Medway Citizens Advice

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Citizens Advice Medway is a registered charity that offers free, independent, confidential and impartial advice to the whole of Medway on a range of issues including Housing, Welfare Benefits, Employment, Debt, Family Law and many others.

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Logbook Loans Campaign

7th April 2014

Logbook Loans Campaign

What are logbook loans?

Logbook loans, or bill of sale lending, is a high cost form of credit.

A consumer will offer an item of their personal property (usually a car) as security for a loan they have taken. Interest rates are routinely circa 400 per cent annual repayment rate (APR) which is high for a secured form of lending.

Our evidence shows us there is a particular lack of consumer protection in logbook lending which is still governed by the Bills of Sale Acts dating from the Victorian period.

How do logbook loans work?

Under logbook loans, ownership of the item of property (usually a car) put up as security for the loan moves from the consumer to the lender meaning a lender does not require a court order before they can repossess the car.

Although the market in logbook lending is small, the level of consumer detriment in this market is high. Irresponsible lending and aggressive debt collection practices are common because there is no incentive for the lender to negotiate when the consumer gets into payment difficulties as they can seize the asset after issuing a default notice.

Some people who have taken out a logbook loan sell the car on without informing the buyer of the loan secured against it. The buyer stands to lose both the car and the money they paid for it if the lender decides to take possession of the asset – which is within their power. In these cases innocent third party consumers who have bought the car in good faith have few rights and their only access to redress would be to sue the person from whom they bought the car.

Key statistics

From our recent policy evidence briefing, of the consumers who have taken out logbook loans:

  • 28 per cent were not treated fairly or appropriately by the lender.
  • 17 per cent had not had the terms of the loans clearly explained in a way they understood.
  • 17 per cent had their car taken away despite not being the original borrower.
  • 14 per cent experienced harsh debt collection practices.
  • 9 per cent had a lack of proper checks to make sure the borrower could repay.
  • 8 per cent were hit with high charges for defaulting on their loan.

What’s happening now?

As the law currently stands the Financial Conduct Authority, which is the regulator responsible for financial services, is unable to take action.

Meanwhile innocent people continue to have their cars repossessed through no fault of their own. This cannot continue.

We believe there is an appetite for changing the legislation governing logbook loans to provide better protection for buyers of second hand cars.

How can you get involved?

More information

You can out more in our press release and recent evidence briefing [Adobe Acrobat Document 180 KB].

Medway Citizens Advice

Contact us

Telephone: 01634 383760
Fax: 01634 383767

3rd Floor Kingsley House
37-39 Balmoral Road