Current project status
The current status of this project is: Complete.
List of project stages:
- Analysis of responses
- Initiation: Could include discussing scope and terms of reference with lead Government Department
- Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
- Consultation: Likely to include consultation events and paper, making provisional proposals for comment
- Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
- Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations
On 24 November 2017, we published our report on the Goods Mortgages Bill. The report presents the final version of the Bill, outlining our recommendations and explaining how they developed in response to consultations. Since the outset of this project, we have worked closely with stakeholders and built wide support for the Bill, from consumer groups and lenders alike. We hope that the Government will introduce the Bill though the Law Commission’s special procedure.
In September 2014, HM Treasury asked the Law Commission to review the Bills of Sale Acts. Our 2016 report recommends that the Bills of Sale Acts should be repealed and replaced with modern legislation that imposes fewer burdens on lenders and provides more protection for borrowers.
In the summer of 2017 we consulted on draft clauses, which were intended to form part of the Goods Mortgages Bill announced by the government in the Queen’s speech in June 2017.
In September 2017, we published a full version of the draft Goods Mortgages Bill, together with a document setting out our response to our July 2017 consultation and an update on the changes we had made to the draft Bill since then. These documents are still available at the foot of this page in the consultation tab.
At the same time in September, HM Treasury, the sponsoring department, launched a short targeted consultation asking stakeholders about their support for the aims of the Bill, and its suitability for the Law Commission’s special parliamentary procedure for uncontroversial bills. That consultation also sets out the government’s proposals for how goods mortgages should be registered. More detail about this is included in our update document. HM Treasury’s consultation closed on 13 October 2017.
What are bills of sale?
Bills of sale are a way in which individuals can use goods they already own as security for a loans or other obligations, while retaining possession of those goods. They are governed by two Victorian statutes, dating from 1878 and 1882.
The use of bills of sale has grown dramatically this century, from 3,000 in 2001 to over 30,000 in 2016. The vast majority of currently registered bills of sale are “logbook loans”.
A logbook loan is a type of lending where the borrower gives the lender a bill of sale on their vehicle. The borrower may continue to use the vehicle so long as they keep up the repayments, but risks having it seized on default.
The current law on bills of sale causes problems for borrowers, purchasers and lenders alike.
Problems for borrowers
Unlike hire-purchase agreements, bills of sale allow lenders to seize assets such as vehicles without a court order, even if almost all of the loan has been repaid.
Problems for purchasers
Innocent private purchasers do not acquire ownership if they buy a vehicle subject to a logbook loan. Instead, they often face a stark choice: pay off someone else’s logbook loan or surrender the vehicle to the lender.
Problems for lenders
Lenders also lose out under the current law. They must register logbook loans at the High Court in accordance with a cumbersome and expensive regime. We estimate that this adds around £2 million of unnecessary costs a year.
The Bills of Sale Acts set out complex documentation requirements. The sanction for non-compliance is severe and disproportionate: the lender loses its right to the vehicle and its right to repayment of the logbook loan.
The Bills of Sale Acts are archaic Victorian statutes, which are wholly unsuited for modern credit arrangements such as logbook loans and should be repealed in their entirety.
The Law Commission’s Goods Mortgages Bill seeks to:
- provide appropriate protection to borrowers, so that vehicles are not seized too readily;
- protect innocent purchasers who buy vehicles without realising that they are subject to a bill of sale;
- establish an electronic register of goods mortgages, which will save costs associated with complex registration arrangements; and
- remove unnecessary restrictions on secured lending to more sophisticated borrowers, such as high net worth individuals and unincorporated businesses.
The following publications are available:
- October 2014: initial call for evidence
- September 2015: consultation paper and summary
- February 2016: analysis of the 38 responses we received to the consultation
- September 2016: a full copy of our report, a 21 page summary and a two page factsheet (in English and Welsh)
- July 2017: consultation paper on draft clauses, summary of the paper and response form.
- September 2017: full version of the draft Goods Mortgages Bill, together with a response to our July consultation
Area of law
Commercial and common law