Finance Repossession Issue

[robyonfrome]

After reading ‘Duncan’ post about his travesty of justice having to hand the boat in, and pay someone else’s finance. Almost 10,000 people have viewed this post, with that amount of interest why cant it be put to some use to set up a petition to lobby a MP’s and get some sort of ruling that when you sell, if you declare there’s no outstanding finance and you lie. You will be liable for all outstanding debt and not the poor chap that’s bought it. Another avenue could be an indemnity insurance policy similar to when you sell a house. I’m about to sell my boat and am really worried about buying another.

 

[BrendanS]

Quick point - That's number of views, not number of people. Many people will have viewed the thread many times as new posts are added, so the actual number of people is much smaller.

 

[robyonfrome]

Good point, never thought of that I,ve viewed it a few times myself come to think of it.

 

[Tranona]

After reading ‘Duncan’ post about his travesty of justice having to hand the boat in, and pay someone else’s finance. Almost 10,000 people have viewed this post, with that amount of interest why cant it be put to some use to set up a petition to lobby a MP’s and get some sort of ruling that when you sell, if you declare there’s no outstanding finance and you lie. You will be liable for all outstanding debt and not the poor chap that’s bought it. Another avenue could be an indemnity insurance policy similar to when you sell a house. I’m about to sell my boat and am really worried about buying another.

If you can bear it, read all the posts.

There is still some confusion about what the actual judgement was and many unanswred questions about the case. You will find an observation by JFM suggesting that if the court had known all the facts (as put up by the OP) the outcome would be different - and it would then have been an example of how difficult it is for somebody to lose a boat in these circumstances.

The law is in favour of the purchaser - or rather the onus is on the lender to prove he has a legitimate charge over the boat. It is also illegal to sell a boat without declaring there is a charge over it. What more do you want?

It is also the case that the number of reported cases is miniscule - when asked for examples, those who claim the practice is rife are simply unable to quote any examples.

This phenomenom is known in the media as "moral panic", where an idea enters the public consciousness and because of the fantastical nature gets a life of its own. Think covens of witches in Rochdale or Devil worshippers in the Orkneys.... Latest is Foxes attacking sleeping babies. One tragic case becomes the basis for an epidemic - but actually, nobody has been able to find another confirmed case. Not saying this one did not happen, but it appears to be unique (but has had the result of filling hours of empty TV time!).

So, one complex and probably unresolved case does not indicate a widespread problem.

Do the normal due dilligence and there is minimal risk (of ownership disputes) in boat transactions - thousands take place evry year without problems.

 

[jfm]

After reading ‘Duncan’ post about his travesty of justice having to hand the boat in, and pay someone else’s finance. Almost 10,000 people have viewed this post, with that amount of interest why cant it be put to some use to set up a petition to lobby a MP’s and get some sort of ruling that when you sell, if you declare there’s no outstanding finance and you lie. You will be liable for all outstanding debt and not the poor chap that’s bought it. Another avenue could be an indemnity insurance policy similar to when you sell a house. I’m about to sell my boat and am really worried about buying another.

Blimey Roby, read the Duncan thrtead. Duncan has to hand the boat to the bank; he is absolutely NOT laible to pay off the loan to the bank. The suggestion that he had to repay the loan was incorrect information put out by Duncan, and even he confirmed that about 3/4ths of the way through the thread.

If you buy a used boat you could be liable to have it seized by a bank that has a charge on it (though that is not a slam dunk and you would have many defences against such a claim by a bank, provided you turn up to court) but you will never under any circumstnaces become liable to repay someone else's loan to the bank. I apprecate that the two things could in practice amount to the same overall effect, but they never compound (ie you will never have to hand over the boat AND pay off the loan, as Duncan incorrectly reported)

Let's keep the description of what could happen accurate!

 

[robyonfrome]

I can appreciate the points being pointed out here, but I think you are missing the point Im making, of using this forum to gain support to lobby the relevant people into changing the law or is there an insurance company that does indemnity policies for this kind of thing. Ok as you say he wont have to pay the outstanding finance great, but I don’t think its fair that he has to hand the boat back either, hence we need one of the above.

 

[jfm]

I think you are missing the point

You asked for "a petition to lobby a MP’s and get some sort of ruling that when you sell, if you declare there’s no outstanding finance and you lie. You will be liable for all outstanding debt and not the poor chap that’s bought it"

What you're asking for is a weakening in the security for all banks who lend to boat buyers. That can be done, but all of a sudden you'll find loans are more expensive and/or not available. Is that what you want? For all the innocents to suffer just because 0.0001% or whatever of sellers are liars and folks like Duncan don't even bother file defences? Careful what you wish for.

