Finance Repossession Issue

[jfm]

All agreed, and well explained, Observer

To be fair to Duncan, I dont think we know the order of events. He might have agreed his ex wife takes the boat as part of divorce settlement BEFORE he knew anything about the defective title

As for banks not registering their charges, I guess that's a commercial decision. I guess they think that the risk of borrower defaulting having sold the boat, and security having to be enforced against innocent buyer, and a Shizelle style haircut to their security interest being imposed by a judge, is remote. So remote that it doesn't justify Part 1 registering the zillions of boats on which they have lent <£20k per boat and whose owners/borrowers are honest people who intend to and do honour their loan obligations. That's just a guess, but it seems to me to make sense as an explanation for banks not registering their mortgages when it is self evidently in their interest, ignoring the procedural cost, to do so.

 

[PaulGooch]

<snip>

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?

No, part 1 registration does not work, It's not a proper system to protect buyers, banks don't have to use it, they use it if they feel like it.

All it needs is a requirement that the banks MUST register their interest, or they cannot posses the boat. It's so simple. They don't lose any security at all. They register their interest, if the borrower defaults they posses the boat, wherever it is. A prospective purchaser can check the register and be reasonably safe that the boat is free from a mortgage.

It really is that simple.

 

[PaulGooch]

All agreed, and well explained, Observer

To be fair to Duncan, I dont think we know the order of events. He might have agreed his ex wife takes the boat as part of divorce settlement BEFORE he knew anything about the defective title

As for banks not registering their charges, I guess that's a commercial decision. I guess they think that the risk of borrower defaulting having sold the boat, and security having to be enforced against innocent buyer, and a Shizelle style haircut to their security interest being imposed by a judge, is remote. So remote that it doesn't justify Part 1 registering the zillions of boats on which they have lent <£20k per boat and whose owners/borrowers are honest people who intend to and do honour their loan obligations. That's just a guess, but it seems to me to make sense as an explanation for banks not registering their mortgages when it is self evidently in their interest, ignoring the procedural cost, to do so.

Surely that is the point. "think that the risk of borrower etc"....... they take the risk, and then want someone else to pick up the bill. If they want to have security over a boat, they should register their interest, or lose the security.

 

[jfm]

Surely that is the point. "think that the risk of borrower etc"....... they take the risk, and then want someone else to pick up the bill. If they want to have security over a boat, they should register their interest, or lose the security.

I understand what you're saying. But the cost of registering all those interests will fall on all borrowers, 99.999% of whom are 100% honest unlike the guy Duncan bought from. You need to be happy with that outcome

Currently the cost of registering a mortgage is quite high, being part 1, say £500 each time, which is fine for a £200k loan but way too much for (say) a £10k loan. Ari has proposed a simpler/cheaper register, a la HPI, but a simpler/cheaper register will intrinsically be easier for determine rip-off merchants to circumvent (change the boat's name and other details etc). Honest people wont circumevent the register, but then neither would they have sold a boat to duncan with £26k owing on it. Crooked people will.

What you're actually proposing is a non watertight solution. If it is put in place tomorrow, and in a year's time Duncan Mk2 buys a boat pledged to a bank whose vendor changed the boat name, HIN and outboard motor serial number plate, will you call for more lobbying of MPs and another law change, or will you post on here along Observer/Tranona/JFM lines namely "sorry mate, tough luck, that's just an intrinsic risk of buying a boat*"?

Or a piece of industrial plant, a light plane, a caravan, a work of art, etc...

 

[PaulGooch]

I understand what you're saying. But the cost of registering all those interests will fall on all borrowers, 99.999% of whom are 100% honest unlike the guy Duncan bought from. You need to be happy with that outcome

Currently the cost of registering a mortgage is quite high, being part 1, say £500 each time, which is fine for a £200k loan but way too much for (say) a £10k loan. Ari has proposed a simpler/cheaper register, a la HPI, but a simpler/cheaper register will intrinsically be easier for determine rip-off merchants to circumvent (change the boat's name and other details etc). Honest people wont circumevent the register, but then neither would they have sold a boat to duncan with £26k owing on it. Crooked people will.

What you're actually proposing is a non watertight solution. If it is put in place tomorrow, and in a year's time Duncan Mk2 buys a boat pledged to a bank whose vendor changed the boat name, HIN and outboard motor serial number plate, will you call for more lobbying of MPs and another law change, or will you post on here along Observer/Tranona/JFM lines namely "sorry mate, tough luck, that's just an intrinsic risk of buying a boat*"?

