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EmploymentLawThe law commission are currently reviewing the legislation around Bills of Sale. Bills of Sale are used to secure loans by an individual on goods, such as vehicles and works of art, they already own. In the retail motor sector these tend to be referred to as ‘log book’ loans.

The legislation to regulate Bills of Sale is outdated and goes back to the 19th century. The specific pieces of legislation are the Bills of Sale Act of 1878 and the Bills of Sale Amendment Act 1882.

The use of Bills of Sale has grown in recent years from 2840 in 2001 to 52,483 in 2014. Ninety pence of those loans are for cars, the so called log book loan, and it is the growth in these that has driven the overall use of Bills of Sale in recent years.

Why Review the Law

The legislation is very outdated and does not protect borrowers or those who buy goods subject to a Bill of Sale. A particular concern for dealers is the lack of requirement to register that a vehicle is subject to a ‘log book’ loan, in the same way a traditional consumer finance agreement must. This means that when a finance search is done on a vehicle it will come up clear of finance even though it is subject to a ‘log book’ loan.

Problems Identified with Bills of Sale

Four main issues have been identified with Bills of Sale:

  • The document requirement, which are highly complex.
  • High Court registration of the loans, which is cumbersome, expensive and provides no third party benefits.
  • Enforcement process, that gives borrowers few protections.
  • Lack of protection for puchasers.

The Proposals

The Law Commission are not going to ban Bills of Sale but are going to reform the legislation. The Bills of Sale Acts will be repealed and will be replaced with new legislation on use of goods for securing loans. Provisionally the type of borrowing created by this new legislation will be called a ‘goods mortgage’ and when specifically used for a vehicle a ‘vehicle mortgage.’

Proposed changes will include:

  • Simplification of documentation.
  • Requirement for warning statements, e.g. your vehicle may be repossessed if you do not keep up repayments on your loan.
  • ‘Vehicle mortgages’ will no longer be required to be registered at the High Court and should instead be registered with a third party listing such as HPI, Experian or CDL. Log book lenders will only be able to enforce a vehicle debt if it is registered in this way.
  • Registration of goods other than vehicles will still continue to be registered through the High Court. However, the process for doing so will be simplified.
  • Borrowers will be extended further protections including the requirement for a court order before seizing goods and the right to Voluntary Terminate.

Purchasers Protection

The proposal for the new legislation includes better protection for purchasers of goods subject to a Bill of Sale who buy them in good faith. This will only apply though to private purchasers. The new legislation should stop loan companies repossessing cars from a purchaser if the loan remains unpaid. Businesses will not be offered the same protection but it is hoped that better registration of loans on asset data bases will reduce the number of vehicles bought by dealers that have outstanding ‘log book’ loans.

The Law Commission are currently consulting on these proposals. The closing date for the consultation is 9 December 2015.

For more information or to give feedback on the proposals please contact 01788 538336 or email




Posted by Sue Robinson on 09/10/2015