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Law Commission wants modern legislation

The Law Commission has recommended that the Bills of Sale Acts, which regulate logbook loans, should be replaced with modern legislation.


Amber-Ainsley   Pritchard

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In September 2014, the Treasury asked the Law Commission to review the legislation which enables individuals to use goods they already own as security for loans, while retaining possession of those goods.

 

A report of recommendations was laid before parliament yesterday, September 12, that suggests fewer burdens on lenders and to provide more protection for borrowers.

 

The Law Commission said that the current Bills of Sale Acts are “wholly unsuited for modern credit arrangements”.

 

The “Goods Mortgages Act” is the recommended legislation to replace the current acts and would protect purchasers who buy vehicles without realising that they are subject to a bill of sale.

 

It would also remove unnecessary restrictions on secured lending to small businesses.

 

Jane Tully, director of external affairs at the Money Advice Trust, said: “While we would have preferred to see a recommendation for logbook loans to be banned all together, this report is good news for consumers at risk of falling victim to this unusual form of borrowing.”

 

The recommendations aim to add extra protection to those borrowers who have paid at least one third of their total loan.

 

A procedure would be put in place so that these borrowers could request their logbook lender to obtain a court order before it repossessed any goods.

 

As part of the report, logbook lenders must explain this right to its borrowers who would then opt-in to the procedure.

 

Peter Tutton, head of policy at StepChange Debt Charity, said: “If people have to actively opt-in to receive protection from the courts against lenders repossessing their car, our evidence suggests it will not work.

 

“It requires too much proactivity and understanding from financially vulnerable people who may not even feel able to open their mail. It also requires too little from sub-prime lenders seeking to take away a car that could be essential for work or family life.”

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