Following a 2016 report in which the Law Commission concluded that the Bills of Sale Acts should be repealed and replaced with legislation less burdensome to lenders and more protective of borrowers, and its consultation over the summer on draft clauses for new legislation, the draft Goods Mortgages Bill has now been published.
Currently governed by two Victorian statutes, bills of sale have proliferated with the use of modern high-cost credit arrangements like logbook loans growing from 3,000 in 2001 to over 30,000 in 2016 – representing a market estimated by the FCA to be worth between £59m and £76m. However, this development has only served to demonstrate how archaic the legislation has become. Unsuited to borrowers, lenders, and purchasers, the Law Commission has recommended a new Goods Mortgages Act with aims to:
- protect borrowers, by ensuring that vehicles are not seized too readily;
- protect innocent purchasers who buy vehicles without realising they are subject to a bill of sale;
- save costs currently caused by unnecessarily complex arrangements for the registration of documents; and
- remove unnecessary restrictions on secured lending to more sophisticated borrowers.
The Bill creates a new regime for goods mortgages that relate to “qualifying goods” that meet set requirements. It introduces a register of goods mortgages which will operate under Treasury regulations. It sets out the rights of third parties, mortgagors and mortgagees, and repeals the 1890 and 1891 Bills of Sale Acts and parts of other relevant legislation. The draft Bill follows a process of consultation and policy development, and it is hoped that it will be introduced into Parliament under the special procedure for uncontroversial Law Commission Bills.
Treasury has launched its own short consultation, focusing on the registration procedure, on which it asks for comment by 13 October.