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 22 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 have made to the draft Bill since then. These are available at the foot of this page in the consultation tab. At the same time, 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. The 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 will run until 13 October 2017.
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 Our 2016 report recommends that the Bills of Sale Acts should be repealed and replaced with modern legislation that imposes fewer burdens on lenders and provides more protection for borrowers.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 summer 2017 we consulted on draft clauses, which are intended to form part of the Goods Mortgages Bill announced by the government in the Queen’s speech in June 2017. That consultation is now closed. The draft clauses and consultation paper are still available for reference at the bottom of this page.
Our hope is that the Bill will be suitable for the special Parliamentary procedure for uncontroversial Law Commission Bills.
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. This reflects the rapid increase in the use of logbook loans.
A logbook loan is a type of sub-prime 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 law on bills of sale is seriously outdated, and causes problems for borrowers, purchasers and lenders alike.
Problems for borrowers
Unlike in hire-purchase, lenders are allowed to seize vehicles without a court order, even if almost all the logbook 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 are also failed by the current law. Lenders 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 legislation sets 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 recommends a new Goods Mortgages Act 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;
- Save costs caused by unnecessarily complex arrangements for the registration of documents; and
- Remove unnecessary restrictions on secured lending to more sophisticated borrowers, such as high net worth individuals and unincorporated businesses.
We hope this Bill could be introduced into Parliament under the special procedure for uncontroversial Law Commission Bills.
The following publications are available:
- October 2014: initial call for evidence
- September 2015: consultation paper and summary
- A summary of the 38 responses we received to consultation
- September 2016: a full copy of our report; a 21 page summary; and a 2 page factsheet (in English and Welsh)
- July 2017: consultation paper on draft clauses, summary of the paper and response form.
The team currently working on the project include Laura Burgoyne (team manager), Daria Popescu (team lawyer), Siobhan McKeering (team lawyer), John Williams (research assistant) and Ruth Keating (research assistant).
The team involved in the preparation of the report included Tamara Goriely (team manager), Fan Yang (team lawyer), Sophia Hurst (research assistant 2014-15) and Robert Ward (research assistant 2015-16).
Area of law
Commercial and common law