Reforming bills of sale—what might the Goods Mortgages Bill look like?

Reforming bills of sale—what might the Goods Mortgages Bill look like?

Daria Popescu, lawyer at the Law Commission, considers the draft proposals made by the Law Commission for the Goods Mortgages Bill to modernise bills of sale.

Original news

The government intends to introduce legislation to deliver a consumer credit market that provides a better deal for consumers. It is proposing, among other things, to repeal the Bills of Sale Acts and replace them with a Goods Mortgages Act that will allow individuals to use their existing goods (such as a vehicle, or a piece of art) as security for a loan.

Why was reform needed, what is the objective of the new law?

Bills of sale are a way for individuals to use their goods as security for loans or other obligations, while retaining possession of those goods. Bills of sale are regulated by the Victorian Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882. The Bills of Sale Acts are unfit for modern business practices, as they:

  • fail to offer adequate protections to borrowers or to third parties who acquire interests in the goods
  • impose unnecessarily burdensome formalities for creating and registering security, which result in significant costs for lenders, and
  • work within rigidly defined boundaries, which stifle the ability of unincorporated businesses and high net worth individuals to use their goods as security

The Law Commission recommended that a new Goods Mortgages Bill repeal the Bills of Sale Acts and replace them with a system of goods mortgages. The Bill is intended to:

  • protect vulnerable borrowers and innocent private purchasers of mortgaged goods
  • reduce administrative requirements for lenders, and
  • make it easier for high net worth individuals and unincorporated businesses to use their goods as collateral

What is the target timescale?

The Goods Mortgages Bill was announced by the government in the Queen’s speech in June 2017. The Law Commission has prepared draft clauses which it is consulting on over the summer. It is hoped that this Bill could be introduced under the special procedure for uncontroversial Law Commission Bills.

What types of financing transactions will fall within the scope of the new law?

The Bill covers a wide-range of financing transactions. The main market affected by the proposed law is logbook lending, a type of consumer credit secured against the consumer’s car.

Unlike bills of sale, the Bill allows goods mortgages to be used to secure revolving cred

Subscription Form

Related Articles:
Latest Articles:

Already a subscriber? Login
RELX (UK) Limited, trading as LexisNexis, and our LexisNexis Legal & Professional group companies will contact you to confirm your email address. You can manage your communication preferences via our Preference Centre. You can learn more about how we handle your personal data and your rights by reviewing our  Privacy Policy.

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:

Meet Neil:

1. Banking and finance lawyer with particular experience in asset finance

2. Likes Wales, wine, sport and anything else that means he doesn’t have the time to have to write personal information about himself

3. Thinks the law is a far broader topic than any of his family and friends who do not work in law

Neil specialises in banking and asset finance transactions with a particular emphasis in finance for shipping, aviation and renewable energy, as well as providing corporate transactional support. He trained and qualified at TLT LLP and spent a further four years working as a finance solicitor, acting for borrowers and lenders before joining the Asset Finance team at DLA Piper (UK) LLP.