Or a piece of industrial plant, a light plane, a caravan, a work of art, etc...

The HPI option works quite well with cars and caravans and i can't see why it wouldn't work with boats too. But, IMO, if the banks want the security on the boat, it should be up to them to insists on part 1 or whatever, obviously passing the cost on to the borrower, which would be happening now in most cases anyway.

I agree that the crooks will get around pretty much any system. But i don't think the determined crooks are really the issue here, they aren't going out and buying boats on mortgages with the intention of selling it on without paying for it. I'm sure that they are borrowing with the intention of paying it back and then getting in a muddle. Selling the boat on to raise some cash, without even thinking that the bank will chase the purchaser down for the boat.

I don't think we'll all be agreeing on this anytime soon, i'm of to Ari's for a beer

 

[Observer]

As for banks not registering their charges, I guess that's a commercial decision. I guess they think that the risk of borrower defaulting having sold the boat, and security having to be enforced against innocent buyer, and a Shizelle style haircut to their security interest being imposed by a judge, is remote. So remote that it doesn't justify Part 1 registering the zillions of boats on which they have lent <£20k per boat and whose owners/borrowers are honest people who intend to and do honour their loan obligations. That's just a guess, but it seems to me to make sense as an explanation for banks not registering their mortgages when it is self evidently in their interest, ignoring the procedural cost, to do so.

You may be right but I would be surprised if the decision whether to compel registration and therefore enable registration of a charge is driven by consideration of the registration cost imposed on the borrower. If it is, and the banks simply weigh the possibility of a haircut on a claim against a subsequent purchaser against the probability of that happening, it would be extremely cynical. My understanding is that if the loan offered exceeds a defined threshold, a mortgage will be required and, necessarily, Part I registration. If under the threshold, the finance is offered as a simple unsecured personal loan.

In Duncan's case, we don't know why the mortgage was unregistered (or, rather, why the bank didn't insist on Part I registration). It could be for the reason you suggested. Or it could be that the bank did require Part I registration but (as I know happens from direct experience), toook an unregistered mortgage initially pending completion of Part I registration and the boat was sold to Duncan before that was done (an effective ploy by a dishonest borrower with fraudulent intent). That (an interim, unregistered mortgage) is often the process where the boat is purchased outside the UK. It is possible to complete Part I registration of a boat that is outside the UK, but far easier and considerably cheaper, if the intention is to return it to the UK anyway, to wait for it to return and complete the process then.

Of course this is supposition. We don't know because Duncan's account was short on detail and a bit muddled anyway. Perhaps I may call one or two of the marine finance houses and ask what their policy is. If I get a sensible response I'll post it. I don't suppose we'll ever know what BoS policy was (the lender in Duncan's case) because they'e no longer active in the marine market.

 

[MapisM]

if the banks want the security on the boat, it should be up to them to insists on part 1 or whatever, obviously passing the cost on to the borrower

See, that really would DEFINITELY mean an additional cost for Joe Publics.
Which, as has been said, could be relevant, particularly for smaller amount.
What I envisage is simply an inversion of the burden of proof against bona fide purchasers, AOTBE.
I'm pretty sure that most banks would not even bother to go legal, if they should prove that the purchaser had some sort of complicity with the seller.
And that wouldn't mean any additional cost for anyone in practice, because the (very marginal) weakening of the bank position could easily be overcome by a more accurate assessment of the borrower - which is what banks should do anyway.
I accept that in theory, as jfm said, also this option could lead to an increased cost of financing.
But I still think that in practice this effect would be not relevant at all, if any.

 

[Tranona]

The HPI option works quite well with cars and caravans and i can't see why it wouldn't work with boats too. QUOTE]

The reason for that is quite simple. There are probably more transactions involving finance on cars and caravans in one day than there are on boats in a year. Just think, 2m new cars a year and at least the same number of SH ones. Cars are much easier to clone/hide/sell than any boat so opportunities for fraud much greater. And HPI does not stop all fraudulent cases (I suspect).

We are back to the same question. Demonstrate with REAL cases that there is a problem and maybe you have a poynt.In the absence of real cases it is just fantasy.