You say "fair". Let's get the facts straight. This guy didn't even bother to sohw up to court or file a defence. He basically ignored his opportunity for fairness, ffs. OK if you can find a case where someone used their opportunity for a fair hearing and still got treated unfairly then let's lobby MPs or whatever. But to lobby MPs based on acase like Duncan's is absurd

As said on here many times, people need to grow up and understand, then manage, and then ultimatey take, risks. Not expect the state to come and wipe their bottoms for them

 

[ari]

Rob, there are several posts on this subject, all running several themes of the same thing. I agree with you completely, the idea of buying a boat that then gets repossessed by the finance company due to a hidden/undisclosed loan makes my blood run cold. Bluntly, I couldn't afford for it to happen (and I suspect many people probably feel that therefore I can't afford the boat in the first place if that is the case).

At the risk of repeating myself, (ok, so it's not a risk, I amrepeating myself), it seems to me is that the simple answer is a more robust central register which would record not just the (very easily changed/removed) boat name and Part One Registration Number (if registered) but the engine serial number, gearbox/outdrive serial number, and HIN number, and a small change to the law to simply state that finance companies only get a claim to the boat if properly registered on the central finance register. Cost to be borne by the finance companies (and therefore passed on to the buyer, just as the cost of Full Part One is currently).

That way, when Duncan bought his boat he could have searched (for a small fee) not just the boat name, but the HIN and mechanical serial numbers, and had any of the flagged up (so if the HIN had been changed then the outdrive number would still have matched for example) he'd know that there was an outstanding loan. Obviously if all the serial numbers had been removed he couldn't have found it, but would you buy a boat with removed or altered serial numbers? (Pretty hard to fake after all).

So there it is, not fool proof but a hell of a lot better than, err, nothing, which is effectively what we currently have.

The objections to this seem to be:

Cost. Even though the cost would be borne by those using the scheme (as Full Part One is now), not by the general boating public (other than searches which, lets face it, would be money well spent).

The existence of a central register. Even though not all boats would be on it (only those with finance) and we already have two registers, SSR and Full Part One.

The fact that it's not completely secure (just a bloody sight better than what we have now, which is basically nothing. Even Full Part One only needs removal of the number and a name change to thwart it).

The fact that "it's not really a problem" (try telling Duncan that).

So I continue to find it extremely odd that so many people seem happy to take the risk. The complete lack of any remotely safe way of checking for outstanding finance will and does put me (and no doubt many others) off buying a bigger boat, so it has to affect used values (less buyers, lower resale) so in effect it affects everyone even if they're not bothered about the risk.

But the bottom line is that there simply isn't the will amongst those that could be affected by this issue to tackle the problem.

 

[MapisM]

What you're asking for is a weakening in the security for all banks who lend to boat buyers. That can be done, but all of a sudden you'll find loans are more expensive and/or not available.
...
people need to grow up and understand, then manage, and then ultimatey take, risks. Not expect the state to come and wipe their bottoms for them

Mmm... While I fully agree that not bothering to show up to court wasn't a smart idea from Duncan, I beg to disagree on your analysis on the possible consequences of weakening the banks securities against private individuals.

The banks have much better ways to avoid taking ANY risk on loans. If and when they don't care about it, that's just because they decide (or used to decide, as it happened) to look at profit rather than risk management.
I don't see one single reason, neither from an economic nor an ethical viewpoint, why their securities shouldn't be automatically "weakened" in this case, against a bona fide purchaser.
And if that would lead to more risk awareness from their part (which I actually don't think would be the case), well, it's about time I reckon, innit?

You know, actually I couldn't agree more with your last sentence above. It should be carved in stone at the entrance of each and every office in the City (among other places around the world, actually)...

 

[PaulGooch]

Well i'm afraid i still believe there should be a register. We already have the register, it's called HPI, it serves the motor trade quite well and costs the finance company peanuts to secure their interests. It also costs the buyers peanuts to check that their prospective purchase of a £1000 car is free from finance, so i don't see how it can't work for a £50k/£500k/£2m boat.

Anyone with an interest HAS to register it, or they can't posses the boat.

Anyone buying HAS to check the register, or they can't STOP then possessing the boat.

Simples !

OK, a crooked seller can change the name, he can change the HIN, hell, he can change the engine/gearbox/whatever numbers. He can do that with expensive Range Rovers and Mercs, he does, but it is still better than nothing.

