The aim is to summarize the Law Commission Report No 369 regarding Bills of Sale. The Bills of Sale are very archaic in nature and these are Victorian Statutes. These statutes can be repealed in their entire self. The proposal of the Law Commission was to come up with the Goods Mortgages Act which has been a recommendation to change the archaic statute and bring in new recommendations. The new recommendation shall incorporate the following, such as:
The Bill seeks to give protection to the borrowers and the aim is to preserve the rights of the borrowers.
The aim is also to help the small businesses so that they do not face too many restrictions on secured lending.
The Bills of Sale are the ways of ensuring that the individuals have access to the goods they already own as security for their loans and the owners can also retain the possession of these goods. Therefore, there shall be extended protection to lenders and also borrowers. The reason behind the inception of these new bills is to do away with the primitive restrictions that was laid down by the laws in the Victorian times.[1] Therefore, the money lenders’ faced restrictions which finally led to the new statutes, the Bills of Sale Act 1878 and the Bills of Sale Amendment Act 1882. Though the Bill of Sale Acts was criticized heavily for being primitive and restrictive in their nature, the bill was still in force and they are still implemented in gauging the rights of the lenders[2].
From the above discussion, it can be seen that the bills of sales facilitate the individuals to use the goods or property which they own, as security for loans or other types of obligations, while simultaneously retaining possession of theses goods. This in turn enable the individuals to efficiently use their goods as and when required[3]. There lies significant economic rationale and notions behind the implementation of the Bills of Sale Act, which can be described with the help of the theoretical and conceptual frameworks of economics, discussed as follows:
In the conceptual framework of economics, one of the primary problems which any economy deals with is that of efficient allocation of resources. One of the primary assumptions in economics is that of the scarcity of resources- that is, all the productive resources are limited and therefore, often trade-offs arise regarding the allocation of resources in such a way that the economic growth as well as the overall welfare is maximized[4].
In this context, the bills of sale, by enabling the individuals to use their owned products as security for the purpose of procuring loans, while still retaining possession of the same, helps to a considerable extent in efficient allocation and utilization of productive resources (as the goods which are usually used as security for obtaining loans generally fall under the segmentation of capital goods, thereby being one of the four crucial factors of production in economics), thereby helping in increasing the overall welfare of the economy as well as that of the individuals in particular[5].
The efficient utilization of resources, in general increases the productivity in an economy. On the other hand, not utilizing the resources to the full capacity level can have the economy stagnated to a production level lower than the optimal level, which can be explained with the help of the production possibility frontier:
Figure 1: Production Possibility Frontier
(Source: As created by the author)
As is evident from the above figure, when the resources in an economy are utilized to their full capacity level, then the economy reaches at the optimal level on the production possibility curve. Any point under the curve (like point C) indicates a sub-optimal situation, where there remain further scopes of increase in the economic productivity[6].
In this context, in the bills of sales was implemented with the view of efficient utilization of resources in the economy. With the help of the bill, borrowing was expected to be easier for the purpose of investment, which in turn could have increased the levels of productivity in the economy, thereby shifting the economy from a sub-optimal situation to an optimal situation on the PPF curve. Without the presence of this facility, the borrowers would not have been able to easily use their property for lending thereby increasing the investment and productivity aspects[7]. All these factors cumulatively advocate in favor of the Bills of Sales as according to these theories the implementation of bills of sales, by emphasizing on the increasing efficiency and productivity of the economy, can have positive implications on the lenders, borrowers as well as on the economy as a whole.
In the older English Law, there was no appropriate law that governed the interests of the lenders and therefore the Law Commission drafted the new bill that ensured that individuals will access the bill to be protected and that the individuals shall have the privilege to use the goods they already have as a security for the loan. The lenders shall have the right to possess the goods. The Bill of Sales has become redundant and has also become very outdated which needs strict overhauling.[8] The new proposed bill shall have the ability to use the personal properties in their possession as collateral. Therefore, the new bill shall give the necessary protection to a consumer in cases when he cannot protect himself against. The economics of the older bill was to promote the rights of the lenders but not much emphasis was given to the borrowers. The bill applied immense pressure and higher caps of payment to the lenders and no protection of law and economics was given to the borrowers. The stakeholders have been at the receiving end of higher payment and costs and therefore there rights in the Bills of Sale Acts was curtailed. The stakeholders were not given the right to review and retain the goods they used as their own and there was also a restriction on the collateral of their personal property.
As discussed above, in the recent period, the need has been felt in the financial and economic domain, for changing the current English laws which exist in the aspects of the bills of sales as the same have been facing the following limitations:
All these factors and limitations of the Bills of Sale highlight the presence of economic reasons behind the need for changing and amending the Bills of Sale Act and the English laws which currently exist in this domain. The primary economic reasons behind the same can be explained as follows:
Presence of market failure- In terms of the conceptual framework of economics, a market failure occurs when the welfare of all the parties or agents are not optimized or maximized or when a situation arises in the market where the benefits are biased, thereby making one side of the market better off at the cost of loss of welfare of the other side[10].
