Hire Purchase and Conditional Sale (Prevention of Fraud) (Hansard, 17 March 1993)

§ Mr. Michael Stephen (Shoreham)

I beg to move, That leave be given to bring in a Bill to amend the law relating to the sale and leasing of goods and to vehicle registration; to make provision for the registration of title to certain other goods; and for connected purposes. I am grateful for this opportunity to present the Bill this afternoon.

Hire purchase fraud is a serious form of criminal activity, which can and must be stopped. In a typical case, a criminal takes goods, usually motor vehicles, on hire purchase, lease or credit sale and sells them to an unsuspecting member of the public or a motor dealer or through an auctioneer without of course, disclosing the existence of the hire purchase company's interest. The criminal then disappears or is not worth suing.

Last year, losses to finance companies exceeded £13.5 million, and further losses exceeding £2 million were suffered by motor traders and auctioneers. Those costs are passed on to our constituents in the form of higher finance charges and higher vehicle prices. Last year, there were also more than 4,500 cases of wrongful disposition of motor vehicles, many of which resulted in prosecutions, with increased costs for the police, the courts the prison system and others, all paid for by the long-suffering taxpayer.

The remedy is not to arrest, prosecute and punish the offender but to change the system of documentation to make it virtually impossible to commit such a crime. As the law stands, if the criminal sells to a private buyer who acts in good faith and without notice of the finance company's interest, the buyer gets a good title and the loss falls on the finance company. If the criminal sells to a motor trader or through an auctioneer who does not know of the finance company's interest, the loss falls on the trader or auctioneer.

A register of hire purchase interest is maintained by a company called Hire Purchase Information, or HPI. It does an excellent job, but traders and auctioneers searching the register will often find no trace of a hire purchase or other security interest. There are two reasons 288 for that. First, many hire purchase companies do not bother to register, knowing that private buyers do not search at HPI and also knowing that, if the criminal sells to a trader, the trader will have to bear the loss.

The second reason is that the criminal may have sold the vehicle very quickly, before the hire purchase interest has been registered. It is therefore necessary to change the system of vehicle registration so that the vehicle registration document sometimes known as the logbook, is endorsed with a note of the hire purchase interest. Traders and private buyers would therefore see straight away whether the car was subject to a finance company's interest and, of course, if the seller said that he could not produce the vehicle registration document, a prudent buyer would send him away until he could produce it. The present pace at which the Driver and Vehicle Licensing Agency at Swansea operates is much too slow and needs to be speeded up.

Some consequential changes to the law would be needed. The main one would be to make it clear that a finance company that fails to register its interest or allows its customer to take possession of a vehicle with an unendorsed vehicle registration document would lose its title if the criminal sold to an innocent private buyer or an innocent trader. There is no reason why a system similar to that which I have outlined should not also be introduced for boats and caravans, which are subject to the same criminal activity.

It is time to take action to crack down on hire purchase fraudsters. I commend the Bill to the House.