RETAIL CREDIT.
WE are glad to find that our observations on Credit have excited con- siderable attention : we have received more than one communication on the subject, and we are not displeased that they afford an apology for recurring again to a subject which is much misunderstood, and which in practice inflicts much evil on the great mass of the .public, without a corresponding advantage to any part of it. We find that we are by no means the first who have endeavoured to expose its workings, or to suggest a remedy. Since the publication of our last number; a well-written pamphlet on the subject has been put into our hands, dated so far back as 1823. So strongly convinced was the very respectable writer, even then, of the evils of the credit system, that he proposed to put an end by statute to all credit under one hundred pounds—or, what was tantamount, to take away the power of suing for any less sum. Something approaching to this is pro- vided in the bill at present before Parliament, in which summary arrest for debts below one hundred pounds is abolished, unless where a special case is made out before one of the Judges. But we rather fear, if the disease was too far advanced in 1823, for so violent a. remedy as the pamphlet proposes, it is absolutely hopeless to look for its adoption in 1830, when all the symptoms have been so greatly aggravated, that the most delicate alterative treatment is required. One correspondent, who signs "R. L." opposes our projected reme- dies ; and he has stated his reasons at length for doing so,—we must say with much candour,—for, on a careful review of them, unless where he has misunderstood us, we find all his statements making for our proposition and against his own. His first objection is, that permission to charge interest on book debts, in the same way as on bill debts, in England, and on all debts in Scotland, would compel the public to limit their purchases to such things as they could pay for in cash or within the appointed time. This is one of the reasons why we recommend the charging of interest on book debts ; and it is rather strange to impute a§ an objection to our plan that it would ac- complish its purpose. Why should any one purchase goods, who has not the prospect of paying for them within the time agreed on ? And if he do not or cannot pay for them according to bargain, why should he not pay the penalty of non-performance ? Every retailer purchases of the wholesale dealer by cash or by bill ;. and on the latter he pays interest from the day it becomes due. Why should not the retailer have the advantage of such a law as well as the wholesale dealer?
"If," says our correspondent, " interest were to be charged by legal autho- rity, the buyer would have to pay interest twice on one debt,—or rather, he would have to pay interest on interest, because the seller often contrives to make a charge for credit, which is comprised in the charge for the thing pur- chased, and thus the seller would be able to defraud the buyer."
Did" R. L." read the article to which he is replying ? Why, it was our chief argument for allowing interest by law, that it is at pre- sent charged without law : our great object was and is, to substitute a definite and known profit for an indefinite and unknown one. To as- sert that, notwithstanding the allowance of legal interest, illegal inte- rest will still continue to be taken in the shape of increased price, is to assert what in the nature of things is impossible, and which would not be submitted to if it were. At present, a shopman imposes an ad- ditional per centage on all goods sold on credit, in order to insure himself against the loss occasioned by dilatory debtors ; we propose to give him a direct remedy instead of an indirect one for this evil ; and " R. L." holds that he will take our cure and his own too. The logicians tell us, when the cause ceases, the effect ceases ; but accord- ing to this doctrine, the removal of the cause leaves the effect pre- cisely where it was. We are accused of taking a partial view of the case—of framing our remedy for the exclusive benefit of the seller. The very contrary is the fact. Our remedy is framed for the special benefit of the honest and punctual buyer, who is at present subjected to grievous overcharges in order to meet the shortcomings of the dis- honest and dilatory buyer. True, it compels buyers of the latter kind to pay for the indulgence they enjoy—and why should they not? But the seller, it seems, will be injured also ; for he, too, has creditors, and " they will charge him with interest in the same way as he charges his customers." If by the retailer's creditors are meant the whole- sale dealers, we have merely to repeat, that they charge him interest at present ; so that in this respect we leave him where we find him; and if by creditors are meant other shopmen with whom he runs accounts, the retailer is, in that point of view, no more than an ordinary con- sumer, and the objection is without value or application. " R. L.' tells us, that " it is not by refusing credit to men who have little money, that we shall put them in a way to pay their debts." True, but by limiting the period of credit within moderate bounds, we shall keep them from contracting debts which they cannot expect to pay. As to shortening the period of credit at a period when money is scarce, it is precisely when money is scarce that the period of credit ought to be shortened. The more frequently payments are made, the smaller quantity of money will serve our purpose. We must, however, dismiss "R. Li" for ii correspondent of another
temper ; whose statements are so important, and his arguments so jnst, that we cannot do better than give them entire, and in his own words.
