mid-1930s, it was a modest recovery which failed to produce a significant reduction in unemployment.Footnote ⁷¹ Thanks to unemployment benefit and public assistance, working-class families were better off during the inter-war period than they had been before 1914, even when the benefits were means tested.Footnote ⁷² Indeed, the monetary gap between those out of work and the low-paid employed lessened considerably but not sufficiently to avoid financial crises.Footnote ⁷³ However, in spite of these improvements, it is likely that 24 per cent of all dockers’ families existed below the ‘poverty line’ during the 1930s.Footnote ⁷⁴ All the evidence suggests that the demand for loans from street lenders should have been as high in the 1930s as it was during the 1920s. The precipitous decline in the number of moneylenders’ certificates issued to both men and women during the 1930s cannot be explained by a dramatic improvement in the economic circumstances of the Liverpool working class.

Did the fall in the number of licensed street lenders lead to greater use of unregistered usurers, the ‘evil’ people that the Moneylenders Act 1927 was designed to eliminate? Periodically, The Times reported on the court appearances of unlicensed moneylenders who had been apprehended and charged but there were very few reports and there was no indication that unlicensed lending at prohibitive interest rates was becoming a national problem.Footnote ⁷⁵ Nor does a study of the Liverpool PSS Loan Fund throughout the 1930s reveal an upsurge in unregistered lending. The PSS Annual Report stated in 1928 that the Loan Fund had rescued many people ‘from the clutches of unscrupulous moneylenders’.Footnote ⁷⁶ Two years later, of the 91 loans granted by the Loan Fund during 1930, only 5 were to assist clients with debts to moneylenders; the Seventeenth Annual Report (October 1934 – September 1935) showed that in 1935 none of the 114 advances from the Loan Fund were to rescue borrowers from the grasp of the street lender.Footnote ⁷⁷ Of the 93 loans awarded between 1 October 1936 and 30 September 1937, only 2 were given to help with moneylenders' debts; between 1 October 1940 and 30 September 1941 there were none.Footnote ⁷⁸ The PSS believed that the 1927 Act would eradicate ‘much of the misery caused by exorbitant rates of interest’, and given the prominent role of Dorothy Keeling in the creation of that legislation it is inconceivable that a resurgence of illegal lending would have gone unnoticed.Footnote ⁷⁹

It is possible that the prosecution of some unlicensed lenders was more difficult than it would appear and there were escape routes for the most cunning. On questioning, some alleged offenders claimed that they were collecting for Didlum clubs, or running a credit drapery business. Others went to a great deal of trouble to conceal their illegal activity by concocting a double set of accounts, one of which would show lending at 48 per cent.Footnote ⁸⁰ But these devices must have been an escape for the inventive few. In June 1939, Mrs Kate Skillett pleaded guilty at West Ham Police Court to illegal moneylending. She had kept no records, issued no receipts to her borrowers, had never applied for a moneylender's licence and her weekly charge was the traditional one penny for each shilling borrowed. Detective Sergeant Fairchild, who apprehended Skillett, believed that she was a large-scale lender. So delighted were Customs and Excise officials with a successful prosecution that a reward of £1 for Fairchild was proposed. His superior officer sensibly declined the offer on Fairchild's behalf.Footnote ⁸¹ By their offer, Customs and Excise indicated how rarely prosecution for serious breaches of the moneylending laws occurred. The inescapable conclusion is that if illegal moneylending became widespread in the 1930s, knowledge of such activities would have leaked out within local communities and been reported. There is no evidence of such a problem nationally, or in Liverpool. Moreover, it is important to ask why borrowers would have approached an illegal rather than a licensed lender. The rate of interest demanded by the former was considerably higher, and the business transaction far less transparent. All the incentives would direct the borrower to the licensed provider though as their numbers fell, an illegal lender might be more convenient. The puzzle is that during a decade of great economic hardship in Liverpool licensed moneylending was in decline and yet there is no evidence that the poor, who must have faced regular crises in their family budgets, turned to illegal lenders in appreciable numbers.

Could financially distressed families have spurned moneylenders and used the services of pawnbrokers instead? A.L. Minkes’ study shows that this was unlikely as pawnbroking also contracted. The number of pawnbrokers’ licences issued in Great Britain halved between 1914 and 1940 with significant reductions in London and Liverpool. Minkes also contends that that between 1931 and 1950 the number of moneylenders licences issued nationally fell by 56 per cent; the decline in the number of pawnbroking licences was, at 53 per cent, almost identical.Footnote ⁸² Taken together, the reduction in the number of pawnbrokers and licensed moneylenders amounts to either a drastic reduction in the provision of credit for working-class borrowers, or a reluctance on the part of those who one would assume needed credit to avail themselves of it.

The fall in the number of moneylenders’ certificate holders accelerated rapidly with the onset of war, and the modest recovery when hostilities ceased is almost entirely reliant on an increase in the number of male lenders. The low levels reached in 1944–45 are proportionately greatest for female lenders (Table 1). It is easy to suggest reasons why the moneylending market changed dramatically during this period. The war brought both full employment and great disruption to working-class communities. Conscription to the armed forces and increasing employment opportunities took many young men away from their homes, as did the evacuation of school age children. There were also civilian jobs for older men, and for women too, where a full working week and overtime boosted family incomes spread over fewer members. But the war also created a great deal of uncertainty, especially in the centre of Liverpool where the ‘blitz’ was particularly intense. During the worst of the bombing in May 1941, many houses close to the waterfront were reduced to rubble and the casualties were alarmingly high.Footnote ⁸³ Some residents were forced to leave their homes and others chose to do so. This disruption to close-knit neighbourhoods fundamentally altered the relationships between borrowers and lenders. Perhaps more important, the introduction of rationing curbed the freedom of consumers to spend their newly acquired wealth. A combination of rising family income and rationing reduced the need to borrow. By the early post-war years the licensed moneylending trade was a pale shadow of what it had been just 15 years previously. If the Moneylenders Act (1927) is to be judged on its ability to bring this ‘evil’ business to near extinction, it was a remarkably successful piece of legislation.