Amendment 17

Financial Services Bill - Report (2nd Day) – in the House of Lords at 6:00 pm on 14th April 2021.

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Lord Stevenson of Balmacara:

Moved by Lord Stevenson of Balmacara

17: After Clause 40, insert the following new Clause—“Bills of Sale Act 1878 and Bills of Sale Act (1878) Amendment Act 1882(1) The Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882 are repealed.(2) In consequence of the repeals made by subsection (1), the following are also repealed—(a) the Bills of Sale Act 1890;(b) the Bills of Sale Act 1891;(c) section 23 of the Administration of Justice Act 1925;(d) in Schedule 11 to the Constitutional Reform Act 2005, in paragraph 4(3), the entry relating to the Bills of Sale Act 1878;(e) in Schedule 13 to the Tribunals, Courts and Enforcement Act 2007, paragraphs 17 to 19;(f) in Schedule 9 to the Crime and Courts Act 2013, paragraph 15.”Member’s explanatory statementBills of Sale are mainly used for “log book loans”, one of the last sources of high cost credit. They are governed by two Victorian statutes which the Law Commission recommended in 2017 should be repealed. This amendment is to further probe the Government's plans to review that recommendation.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Labour

My Lords, I am speaking to Amendment 17, which has been retabled in the same form in which it appeared in Committee. I am grateful to the noble Baroness, Lady McIntosh of Pickering, for her support, and I look forward to her contribution and that of the noble Lord, Lord Holmes, in due course. I also thank other noble Lords who have spoken on various amendments we have considered over the passage of this Bill that all relate to the devastating impact that high-cost credit can have on those who borrow from such providers. We are gradually reducing the number of these providers, which is a good thing, but we still need initiatives for the growth of low-cost credit sources, which are urgently needed to replace them.

I am grateful to the Minister for facilitating several meetings on this issue. The noble Lord, Lord True, and his officials have shown a genuine willingness to engage, and we have initiated this debate to allow further assurances to be placed on the record. When the Minister responded to the debate in Committee, he reminded us that the Government had previously set out their intention to repeal the Bills of Sales Acts, which is the focus of Amendment 17, and replace them with a new goods mortgages Act. He also mentioned that, while the consultation carried out in September 2017 showed broad support for this, some stakeholders raised significant concerns about the degree of consumer protection to be afforded by the proposed new regime. We accept that the concerns raised by stakeholders need to be addressed. We also concede that, egregious, archaic and unsatisfactory as it is—I am using the words from the Law Commission—simply repealing the Victorian bills of sale legislation will not, in itself, sort out the problems arising from logbook loans.

When he comes to respond, I hope that the Minister will be clear that the Government will continue to reflect on this issue as part of an upcoming workstream, which I believe will begin with the review of the broader consumer credit regulatory framework and then consider a range of possible reforms. While we would not wish this issue to be rushed, we need to be assured that the issues around high-cost credit will not simply be filed as “too difficult.” If the Minister is able to address our concerns and speak to this last point on timescale, we would see no need to test the opinion of the House on this occasion. I beg to move.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative 6:15 pm, 14th April 2021

It gives me great pleasure to follow the noble Lord, Lord Stevenson of Balmacara, and lend my support, with my co-signing, to an important follow-through from the Law Commission’s conclusions and recommendations. I echo the remarks I made in my support in Committee, and I believe the contribution from the noble Lord, Lord Stevenson, has been modest today. We are seeking reassurances, and I echo his concern about a definitive timescale.

It is interesting to note, as a non-practising Scottish advocate, that bills of sale do not apply in Scotland, so the Act does not extend to Scotland, and the provisions only really apply to England and Wales in this regard. Bills of sale, being mainly used for logbook loans, relate mostly to vehicles. But this is an opportunity, in supporting the amendment before us this afternoon, to probe my noble friend and the Government a bit further about what their plans are to review the recommendation.

Law Commission reports do not come along that often, and they come along often at the invitation of the Government. I would like to ask my noble friend about his intentions to give effect to the recommendations of the Law Commission report of 2017. In the consultation paper, it was proposed that the Bills of Sale Acts should be repealed in their entirety and replaced with new legislation to regulate how individuals may use their existing goods as security while retaining possession of them. Out of the 32 consultees who expressed their views, 24—75%—agreed to that.

