Consumer Minister Reveals
Plans to Ban Bills of Sale Lending - Embargoed until 00:01 22nd
December 2009
Embargoed until 00:01 22 nd December 2009
Consumer Minister Kevin Brennan today announced plans to ban the
use of an outdated law used to sell high-cost loans.
Bills of sale are typically used for ‘logbook’ loans which are
secured against the value of the consumer’s car.
Consumer Minister Kevin Brennan said:
“These bills of sale are archaic and allow vulnerable peoples’
goods to be seized without a court order. They were developed in
the days of Charles Dickens and don’t meet 21 st Century consumer standards.
“They can encourage people to slip even further into debt rather
than taking control of their finances.
“We must consider all the options but it seems they don’t fit
easily into a modern consumer regime which should allow honest
businesses to thrive and offer adequate protection for consumers.”
The number of registered bills of sale has risen over the years
with nearly 40,000 being made between April 2008 and March 2009.
This equates to around £30million in loans to consumers.
The Office of Fair Trading reports that more than 1,000 consumers
have complained about problems with these loans and claims of
losses total £1.47million in the last four years.
Complaints relate to the lack of protections available to people
if they fall into arrears, unfair collection practices, the
complex and confusing nature of the language used in the
agreements and the excessively high cost of the loans.
The Government is launching the consultation today and is seeking
views on the following options:
· Ban the use of bills of sale for consumer lending
· A voluntary code of practice or other non-statutory regulations
· Targeted reform to bills of sale legislation
Citizens Advice has seen a 100 per cent increase
in enquiries relating to bills of sale in 2008/9. The following
case study is an example of one of them:
In September a married mother of two took out a £500 loan to pay
the rent and keep the family afloat after her husband lost his
job. The debt has already grown to approximately £1,500. Her car
is worth less than £2,000 and the loan company already have the
logbook. She says she feels totally trapped and bitterly regrets
taking the loan out
Second case study from Trading Standards:
Another consumer agreed with a lender to set up a direct debit
for a loan of £500 to buy a car. This direct debit was never
activated by the lender, and after two months the account was in
default.
The consumer made two payments to bring it into credit, but
received no written contact or notice regarding outstanding
arrears - just texts from a collections agent including threats to
register the car as stolen with the police if payment was not
received. Their family and partner were also contacted.
The bill of sale offered by the lender, contained a provision
that allows the lender to "break open doors or windows to
obtain admission" to any premises on which the vehicle is
situated.
Notes to Editors
1. The consultation on bills of sale was first announced in The
White Paper A Better Deal for Consumers – Delivering Real Help
Now and Change for the Future on July 2 nd 2009 and is
available at :
http://www.berr.gov.uk/whatwedo/consumers/consumer-white-paper/index.html
2. The consultation document can be found at http://www.bis.gov.uk/consultations
3. A bill of sale is a legal contract between the borrower and
lender, which specifies that on a particular date at a recorded
location and for a defined sum of money, the borrower sold to the
lender a specific item of personal property. The property itself
does not change hands and the borrower is able to continue to use
the property, but the lender, as the ‘owner’, has personal rights
of seizure. If the borrower defaults on repayments, the lender can
take possession of the item of property without the need for a
court order, then sell it and still pursue the borrower for any
shortfall on the loan. The bill of sale is prescribed in the Bills
of Sale Act 1878 and the amendment Act 1882.
4. Logbook type lenders are the majority users of bills of sale,
one lender met by BIS accounted for over 50% of registered bills
of sale and stated their average loan size was £750.
5. The consultation runs alongside the OFT’s review into the
supply of high-cost credit and the forthcoming Guidance on
Irresponsible Lending Practices.
Department for Business, Innovation & Skills
The Department for Business, Innovation and Skills (BIS) is
building a dynamic and competitive UK economy by: creating the
conditions for business success; promoting innovation, enterprise
and science; and giving everyone the skills and opportunities to
succeed. To achieve this it will foster world-class universities
and promote an open global economy. BIS - Investing in our future.
Contacts:
BIS Press Office
NDS.BIS@coi.gsi.gov.uk
Helen Cook
Phone: 020 7215 6963
Helen.Cook@bis.gsi.gov.uk