This can be seen to be happening in the concerned scenario with the current English laws for bills of sales in action. This is because, the Bills of Sale Act, since its implementation, has focused more on securing and increasing the welfare of the lenders in the economy, thereby to some extent ignoring the aspects of the protection of the borrowers and the third parties.
This in turn, has led the borrowers and the third parties to a comparatively worse off position, hampering their economic welfare, which shows the occurrence of what is known to be market failure in the conceptual framework of economics, as in the presence of the current laws in this domain, the welfare of all the participants in the concerned market has not been seen to be maximized[11].
Lack of efficiency- As discussed above, one of the criticisms which the Bills of Sale Act faced in the contemporary period is that of the presence of highly defined and rigid boundaries in the aspects of the lending and borrowing activities and particularly in terms of registration of the securities for the purpose of acquiring loans or for meeting obligations[12].
The presence of burdensome formalities in the aspects of creation and registration of the securities indicates towards the lack of efficiencies in the market as the processes are time-taking as well as costly. The rigidly defined boundaries also hamper flexibilities in the operations and not all the businesses (specially the small and unincorporated ones) could reap the fruits of the Bills of Sale Act, which in turn is another economic reason behind the need for changing and amending the concerned act as due to the lack of efficiencies the same is not fit for the contemporary business environment.
Presence of high transaction costs– In terms of the generalized theoretical framework of economics, the term “transaction cost” refers to the costs which are associated with the exchange of commodities and services, which mainly occur due to the presence of any kind of market imperfections[13]. Thus, the transaction costs include communication charges, legal fees, cost of information of price and others. The presence of high transaction costs in a market indicates towards the presence of high level of market imperfections, thereby hampering the activities of the concerned markets.
In this context, in the concerned scenario, the burdens of high formalities in the aspects of creating as well as registration of the securities can be seen to have imposed considerable costs for the lenders, which can be categorized under the domain of transaction costs arising out of the market imperfections and lack of efficiencies in the market.
Thus, from the above discussion, it can be asserted that there are significant economic reasons behind the need for changes in the Bills of Sale Act and the current laws existing in the domain of the same.
3: The Goods Mortgage’s Bill was announced as a speech in the year 2017. The hope was that it will be introduced as a special procedure in the parliament. This was seen as a new start with the uncontroversial announced in the parliament. In the year 2014 with the recommendation of the treasury it was seen that the Law Commission was given the responsibility of regulating the earlier bills as the whole concept of the law governing logbook lending was considered untenable. The reform gathered support from the logbook lenders as well as the protectors of consumers in the agency. The stakeholders also ensure protection with the new recommendation. The treasury gave the responsibility to the commission legislation show the parliament could review the draft clause in this session[14]. This shall also form a part of other legislations that looks at the interests of the borrowers and also will be read along with the provisions of the Consumer Credit Act 1974 as well as the Financial Conduct Authority. The aim of the measures taken by the new bill is to make sure that the lenders conduct for projects which are affordable in nature and also that the borrowers are made aware of all the information that related to the credit. In the year 2015 with the help of a bill there was a cap which was put on the price which related to payday lending. The intention was to regulate the function of the financial conduct authority so that they apply a cap on default charges of the loans that arose out of the log book.
The recommendations also aim to prove that the laws of the England and Wales also need overhauling with regards to implementation of the bill. The laws do not apply to the jurisdiction of Northern Ireland. In the year 2015 the need for reform was highly felt and it was believed that the rights of the lenders as well as the borrowers was getting hampered. The AutoMoney reflected the condition of their rights and held that the Bills of Sale Act was outdated and that it severely needed overhauling and reform. The new idea was to make sure that the personal property which was in the possession of the people could made be used as a collateral. It was also agreed by the charity organization StepChange which also held that the old law had to be changed with time and that the law was not moving with the needs of the time. In his language, the law had become very antiquated and was also becoming very incomprehensible by other users and the consumers were not coming ahead with their borrowing. The rights of the innocent purchasers were not getting addressed and the old law was not giving adequate protection to the consumers. The law did not give enough attention to the needs of the consumers and was also held that under the provisions of the old law, there was no place for consumer protection. In cases when the borrowers fell into any difficulty with regards to payment, the law did not give much credit to them and their rights were neglected. Therefore, the new law came in place so that the situation could be ameliorated with the regards of the hardships that the borrowers face along with the private purchases[15]. The lenders are not allowed to take part in any financial undertakings and there are strict restrictions on them.