He can change the plate on a caravan drawbar easier than he can change the HIN on a boat. The pikeys have pop rivet guns, they might not know how to gel-coat Having all the windows on a boat etched with the HIN number would slow the buggers down a bit.

Nothing will stop a determined crook, but most of the time we're not talking about determined crooks. In most instances, i'd wager we're talking about an otherwise reasonably honest bloke who's got himself in a financial mess.

Maybe not perfect, but better than what we have IMO

Instead of making excuses why it won't work, think of ideas to MAKE it work, as best as it can.

 

[jfm]

I beg to disagree on your analysis on the possible consequences of weakening the banks securities against private individuals.

The banks have much better ways to avoid taking ANY risk on loans. If and when they don't care about it, that's just because they decide (or used to decide, as it happened) to look at profit rather than risk management.
I don't see one single reason, neither from an economic nor an ethical viewpoint, why their securities shouldn't be automatically "weakened" in this case, against a bona fide purchaser.

I'm not understnading your point MapisM. If a bank doesn't have a charge over the boat, its credit positioned is weakened, isn't it? Am I missing something? So if a law is passed saying the charge doesn't survive a sale of the boat as Robyonfrome proposed, that weakens the bank's position doesn't it, ie increases lending risk for the bank? That will make loans more expensive and/or less available wont it?

 

[Tranona]

But the bottom line is that there simply isn't the will amongst those that could be affected by this issue to tackle the problem.

Please, Ari, why do you constantly repeat all this without providing ANY evidence of the problem, nor explain how your register will solve the problem - because it simply does not exist in the way that you think it does.

I am really interested in understanding why you take such an extreme and unsupportable position. I would be more inclined to see some merit if you could cite a string of REAL cases and explain in each case where the purchaser lost out and how your register would have prevented the loss.

In the meantime all you are doing is feeding the "moral panic" that I explained earlier in this thread.

Fortunately in this country we tend to form laws, rules, and regulations based on evidenced facts rather than personal beliefs that have no substance.

Of course, if you want to live in a fantasy world of your own creation - that is fine. Just don't expect others to believe your fantasies!

 

[MapisM]

I'm not understnading your point MapisM. If a bank doesn't have a charge over the boat... That will make loans more expensive and/or less available wont it?

Nope, in spite of the fact that your train of thought is formally correct.
But both the cost and the availability of these loans are mainly based on the beneficiary solvency, rather than on the collaterals.
Sure, the banks also want any collateral they can grab, but that's just because they are the first who still need to grow up and understand, then manage, and then ultimatey take, risks. While I'm afraid that they didn't change their mentality a lot, since the last time the State actually HAD to come and wipe their bottoms for them.
But I digress. The point is, if the person (not the boat) THEY assessed and THEY financed was actually dishonest, and didn't repay the loan, why on earth a bona fide purchaser should be the one who solves THEIR problem?

 

[jfm]

But both the cost and the availability of these loans are mainly based on the beneficiary solvency, rather than on the collaterals.
Sure, the banks also want any collateral they can grab, but that's just because...

Ok, I wasn't missing your point. I wasn't trying to start a dialogue on how banks should lend money . You may well be right, but the practical fact for Mr Joe Public trying to borrow money is that banks care a lot about collateral. Without collateral, loans are harder to get and more costly. Sure, the banks may be wrong/stupid/irrational in caring about collateral, but let's park that debate for another day. The fact is they do care. All I'm saying is that if a law is passed that reduces the quality of bank security, loans will in the current market wrightly or wrongly get more expensive, and my point is "careful what you wish for"

The point is, if the person (not the boat) THEY assessed and THEY financed was actually dishonest, and didn't repay the loan, why on earth a bona fide purchaser should be the one who solves THEIR problem?

That's not quite fair. The bank assessed both the borrower and the collateral. You can't re-write history and say they only assessed the borrower. Indeed, seen thru the bank's eyes, their ability to seize Duncan's boat proves the usefulness of collateral. Nevertheless the question you raise is valid: should the law be changed so a bona fide 3rd party buyer does not get stung for the pledge of the boat? That's a question to be debated and, I repeat, I'm merely pointing out that there is no win-win answer to that question; if Joe Public gets the protection being proposed he will have to face higher loan costs and less availability of loans for boats. The cost of that (spread across many Joe Publics) will be much larger than the price of Duncan's (and all the other Duncans) boats. Joe Public should therefore consider which way the gun is pointing before pulling the trigger.

 

[MapisM]

I'm merely pointing out that there is no win-win answer to that question; if Joe Public gets the protection being proposed he will have to face higher loan costs and less availability of loans for boats. The cost of that (spread across many Joe Publics) will be much larger than the price of Duncan's (and all the other Duncans) boats. Joe Public should therefore consider which way the gun is pointing before pulling the trigger.