 

[PaulGooch]

The HPI option works quite well with cars and caravans and i can't see why it wouldn't work with boats too. QUOTE]

The reason for that is quite simple. There are probably more transactions involving finance on cars and caravans in one day than there are on boats in a year. Just think, 2m new cars a year and at least the same number of SH ones. Cars are much easier to clone/hide/sell than any boat so opportunities for fraud much greater. And HPI does not stop all fraudulent cases (I suspect).

We are back to the same question. Demonstrate with REAL cases that there is a problem and maybe you have a poynt.In the absence of real cases it is just fantasy.

The potential is there for loss and people do lose. Just because it doesn't happen a million times a year, doesn't make it a potential problem

You still totally miss the point and are blinkered in your thinking. You refuse to accept that the simple solution is to require registration of a mortgage.

The cost issue is a nonsense. You all keep saying how the vast majority are registered, so therefore it follows that only a minority are not registered. If you want to borrow money on a boat and the banks want to be so stupid as to not register their interest, i don't see why i should be put at risk just to save you a few quid in registration costs.

HPI DOES work. It isn't foolproof in every case, nothing is. You try buying a car on finance and then selling it.

 

[Tranona]

The potential is there for loss and people do lose. Just because it doesn't happen a million times a year, doesn't make it a potential problem

If that is the case, please provide REAL examples to illustrate what you mean. "Potential" is not good enough. I agree there is potential but cannot agree with your statement "and people do lose".

I am afraid it is you that is blinkered. You think there is a problem, think you have a solution - but don't really know, but insist the "solution" should be implemented (even when all the parties involved see no need) just in case.

Hardly a model of clear thinking.

As I have said several times, show us the list of cases that fit your hypothetical scenario and how your register would have prevented the losses.

You may also like to consider the principles of risk assessment. The point about large volumes of transactions with a small probabilitiy of failure is that the cost can be spread over a very large number of people (simple insurance principle). Here we have a small number of transactions - a tiny probability of a failure occuring (because of the mechanisms already in place) and no reliable record of the causes of failure to allow the risk to be calculated.

The only identifed risk is an unregistered charge on a boat, and yet again there is no evidence this is widespread, simply because lenders know that they will have difficulty in enforcing an unregistered charge.

 

[ari]

See what I mean Rob? It's why, other than mooting a perfectly sensible, practical, and workable solution, I don't bother to get further involved in these threads anymore.

Too many people who regard £8K (or £80K or whatever) as an insignificant sum (not to me matey), or who think that unless a system is absolutely 100% watertight then there's no point (by which logic the HPI register for cars must be a total waste of time then).

As I say, there is a perfectly workable and easily achievable solution that would provide way better cover than is now available (which is basically none) but ultimately, as is demonstrated here, people generally prefer to simply take the view that it'll never happen to them.

I must add also that I find the touching faith in Full Part One registration somewhat naive. Finance companies don't generally bother to insist on it for loans below £50K, and there is no onus on any owner to attach a carving and marking notice in such a way as it cannot be removed, and how hard is it to peel off a vinyl boat name? Not very.

Bingo, instant un-traceability via Full Part One.

So we're stuck with fingers crossed I'm afraid.

 

[Observer]

You still totally miss the point and are blinkered in your thinking.

Oh the irony. Either you have no idea what you don't know or you're ignoring facts don't support your poorly founded opinions. Here's a selection.

1. HPI is not compulsory, although it is routinely used by most if not all motor finance companies. However, it doesn't change the law. A used car buyer that purchases a car that is actually owned by a third party won't obtain clear title merely because it wasn't HPI registered. HPI offers a 'guarantee' but it only bites where they have cocked up by failing to disclose an interest that has been registered. In effect, it's meaningless; if an interest is recorded, there is virtually no chance that it won't be disclosed by a search; if nothing is disclosed because nothing was registered, but the vehicle is actually subject to another ownership interest, they have no liability.

2. Motor finance falls into three categories:

(a) Hire purchase/contract purchase (perhaps with some conditional sale)
(b) Leasing and contract hire
(c) Credit sale and unsecured loans

In (a) and (b) above, legal titile remains with the finance co anyway, regardless of whether the interest is registered with HPI and, subject to some statutory rules I can't remember the exact details of, a purchaser won't obtain clear title. With (c), I believe the practice is that finance companies that offer credit sale/loans via dealers register an 'interest' in a vehicle even if they do not have a legal interest. This is a practical measure that has no legal foundation.

