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  4. MSPs seek consumer exclusion from moveables reforms

MSPs seek consumer exclusion from moveables reforms

6th December 2022 | banking-financial services , consumer | Consumer credit

Consumers should be excluded from Scots law reforms to transactions concerning moveable property that as things stand would let them take out loans secured over moveables, a committee of MSPs has recommended.

The Moveable Transactions (Scotland) Bill, which takes forward proposals of the Scottish Law Commission, aims to reform the law to make it easier for businesses and individuals to raise finance using moveable property, through a new type of security known as a statutory pledge.

While businesses have long called for such reforms to make it easier to raise finance, Scots law in this area long having been regarded as outdated, concerns were raised after the bill was introduced that it would allow consumers to borrow money without the protections provided under the consumer credit and hire purchase legislation. (See this Journal article, and the reply from the lead commissioner on the reform report.)  

In its stage 1 report on the bill, the Delegated Powers & Law Reform Committee supports the general principles of the bill, but has responded to the concerns by recommending that consumers should be excluded from the parts of the bill that would enable them to take out loans on moveable property. It asks the Scottish Government to consider how this can be done, without impacting on sole traders and early startups, who stand to benefit from the reforms.

At the same time it recommends that consideration be given to creating more protections in the bill for sole traders, who will in many cases be in a similar position to individual consumers.

If consumers are not to be excluded, the committee recommends that additional protections are put in place for this group, such as increasing from £1,000 to £3,000, or even £5,000, the minimum value of assets that could be pledged in this way to raise finance. Any such figure should also be automatically updated annually on an agreed date by reference to the Retail Prices Index.

In addition, the committee recommends that the bill is amended to specify that “essential household goods” are excluded – a term the definition of which would have to be carefully considered. It also proposes additional criteria which must be satisfied before a statutory pledge can be enforced against an individual not acting in a business context. 

The MSPs also ask for further information from the Scottish Government on the proposed Register of Assignations, and the possible impact of assigning debts without intimation to the debtors.

Committee convener Stuart McMillan MSP commented: “The evidence our committee has heard has demonstrated that this legislation will modernise Scots law and help Scottish businesses. It was apparent that Scottish businesses have had to implement expensive work-arounds for some finance options; however this bill will make Scotland competitive once again with this finance option.

“However, while the overall impact of the bill is positive, there are some important consumer protections that we would like the Government to address. We look forward to considering the bill further when it returns to the Parliament at stage 2.”

Read the report here.

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