In the new bill, after complete consultation, it was felt that the bill will majorly try to address issues related to credit loans and also logbooks which are used by the consumers. The bill explores the rights of the small traders who believe that they mostly depend on their vehicles and also they start borrowing for their own support and protection. The new bill believes that there is much higher need for protection of the borrowers and if there are provisions of repossession, it will turn out to be a very bad situation for the borrowers.
The new bill also tried to address the issues that arise out of unintelligible documents. The problem that has been faced by many borrowers is that they cannot comprehend the purport and the implications of the documents and end up making wrong decisions. They do not put much emphasis on the implications of the logbook loans and therefore are faced with situations that arise out of their domain. The bill of sales failed to enlighten the borrowers regarding their rights and obligations. It is a primary requirement of modern documents that it has to be in written format and that the text should contain proper details which are comprehensive and can be understood with proper deliberation[16]. If the ordinary people cannot understand the meaning of the documents by plain reading, the intention of the document is questionable and also the question of applicability of the bill becomes doubtful. The new bill as formulated by the Law Commission tries to change this problem and makes sure that the documents are well crafted and uses proper language so that there are no issues regarding the common people not understanding the meaning[17].
The court gives relief to a borrower with regards to his failure to make payments on time. This does not help the borrowers who do not have the power to repay the loans. The court is lenient on borrowers who can pay the loan but not with the borrowers who do not have any future prospect of making that payment. In such cases, the clause of voluntary termination comes into play. The CCTA give the provision of voluntary termination which is for the consumers to apply for it. It is also important because it provides the consumers with the right to apply for the repayment and also they are given some control over what they want as a statutory protection.
The Victorian laws were very restricted in their approach regarding the protection of private purchasers and they were not given all the rights. The private purchasers were made to act in their best capacity and even though they acted in good faith and care, it was seen that they were not recognized and the problem was faced mostly by people who bought second hand cars. In such cases, if a situation arises when the party who has bought a second hand car does not know that it is whose he faces problems regarding paying off the loan. The purchaser does not know where that loans is getting paid and he might end up losing that car. Therefore, the nee recommendation states that the rights of the private investors should be primary[18].
The Bills of Sales Act mandates that all the bills of sale shall be recognized by the high judiciary and that the High Court shall acknowledge all the bills. The entire [process of registration is very expensive and also very tedious. The Law Commission therefore states that the entire process should be done online and that will help in keeping an online database. The process becomes easy because the online registration is not expensive and also easily accessible by everyone[19].
Conclusion
The entire process of registration under this bill shall reform the whole process. The rights of the traders along with the partners will be protected. In cases when the Law Commission becomes aware that a particular bill is being targeted for being illegal and not recognized, it will also lead to bankruptcy. Sometimes the registration might take a very long time and therefore it is highly advisable that the laws are in sync with the current needs of the legislation. The new bill shall reform all the rights of the borrowers among with the lenders. It shall be a new age law that will take into account every right and obligation of the borrowers. The law is to keep the interest and the rights of the borrowers. The Victorian laws were very strict and they needed completed reform along with the passage of time. It is soon believed that it is needed for the laws to adapt to the changing scenario. The reason behind the recommendation is to keep into account the continuous process of overhauling. The older laws did not consider that the consumers needed laws for their protection and they were very oblivious to the needs but with time, it has been believed that the rights of the borrowers are equally important and they need equal protection and care[20]. In cases when there is delay in payment, it is always the borrowers who face the wrath of the law, With the new recommendation committee trying to understand the flaws in the Victorian era, it has become very clear that there delays could be due to financial crunches and therefore much time is given and also a scope for them to give proper justification. Therefore, it can be said that the new bill is very understanding of the needs of the borrowers and therefore the bill shall consider address all issues related to the lenders.
References
Balassa, Bela. The theory of economic integration (routledge revivals). Routledge, 2013.
Bridge, Michael G. The international sale of goods. Oxford University Press, 2017.
Collins, Brian D., and Shai Akabas. “Bipartisan Recommendations-for Policy Makers and Practitioners-to Improve Retirement Security and Personal Savings.” Benefits Quarterly 33.3 (2017): 8.
Collins, Daniel M. “Security bills of sale and logbook loans: a tolerated eccentricity.” Journal of International Banking Law and Regulation 31 (2016).
Fej?s, Andrea. “Achieving safety and affordability in the UK payday loans market.” Journal of Consumer Policy 38.2 (2015): 181-202.
Friedline, Terri. “Policy Recommendations for Expanding Access to Banking and Financial Services.” (2018).
Giliker, Paula. “The Consumer Rights Act 2015–a bastion of European consumer rights?.” Legal Studies 37.1 (2017): 78-102.