In contrast, all or nearly all marine finance (certainly all mainstream finance) is based on loans, so the lender has no inherent ownership rights (or risks, that's why it's done that way) and has to take a security interest, where that's necessary because of the size of the loan, by way of a (chattel) mortgage. If a lender was unable to enforce its security for want of registration of a charge/mortgage (if such a registration system existed), it would be equivalent (in motor finance context) to denying the finance company's ownership rights because of failure to register with HPI. It hasn't been done for motor vehicles and won't be done for boats/ships. The ramifications of a change of law in this area, merely to provide some protection for a small number of boat purchasers whose enquiries have failed to disclose a charge, possibly for lack of due diligence, are massive and, on the evidence, there is no or virtually no mischief to remedy.

3. As Tranona has pointed out, the pool of vehicles that HPI can bite on is vast compared to boats. There are ~30 million registered vehicles in the UK. According to the AA, 1 in 4 cars have finance recorded. Allowing for commercial vehicles, I'd guess that ~5 million cars are registered on HPI. There are also vastly more sale and purchase transactions - I have no actual knowledge how many used vehicles change hands each year but a reasonable guess could be 6 million (3 used cars for each new car). So that's 6 million opportunities for HPI to cover its costs from a search, before counting the income from actual registrations.

4. The RYA and BMIF did try to set up a HPI style scheme for boats about 20 years ago (actually run by HPI, I think). It was called "Boatmark". AIUI, it was closed down because of lack of demand. A scheme of that nature needs to hit a critical mass of registrations and activity to be financially viable and then (arguably) a higher critical mass (perhaps 75%, even 90%, of all the target market?) of registrations; otherwise it is at risk of giving false reassurance and is worse than nothing.

Frankly if, in the face of these facts, you don't see that you're tilting at windmills, you're simply not using your head.

 

[fireball]

<snip> Not expect the state to come and wipe their bottoms for them

You mean we've got no Arsewipe politicians? I beg to differ!

 

[jfm]

I agree that the crooks will get around pretty much any system. But i don't think the determined crooks are really the issue here, they aren't going out and buying boats on mortgages with the intention of selling it on without paying for it. I'm sure that they are borrowing with the intention of paying it back and then getting in a muddle. Selling the boat on to raise some cash, without even thinking that the bank will chase the purchaser down for the boat.

OK fine. But let's be clear then what you are proposing: an HPI system for boats where the innocent buyers like Duncan are protected from non-determined crooks but are not protected from determined crooks. Right?

When duncan Mk2 posts on here in a year's time that he bought a boat from a bloke who turned out to be a determined crook, yet Duncan Mk2 thought he was safe becuase he checked the HPI and it didn't indicate any mortgage, your reply to him on these forums will be "sorry to hear that mate but hey you gotta live with that intrinsic risk of buying a boat, tough tittie, better luck next time"?

 

[PaulGooch]

OK fine. But let's be clear then what you are proposing: an HPI system for boats where the innocent buyers like Duncan are protected from non-determined crooks but are not protected from determined crooks. Right?

When duncan Mk2 posts on here in a year's time that he bought a boat from a bloke who turned out to be a determined crook, yet Duncan Mk2 thought he was safe becuase he checked the HPI and it didn't indicate any mortgage, your reply to him on these forums will be "sorry to hear that mate but hey you gotta live with that intrinsic risk of buying a boat, tough tittie, better luck next time"?

Just because a system can't protect every transaction, it doesn't make it a waste of time.

We're never going to agree here, so let's call it a day.

 

[robyonfrome]

Thanks guys, a fantastic response to the thread, I believe its now run its course. As I started the debate perhaps I could be permitted to have the last say or rather opinion. I still tend to agree with Ari, PaulGooch etc that a HPI system is the only solution and cant see any argument why not, (discarding the determined criminal element which I believe extreme)
Its interesting to know that the RYA stet up this system 20 years ago but closed down from lack of demand, surely things are different now with the buy today, pay tomorrow culture and lots more boats being sold. I think going back to my original post, we should use the strength of this forum to influence the RYA to resurrect the “Boatmark” system.

 

[Tranona]

Sorry, Roby, despite the (literally) hundreds of posts on this subject recently, NOBODY has come up with any REAL examples where an HPI type scheme would be of benefit.

So difficult to see how you can persuade anybody to take any action to resolve a non - existent problem.

So, a better summary is that some people think there is a problem but have no evidence and others think there is no problem because there is no evidence. Therefore it becomes a sterile debate until the evidence changes.