I entirely endorse the Law Commission’s opinion that:

The Bills of Sale Acts are written in obscure, archaic language, using words such as ‘witnesseth’ and ‘doth’.”

That sounds a bit like “the Leith police dismisseth us”. In the interests of modernising the legislation and making it more transparent, the purpose of Amendment 17 is entirely clear, and I take this opportunity simply to nudge and press my noble friend on what the Government’s intentions are now, four years on from the Law Commission’s recommendations.

Photo of Lord Holmes of Richmond Lord Holmes of Richmond Conservative

My Lords, it is a pleasure to follow my noble friend Lady McIntosh, and to congratulate the noble Lord, Lord Stevenson of Balmacara, on all his efforts in this respect. The Law Commission’s recommendations seemed pertinent and on point in 2017; four years on, they seem similarly pertinent and on point. Will my noble friend the Minister set out the pathway and the timetable for consideration of those arcane statutes, and tell us what issues and other legislation, which he alluded to, may also be under consideration along that pathway?

Photo of Baroness Kramer Baroness Kramer Liberal Democrat Lords Spokesperson (Treasury and Economy)

My Lords, I shall be extremely brief. It is absolutely clear that bills of sale legislation is fraught with problems both legally and practically, including allowing goods to be repossessed on a single default, and giving no protection to purchasers who unwittingly buy goods subject to bills of default. The Government promised us reform, and they had a draft Bill from the Law Commission in 2017, but then they changed their mind and decided not to legislate. If they can change their mind once they can change it twice, so I hope they will now change their mind again, and take action.

Photo of Lord Tunnicliffe Lord Tunnicliffe Opposition Deputy Chief Whip (Lords), Shadow Spokesperson (Defence), Shadow Spokesperson (Treasury), Shadow Minister (Transport)

My Lords, I shall be brief in responding to the amendment, which was ably introduced by my noble friend Lord Stevenson of Balmacara. We are grateful to the Minister and officials for their time discussing this and other consumer issues during the passage of the Bill. Those meetings have been useful, particularly for better understanding the numbers of people affected by financial agreements enabled by the antiquated bills of sale Acts referenced in the amendment. We understand that the Government cannot simply accept the amendment, because of the complexity of the issue and the scope for unintended consequences. Normally we would roll our eyes on hearing that phrase, but, as my noble friend noted, this amendment was tabled as a means of starting a conversation. We hope the Minister can give a strong commitment from the Dispatch Box that the Treasury will undertake a proper review of this part of the credit market, and will have regard to the earlier Law Commission recommendations when deciding on a policy response.

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

My Lords, again I thank all those who have spoken in this slightly shorter debate. I thank the noble Lord, Lord Stevenson of Balmacara, very much for his continued engagement with all aspects of the Bill and with the underlying issues of credit—on which he has long been such a distinguished advocate—and for his interest in this issue. I hope I will be able to give him an assurance that he will find satisfactory.

First, however, I must respond to my noble friends Lady McIntosh of Pickering and Lord Holmes, who asked about the Law Commission report. The noble Baroness, Lady Kramer, also alluded to it. I set out in Committee the reasoning behind the Government’s decision not to take forward their proposed goods mortgages Bill, which had followed from the Law Commission report, in 2018. That Bill would have repealed the bills of sale Acts and replaced them with a new goods mortgages Act, and it was the result of the Law Commission’s report on bills of sale, to which my noble friends referred.

However, when the Government consulted on the proposed goods mortgages Bill, the consultation responses—not all of them, I confess, but the serious responses—showed that while there was broad support for the proposed approach set out in the Bill, some stakeholders raised significant concerns about the degree of consumer protection afforded by the proposed regime. Furthermore, there was a risk that a more modernised, streamlined regime for consumers could lead to more consumers using goods that they already owned as security for a loan, which is inherently a higher-risk form of borrowing. Given the concerns raised in the consultation and the shrinking size of the market, the Government decided not to take forward the goods mortgages Bill. Still, I highlight again that the use of logbook loans has fallen substantially and continues to decline: the number of bills of sale registered at the High Court has fallen from 52,000 in 2014 to just 3,758 in 2020—and a little higher the previous year. Obviously, we will watch this figure.

