This month, the Law Commission published a consultation paper on draft clauses that would form part of the new Goods Mortgages Bill, which replaces the Bills of Sale.
In September 2014, HM Treasury asked the Law Commission (LC) to review the Bills of Sales Act. The LC’s 2016 report recommended that the Bills of Sales Act should be repealed and replaced with modern legislation that offered more protection for borrowers and imposed fewer burdens on lenders.
Bills of sale
A bill of sale is a means of obtaining security over goods, often goods already owned by individuals, for loans or other obligations while retaining the possession of those goods. According to the LC, over 30,000 bills of sale were used in 2016. Today, bills of sale are mainly said to be used for “logbook loans” where a borrower grants security over their vehicle. The borrower may continue to use the vehicle while they make the repayments but if they default, their vehicle can be seized by the lender without a court order.
Following its consultation in 2015, the LC published a report in 2016 that found the current law to be archaic and “wholly unsuited to the 21st century”. It felt that logbook lenders, logbook borrowers, business borrowers and third party purchasers were not offered adequate protection under the law. As a consequence, the report recommended that the Bills of Sales Acts (Bills of Sale Act 1878 and Bills of Sales Amendment Act 1882) should be repealed in their entirety and replaced with a new “Goods Mortgages Act”.
The draft clauses
The LC is now consulting on draft clauses on:
- exempt and non-exempt goods mortgages;
- the creation of goods mortgages; and
- deals with third parties
The consultation paper also explains the proposed structure of the draft Bill. Comments are welcomed by the LC until 7 August 2017.