Well J, I'm afraid we'll have to agree to disagree on that. To me, this sounds only like an argument which I'd expect a banker to raise, in defense of something which is only useful for him - not for Joe Publics.
It's not JP who's interested in having easy financing available regardless of whether he'll be able to repay it or not.
Those interested in that are only the banks on one hand (who only care about meeting their targets), and (possibly, but not necessarily) some "unemployed black man sitting on a crumbling porch somewhere in Alabama in his string vest" otoh, as John Bird put it.
I know a first hand example of someone who's lending 2M right now to purchase a boat, and in the pre-financing the bank is not getting ANY collateral. Yes, they will have the boat afterwards, but only because the final structure is a leasing.
Now, believe it or not the spread this gentleman is paying is 150 basis point - just do the math.
How much more difficult or more expensive do you think it would have been for him, if the bank had NO collateral at all? Not a iota.

The "normal" Joe Public is someone who lends the money he knows for sure that he can repay, and the banks can understand whether that is the case or not. In fact, when they're doing some risky business, they're also making big margins on them. And in these cases, why they should also be protected by mean of Duncan and the likes covering their losses, that's beyond me.

 

[robyonfrome]

From Ari. At the risk of repeating myself, (ok, so it's not a risk, I amrepeating myself), it seems to me is that the simple answer is a more robust central register which would record not just the (very easily changed/removed) boat name and Part One Registration Number (if registered) but the engine serial number, gearbox/outdrive serial number, and HIN number, and a small change to the law to simply state that finance companies only get a claim to the boat if properly registered on the central finance register. Cost to be borne by the finance companies (and therefore passed on to the buyer, just as the cost of Full Part One is currently).

I think this paragraph from Ari is probably the best solution to the problem but how can we enforce finance companies to abide by it, making it law to register finance on a central register or forfeit the right to reposes the boat. Hence my original thoughts on using this forum as a vehicle to lobby the relevant authority.

Many thanks for contributions.

 

[Observer]

Ye Gods. Why do you lot (jfm and Tranona excepted) keep on with this drone of "something should be done about it" and "there ought to be a law against it" without ever properly thinking though the implications and costs of your fantasies. Just for starters, you're inventing a solution for a theoretical problem that, in practice, hardly exists. Don't you think that we (as a country) have more pressing problems to solve than working out how to save from himself an individual who has lost £8k on a completely non-essential, luxury item of goods, that he may well not have lost if he shown sufficient interest to turn up in court to defend his own interests. Why should everyone else (you, me and the taxpayer in general) protect him? He chose to abandon his right to defend himself.

We have a system for registering ships that, in practice, is an effective if not watertight system by which owners, financiers and prospective purchasers of ships can protect their respective interests. Those interests sometimes compete and, where that is or appears to be the case, it is up to the individuals concerned to assess and manage the risks of doing business.

We also have a centuries old system of law that permits the owners of personal goods to create security interests against their personal possessions (not just boats - cars, caravans, equipment, works of art, jewellery etc). What is so deserving or special about a very small minority group (boat owners) that would justify special treatment by a change of law? If the law was changed (unnecessarily, because there is no weight of evidence of a mischief that needs to be remedied), what would be the boundaries of its application and why? Value thresholds (lower and upper)? If so, how set? Natural persons not corporations? How much would it cost? Who would pay? What is the cost-benefit? What are the negative impacts? If you don't have answers for these, perhaps you should.

Jeeze - no wonder we're in the mess we're in (a state that has grown so large it's completely unaffordable) when there are so many people unwilling to take responsibility for themselves and their own decisions.

 

[PaulGooch]

<snip>

Jeeze - no wonder we're in the mess we're in (a state that has grown so large it's completely unaffordable) when there are so many people unwilling to take responsibility for themselves and their own decisions.

What nonsense. How about the banks (that's the people largely responsible for the mess we are in) take responsibility for themselves and their own decisions ?

If they can't be bothered to register their interest in a boat, why should the unsuspecting public have to suffer the loss of their boat ?

You keep banging on about the cost and how difficult it is to set up, it isn't difficult to set up and it would cost peanuts.

If you read back through your post and the thread by Duncan, you might see you're talking a total load of bollox. How can you say "lost £8k on a completely non-essential, luxury item of goods, " ? What a pompous and outrageous statement. To some people, £8k is a lot of money.

"We have a system for registering ships that, in practice, is an effective if not watertight system by which owners, financiers and prospective purchasers of ships can protect their respective interests. "

There is no agreed system, that's why problems arise, wake up.

