Citizens Advice Medway is a registered charity that offers free, independent and impartial advice to the whole of Medway on a range of issues including Housing, Welfare Benefits, Employment, Debt, Family Law and many others.
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.
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.
From our recent policy evidence briefing, of the consumers who have taken out logbook loans:
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.