MR. SPECTATOR—I feel grateful to you for your efforts to introduce a more safe and rational system of credit. In truth, no measure would afford us speedier and more effectual relief. The wholesale dealer,in few instances, allows us even twelve months credit, and it more ordinarily ranges from two to six months ; whilst, on the other hand, we are forced by competition, and by the extravagance and irregularity of our customers, to give twelve months, and two and even three years. To indemnify ourselves, We augment the price, but that alternative is now forsaking us in the advance of competition. I will give one or two instances. The wine-merchant (retail) has nine months credit from the time the wine is shipped : now, as this wine is seldom fit to drink until it has been in bottle'a year or two, interest is charged upon the original price according to the number of years ; it thus remains in the dealer's cellar ; at the end of two or three years, it is probably sold, but the wine-merchant is not paid within another two or three years. Conceive, then, the amount of idle money, which a dealer must have employed in his business ; and exposed, too, to,the risk of never being repaid. Noblemen and gentlemen of fortune often owe their butcher, their fishmonger, and their poulterer, sums of 5001. or 6001. and such tradesman is not only compelled to charge highly, for the sake of indemnity, .but if one of these dilatory gentle- men should learn from another, more punctual and honest, that the articles were purchased by the latter at a more moderate price, the custom of the former would be inevitably lost, the existing debt put in jeopardy, or pay- ment deferred to the latest period, and every effort would be made to injure the poor tradesman. I know one instance of a tradesman, who serves a noble- man of high rank and unbounded wealth, but who loves lung accounts : this unfortunate fellow absolutely dreads the occurrence of an entertainment given bythis nobleman, forassuredly as the event approaches, the purveyor of his lordship relieves the tradesman of his entire stock ; and there is no hope of repayment except at a great distance of time. Resistance would he danger- ous, for the reasons I have already stated. It is in vain to say that the tradesman, if he had spirit, might prevent the recurrence of this dilemma,— one cannot vanquish the custom of many ; and unless the many coalesce, the entire trade of the single reformer would be destroyed, and he would lose his hope of remuneration either immediate or ultimate.
Your suggestion, Sir, that the tradesmen should, after the lapse of the ordi- nary period of credit from the time of purchase, be entitled to charge interest, is extremely valuable; as it will induce customers to consider the advantages of immediate payment, and inflict the punishment upon the right offender— the dilatory customer. And I esteem your second suggestion—that the period of prescription, or, as it is called more commonly, of limitation, be still more limited, as of little less value. Some tradesmen (whose purses are the longest) rind their account in dilatory demands ; and this is not the case of trades- men only, but of professional persons, as surgeons, attornies, and others. It is not possible sometimes to obtain from these people an account of their claim ; and the poor customer or client, having a vague and indefinite notion of his debt, is tempted to expend the means 'of paying it, and by and by is surprised, by an account, which he can only pay by mortgaging his estate, or by a future deduction from income, which he could. have prevented had he been earlier apprized of the exact amount of the claim. This is a serious evil to punctual and scrupulous perSons • and I have known several brought into deep distress by such an unlooked-for demand,-1 mean unlooked-for in point of amount. But a still greater evil is the result of this system; which not unfrequently brings ruin both on the guilty and the innocent. Suppose
a person living in a genteel house, keeping his carriage and a number of ser- vants, and having all the appearance Of a man of fortune: it not uncr,m- monly happens that this appearance is obtained by means of the credit given by the several tradesmen, who 'are' thus conspiring, unwittingly, to effect each other's ruin. For a long time, by small casual payinents on account, this man is suffered to live to twice the extent of his income ; by and by, some poor defrauded tradesman, whose patience is exhausted, peremptorily enforces his claim; and then the truth is unveiled—his creditors find they. have contributed to dupe each other, and but for their mutual forbearance, the embarrassments of their customer could not have been concealed so long. The world often wonders how these men contrive to live: this is the solu- tion of the mystery. If tradesmen were not indemnified for this imprudence by their charges on other customers, the public would not have to regret the punishment. It is not too much to ask, under these circumstances, that tradesmen should make an early demand for their claims, and enforce them— that the innocent public may be saved from the charge of indemnity ; and that they may cease to ruin one another by this profligate system. Nothing would be more desirable than that it should be. broken up ; half the evils oi the memorable 1825 resulted from its operation. Speculators applied their ready money to the purchase of shares, and kept their tradesmen waiting— the evil day came, and both were ruined. It is obvious, in such a case, that the tradesman shares the risk of his customer's speculation, but he receives no compensation on that account, his debtor 'pays no interest on the de- ferred claim ; and, calculating upon the profit of his speculation, he canafford to apply his funds in that way.
The measure you suggest, could be effected by a short bill, for limiting the
period within which actions may be brought for the recovery of simple con- tract debts; and to give the right of interest upon all debts from the next elapsed period of credit,—say for debts incurred between New-year's day and Midsummer, interest from Midsummer ; and between Midsummer and Christ- mas, interest from Christmas-day. There should also he a clause in such bill, that the party claiming should bend fide prosecute his claim, within as short a period as the practice of the Courts would allow. The present Statute of Limitations is often avoided by some technical proceedings. I think the period of limitation may not improperly be assimilated to that of prescription in Scotland—viz, three years ; for I concur with you, that if a man cannot pay in that time, he may reasonably be presumed-not to be able to pay at all : but I should prefer a limitation of two years, and that parties should be com- pelled to prosecute to judgment as speedily as possible. It should be borne in mind, that the present Statute-of Limitations was enacted for a very dif- ferent purpose—viz. to prevent the prosecution of claims after a given period, that parties might not be surprised by the revival of dormant claims. The present proposition extends that principle, while it affords a pretext to the tradesman to make an early claim ; and keeps the debtor alive to his obliga- tion—compelling him, in some sort, to square his expenditure with his in-
come. I am, Mr. Spectator, One of your admiring readers,
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