The Law Commission has said it is “disappointing” the government has decided to scrap a proposed bill to protect consumers from a type of risky credit where cars are used as collateral.
The government announced yesterday that it was scrapping the Goods Mortgages Bill which was announced in last year’s Queen’s Speech.
Under the current law bills of sale are a way that people can use their possessions as collateral for loans while retaining possession of those goods.
They are mostly used for logbook loans (loans against cars) an expensive form of credit regulated by the Financial Conduct Authority (FCA).
Bills of sales allow goods to be repossessed on a single default and give no protection to purchasers who unwittingly buy goods subject to bills of sale.
Law Commissioner Stephen Lewis said: “It’s disappointing not to see the goods mortgages bill being brought onto the statute.
“The current law doesn’t provide adequate consumer protection. Businesses, lenders and consumer groups strongly agreed our reforms would have made a vast improvement.
“However, we understand that there are enormous pressures on Parliamentary time at the moment.”
The proposed bill would have given borrowers an adequate warning at the outset of the agreement, introduced a requirement for lenders to obtain a court order before seizing goods and protected purchasers who unwittingly bought a car with an outstanding logbook loan.
HM Treasury said yesterday that given “the small and reducing market and the wider work on high-cost credit, the government will not introduce legislation at this point in time.”
The Treasury said it would continue to work with the FCA on its high-cost credit review.