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Thursday, 20 December 2012

'Pay-day' loans are nothing new

'The Accommodation Bill' 1864
As long as people have been short of money, there have been ways of borrowing it. And in general, the more desperate a person was for the money, the higher would be the cost to them of borrowing even quite small sums. That hasn't changed either. Many of us have heard of pawn shops, even if we have no experience of using them, and they feature quite a lot in literature. The plots of a number of Charles Dickens' stories revolve around debt, much of it based on his own experience - his father, John Dickens, was notoriously improvident, and Mr Micawber in David Copperfield is said to have been based on him. Mr Pickwick and Mr Dorritt even find themselves imprisoned for debt, and Dickens is by no means the only Victorian writer who returns to this theme over again.

Some of us have even found records of ancestors' appearances in the bankruptcy courts, or at least a notice in the London Gazette. While doing some research on the General Register Office I found a number of references to clerks who got into difficulties with money, particularly in the 1840s and 1850s. In 1847 the Registrar General, George Graham, wrote 'I daily find great inconvenience from the irregular attendance of clerks involved in pecuniary difficulties'. In some of the cases described the men are said to have been involved in 'bill transactions' and in 1855 one of the clerks, George Voules, was engaged in 'usurious dealings as a money-lender and bill discounter'. It is plain from the context that some of these men were not only in difficulties themselves but brought others down with them by means of 'bill transactions' or 'bill discounting'. I was intrigued, but I had no idea what these transactions involved, and none of the reference books I consulted was of any help.

I found the answer in an unexpected place, and like many of the best discoveries, I made it while I was looking for something else. Or, to be more accurate, I was at a book fair, indulging my weakness for second-hand books when I came across 'Commercial Tales and Sketches', one of those improving pieces of Victorian literature produced by religious organisations. This anonymous volume was published in 1864 from the Leisure Hour Office - the Leisure Hour was a 'family magazine for Sabbath reading'. The very first of the book's cautionary tales was called 'The Accommodation Bill' and described in detail how a young man took out a costly short-term loan which he could not repay, and then fell into an increasing spiral of debt until, in desperation, he embezzled money from his employers, was convicted of fraud and transported for his crime.

The scene above shows the young man, Wilson, and his friend Maxwell in a coffee-room where he is about to to take the fateful step of signing the Accommodation Bill.

'You will be able to meet this when the time comes round; and if not, we will get it renewed, that's all. the thing is done every day. It is for your good, you know. I shall get nothing by it, only the risk'   
Wilson faintly expressed thanks to his friend, who proceeded glibly with his pen to draw upon Wilson for the sum of twenty-five pounds 'Value Received' a bill at three months.
'Now just accept it, and it is done' 
'All but turning it into money,' replied Wilson, with an attempt to smile, as he wrote across the face of the bill. 
'That will soon be done. Wait here half an hour, and I will be with you by that time,' said Maxwell, putting the acceptance in his pocket-book, and leaving the table. In another minute Wilson was alone, his head buried in his hands...At length his companion returned. 
'It's all right,' said Maxwell, seating himself; 'and here is the needful.' 
He laid the money before his friend . It was considerably short of twenty-five pounds. Wilson counted it with a nervous hand, and recounted it. 'This is a heavy discount,' he said. 
'It is the best I could do for you, my dear fellow; those discounters will make us pay for it. I have known fifty, sixty and even seventy per cent taken for discount. This is only twenty-five; so you may think yourself well off.'...Wilson knew this, and in a more cheerful tone he thanked his friend for the assistance he had given.
So Wilson had agreed to repay £25 in three months time, but but had only received three-quarters of that amount, the 25% 'discount' effectively being the interest. Maxwell was acting as guarantor for Wilson's debt, on the understanding that Wilson would do the same for him one day. The story continues with Wilson's debt coming to the attention of his employers, since these accommodation bills could be traded by the original lenders, in the way that debts can still be bought and sold today. Inevitably, some borrowers would have been unable to make the payment on the due day, and so take sign another bill, often at even less favourable terms. Some may have realised that this would be a way to make easy money for themselves, once they were solvent again, and this may be what Mr Voules had been doing. One of his victims was another GRO clerk, William Owen, who was imprisoned for debt, but seems to have been allowed to return to his job later. For the record, Voules was 'allowed to resign' in 1855 and died two years later.

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