 

[Tranona]

Very harsh!

Read back the Duncan posts. There are HUGE holes in his story! We have no idea how he acquired the boat - there is some mention of a third party "dealer". We have not seen the documentation he got with the boat. We do not know who the vendor was. We do not know how the Bank got a charge on the boat.

Duncan ignored the problem for YEARS, failed to attend the court even though he knew the case was on. After all that he transferred title to a third party (his ex wife), knowing that ownership was in dispute. Now he whinges about how unfair it all is.

Do you think that this is normal behaviour and could happen to anybody? Do you think there is a conspiracy by banks, vendors, dealers, lawyers etc against normal people? Hard for Duncan, but he seems to want to bear none of the responsibility for the mess he has got himself into.

Once again, like my response to Ari, if you know of lots of cases where "normal" transactions have gone this way, please share them with us.

Otherwise it stays in the urban myth category along with the witches and devil worshippers.

As I said in the original thread, when cases get to this stage there is always far more going on than meets the eye, and to use such cases as exemplars of a problem you think exists is just daft.

 

[Observer]

What nonsense. How about the banks (that's the people largely responsible for the mess we are in) take responsibility for themselves and their own decisions ?

Is it your argument that the banks' marine finance practices are responsible for the banking crisis? Your comment would have some validity (but not otherwise), in the context of this discussion, if that was the case.

If they can't be bothered to register their interest in a boat, why should the unsuspecting public have to suffer the loss of their boat ?

We don't know the circumstances of the original finance deal, except that the boat was unregistered when Duncan bought it. If a boat is not Part I registered, there is no way of registering a mortgage. We don't know why the bank did not insist on Part I registration - perhaps the borrower was reluctant to pay the cost and the bank was responding to competitive pressures by not insisting on it. This is all speculation. We can say, with certainty, that it is always in the lender's interest to protect its security. Taking unregistered security when a means of registration exists is poor banking practice and it is a mystery to me why it happened in this case. My experience is that banks that provide secured marine finance always require Part I registration for that reason.

You keep banging on about the cost and how difficult it is to set up, it isn't difficult to set up and it would cost peanuts.

I'm afraid this is more shallow thinking of the "there ought to be a law against it" variety that I mentioned before. You don't make anything happen merely by wishing it into existence. A centuries established system of legal principles and precedent cannot be altered by a snap of the fingers; to think otherwise is naive. The ramifications of changing the law in this area to benefit subsequent purchasers to the detriment of lenders are considerable. Just as one simple illustration, if you lent money to a friend or relation secured on an asset (not real estate, which does have a separate legal system) and your borrower sold the security asset without your consent, and then failed to repay you, would you feel it fair to lose your security. I doubt it.

As for cost - well think about that. How many boats would be 'eligible'? Crude approximation - say 150 marinas x 500 berths so ~40,000. (I suspect that's overestimate). How many of those are on finance - say 50%? How many of the 50% would have owners willing to pay a separate registration cost? Say 50%. You're down to a relatively small number so a relatively high cost to fix a problem that doesn't exist.

If you read back through your post and the thread by Duncan, you might see you're talking a total load of bollox. How can you say "lost £8k on a completely non-essential, luxury item of goods, " ? What a pompous and outrageous statement. To some people, £8k is a lot of money.

I have read the original thread - perhaps you should:

I did my own defence as I felt the boat wasn't worth the price of QC's.

I presumed that if they won they would be entitled to the boat, but that is not all. The judge has ruled that the entire mortgage and interest is now my liability.

It seems, from the above, Duncan was resigned to losing the value of the boat if he lost the case. He didn't expect to be landed with liability for the entire debt. However, as emerged in a later response, he hasn't been. As a result of the judgment, his choice was to hand over the boat OR pay the debt which was secured by it (£26k). Obviously he would choose the former. If he had felt differently, and defended the claim properly, he may very well have found some weakness or the court may have granted relief from forfeiture.

There is no agreed system, that's why problems arise, wake up.

Yes there is - it's called Part I registration. It works. It may not be absolutely watertight but it is largely effective. The empirical proof of that is that there is (AFAIK) no case where a buyer has lost out on a boat that was Part I registered (which tends to show that the enhancements Ari insists upon are really not necessary). Even where Part I registration was not used (as in Duncan''s case) there is no evidence that a completely blamless purchaser has lost everything (not in Duncan's case because he was certainly not "blameless" in failing to defend his case and not in the case of Shizelle where liability was apportioned). Are there other cases to show that this problem really exists?