A number of other points were also raised in Committee. The noble Lord, Lord Stevenson, raised the cost of logbook loans. It has been suggested that some of these loans have very high interest rates. There is already a power for the FCA to cap the cost of all forms of credit, including logbook loans. It will use that power where it thinks it is necessary to protect consumers. Most recently, it capped the cost of rent-to-own products in March 2019.

My noble friend Lady McIntosh questioned in Committee why a model that used hire purchase could not be used for logbook loans. Hire purchase is a financing option that allows borrowers to hire a car and then gives them the option to buy it by the end of the contract. This model would be inappropriate for borrowers who already own their vehicle, as ownership of a vehicle should automatically revert to the borrower when they have repaid their loan.

I turn to the amendment itself. As I explained in Committee, it is likely to have unintended consequences that could lead to a greater risk of detriment, particularly to borrowers. The repeal of the bills of sale Acts would not necessarily prevent this type of credit being offered. Rather, it would remove the statutory framework that governs this type of credit, which could inadvertently lead to a greater use of such lending through the removal of some of the frictions to which some who have spoken have alluded—“frictions” is a polite Treasury word—that the bills of sale Acts impose. Given that, the Government do not believe that repealing the bills of sale Acts would be an effective way of increasing protection for borrowers. Furthermore, the Government do not believe that it would be proportionate to introduce new legislation to specifically implement a replacement for the bills of sale Acts, given the continued decline in their use.

However, I recognise the strength of the feelings of the noble Lord, Lord Stevenson, on the subject of logbook loans, and I have heard the echoes that his resounding voice has provoked. I understand that he wants to know what plans the Government have to review the regulatory treatment of logbook loans. I have had the opportunity to discuss this issue with the noble Lord. As we look beyond the Covid-19 crisis, the Government are keen that work should progress to consider reform of the broader consumer credit regulatory framework to ensure that it remains fit for purpose. That is a substantial piece of work. As part of it, I can give the noble Lord the specific assurance that he asked for: the Government will consider the extent to which that regulatory framework can provide robust protections for logbook-loan borrowers and third parties who may unknowingly buy a car subject to a logbook loan. On that basis, I hope the noble Lord will feel able to withdraw his amendment. I have every confidence that, even if he does, he will continue to knock at the Government’s door.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Labour

My Lords, I thank all those who have spoken on this amendment and those who spoke in Committee on this issue. It must be obvious that I think the case for reform here is unanswerable and that we need to move forward as soon as we can. The Minister made a kind reference to my assiduous pursuance of this over the last four years; I can assure him I have only just warmed up. I have plenty more capacity now that I have stepped back from the Front Bench and this remains one of my main targets—so I will be calling again in the near future.

I was slightly struck by the rather defensive notes in the early part of his speech, because I do not honestly think there is much you can say about bills of sale other than that, ironically, when they were first introduced—although not in Scotland—they were in essence an early form of consumer protection. What has gone wrong, of course, as he mentioned, is that the considerable collateral damage to subsequent purchasers of goods subject to bills of sale has been devastating for many people. Yes, it is true that the numbers are down, but I do not buy the argument that it is okay to let this egregious behaviour carry on simply because there are not very many. Every single person affected by this is affected in a most extraordinary way, and it should not happen.

The noble Baroness, Lady McIntosh, was right; we should look at the wording of the original bills and see what the Law Commission said about it. Even if it were a question of rewriting them in modern language and trying to fit them better into the existing consumer protection framework, that would be a job worth doing—but actually there is a greater harm behind that. However, I am not going to engage with that at this stage; there will be other opportunities to talk to the noble Lord and indeed to the Economic Secretary to the Treasury, who I know has an interest in this.

The Minister has confirmed that the Government will continue to reflect on this issue as part of the upcoming review and build on their earlier decision, which was publicly announced, to repeal the egregious and archaic bills of sale. We can hope that that will happen quickly, but we understand it will take time. I will certainly be pursuing it by whatever means I can. Indeed, I am sure there will be other legislative opportunities, as well as questions the Minister will have to prepare for. In the meantime, I accept what is on offer. I think it is made in good faith and I will make sure we stick to that. I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

Photo of Baroness McIntosh of Hudnall Baroness McIntosh of Hudnall Deputy Chairman of Committees, Deputy Speaker (Lords) 6:30 pm, 14th April 2021

We come now to the group beginning with Amendment 18. Anyone wishing to press this or anything else in the group to a Division must make that clear in debate.