Security Bills Of Sale And Logbook Loans: A Tolerated Eccentricity

Collins, DM (2016) Security Bills Of Sale And Logbook Loans: A Tolerated Eccentricity. Journal of International Banking Law and Regulation, 31. ISSN 1742-6812

Preview

Available under License In Copyright. Download (127kB) | Preview

Abstract

Security bills of sale are an antiquated means of securing a loan over an individual’s existing physical assets, and whilst they share certain features of other types of credit agreement, they offer none of the protections. A recent Law Commission Consultation proposes a range of sensible amendments. "The civility which money will purchase, is rarely extended to those who have none."1 Charles Dickens, The Broker’s Man The works of Dickens are replete with tales of moneylenders displaying a malevolence and implacability in their dealings with those individuals who, through sheer desperation, became their debtors. Indeed, the real-life versions of Scrooge, Quilp and Heep were freely able to exercise their rapacity at a time when poverty in Victorian England was rife—the Poor Law was the social security of its day and the workhouses were in full swing. Moreover, there was little by way of legislative protection for the debtor, and debtors’ prison was often the consequence of non-payment of debt.2 Whilst these institutions have long since disappeared, and a plethora of consumer credit legislation3 enacted to obviate the worst excesses of Victorian usury, there still exists a compendium of questionable lending practices. This was recognised by Lord Scott in Wilson 4; he commented that consumer credit controls: "[R]ecognise the vulnerability of those members of the public who resort to pawnbrokers and moneylenders when in dire need of funds to make ends meet … They need protection." 5 HH Judge Simon Brown QC made a similar observation in Rankine,6 when commenting on the need to "protect the individual unsophisticated in financial affairs in contracts with unscrupulous and sophisticated financial institutions".7 To this end, and following several revealing investigations into the payday loan sector,8 the Financial Conduct Authority (FCA) has recently shifted its attention to the evolving, yet equally contentious, logbook loan9 —a business model predicated upon individuals offering their vehicles as security for a loan.