12/07/2017
The Law Commission is seeking views on draft clauses intended to complete a new Bill that will replace the Victorian-era statutes still used by individuals who want to pledge their own goods as security for loans or other obligations, while retaining possession of them.
The draft clauses will be added to the Goods Mortgages Bill, which was announced in the Queen’s Speech and will replace the 1878 and 1882 Bills of Sale Acts with modern legislation that imposes fewer burdens on lenders and provides more protection for borrowers.
The rapid increase in the use of logbook loans * has been responsible in a rapid rise in the use of Bills of Sale this century from 3,000 in 2001 to more than 30,000 in 2016.
Bills of Sale cause problems for
- borrowers, because they allow lenders to seize vehicles without a court order, even if almost all the loan has been repaid
- innocent private purchasers, who do not acquire ownership if they buy a vehicle that is subject to a logbook loan
- lenders, who must register logbook loans at the High Court under a cumbersome and expensive regime
‘Bills of Sale: Current project status’ will, by contrast
- provide appropriate protection to borrowers, so that goods are not seized too readily
- protect innocent purchasers who buy goods without realising that they are subject to a bill of sale
- save costs caused by unnecessarily complex arrangements for the registration of documents
- remove unnecessary restrictions on secured lending to more sophisticated borrowers, such as high net worth individuals and unincorporated businesses
It is hoped that the Bill will be introduced under the special procedure for uncontroversial Law Commission bills.
* A type of sub-prime lending, where the borrower gives the lender a bill of sale on their vehicle, but can continue to use it so long as they keep up repayments.