Hanrahan, Pamela. “Professional conduct: New restrictions for lawyers involved in managed investment schemes.” LSJ: Law Society of NSW Journal 45 (2018): 72.
Iossa, Elisabetta, and David Martimort. “The simple microeconomics of public?private partnerships.” Journal of Public Economic Theory 17.1 (2015): 4-48.
MANNING R. production-possibility frontier. Production Sets. 2014 May 10:51.
Meade, James E. A Neo-Classical Theory of Economic Growth (Routledge Revivals). Routledge, 2013.
Peters, Pauline E. “Analysing Land Law Reform.” Development and Change 46.1 (2015): 167-193.
Piscicelli, Laura, Tim Cooper, and Tom Fisher. “The role of values in collaborative consumption: insights from a product-service system for lending and borrowing in the UK.” Journal of Cleaner Production 97 (2015): 21-29.
Rios, Manuel C., Campbell R. McConnell, and Stanley L. Brue. Economics: Principles, problems, and policies. McGraw-Hill, 2013.
Scitovsky, Tibor. Welfare & Competition. Routledge, 2013.
Stiglitz, Joseph E., and Jay K. Rosengard. Economics of the public sector: Fourth international student edition. WW Norton & Company, 2015.
Tadelis, Steven, and Oliver E. Williamson. “Transaction cost economics.” The handbook of organizational economics(2012): 159-193.
Tharney, Laura C., and Samuel M. Silver. “Legislation and Law Revision Commissions: One Option for the Management and Maintenance of Ever-Increasing Bodies of Statutory Law.” Seton Hall Legis. J. 41 (2016): 329.
Thomas, Sean. “Mortgages, Fixtures, Fittings and Security over Personal Property.” N. Ir. Legal Q. 66 (2015): 343.
Yap, Ji Lian. “Considering commercial and company law reform.” Statute Law Review 36.2 (2015): 152-159.
[1] Bridge, Michael G. The international sale of goods. Oxford University Press, 2017.
[2] Yap, Ji Lian. “Considering commercial and company law reform.” Statute Law Review 36.2 (2015): 152-159.
[3] Piscicelli, Laura, Tim Cooper, and Tom Fisher. “The role of values in collaborative consumption: insights from a product-service system for lending and borrowing in the UK.” Journal of Cleaner Production 97 (2015): 21-29.
[4] Iossa, Elisabetta, and David Martimort. “The simple microeconomics of public?private partnerships.” Journal of Public Economic Theory 17.1 (2015): 4-48.
[5] Meade, James E. A Neo-Classical Theory of Economic Growth (Routledge Revivals). Routledge, 2013.
[6] MANNING R. production-possibility frontier. Production Sets. 2014 May 10:51.
[7] Balassa, Bela. The theory of economic integration (routledge revivals). Routledge, 2013.
[8] Hanrahan, Pamela. “Professional conduct: New restrictions for lawyers involved in managed investment schemes.” LSJ: Law Society of NSW Journal 45 (2018): 72.
[9] Fej?s, Andrea. “Achieving safety and affordability in the UK payday loans market.” Journal of Consumer Policy 38.2 (2015): 181-202.
[10] Rios, Manuel C., Campbell R. McConnell, and Stanley L. Brue. Economics: Principles, problems, and policies. McGraw-Hill, 2013.
[11] Stiglitz, Joseph E., and Jay K. Rosengard. Economics of the public sector: Fourth international student edition. WW Norton & Company, 2015.
[12] Scitovsky, Tibor. Welfare & Competition. Routledge, 2013.
[13] Tadelis, Steven, and Oliver E. Williamson. “Transaction cost economics.” The handbook of organizational economics(2012): 159-193.
[14] Friedline, Terri. “Policy Recommendations for Expanding Access to Banking and Financial Services.” (2018).
[15] Collins, Daniel M. “Security bills of sale and logbook loans: a tolerated eccentricity.” Journal of International Banking Law and Regulation 31 (2016).
[16] Thomas, Sean. “Mortgages, Fixtures, Fittings and Security over Personal Property.” N. Ir. Legal Q. 66 (2015): 343.
[17] Tharney, Laura C., and Samuel M. Silver. “Legislation and Law Revision Commissions: One Option for the Management and Maintenance of Ever-Increasing Bodies of Statutory Law.” Seton Hall Legis. J. 41 (2016): 329.
[18] Peters, Pauline E. “Analysing Land Law Reform.” Development and Change 46.1 (2015): 167-193.
[19] Collins, Brian D., and Shai Akabas. “Bipartisan Recommendations-for Policy Makers and Practitioners-to Improve Retirement Security and Personal Savings.” Benefits Quarterly 33.3 (2017): 8.
[20] Giliker, Paula. “The Consumer Rights Act 2015–a bastion of European consumer rights?.” Legal Studies 37.1 (2017): 78-102.
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