Logbook loans set to soar by 61%
The number of logbook loans taken out this year could soar to 60,000, up 61% from 2011 finds Citizens Advice.
The charity has warned that borrowers using these loans are at risk of aggressive practices and absurd charges. People have complained to Citizens Advice about lenders issuing death threats and sexually harassing clients.
One bureau helped a mother with a disabled son who was left stranded on the roadside on her way to work by a logbook lender. The tow truck driver blocked her car, reached through the car window to take the keys and took the car without allowing her to remove her possessions.
The new figures released today are from a Freedom of Information request to the HM Courts and Tribunals Service. The table below shows the numbers of bills of sale – the official term for a logbook loan – registered with the court services in the last three years. There has been a 35% increase in loans between 2011 and 2013.
Year - Number of loans
2011 36,829
2012 41,123
2013 49,745
2014 59,286 (predicted)
The figure for 2014 is a forecast based on 9,881 registrations from January and February this year.
A rise in the number of logbook loans could mean more innocent drivers are vulnerable to losing their second hand car. As it stands, motorists can have their car taken away if it has a logbook loan on it – even if they didn’t take out the loan.
Citizens Advice is calling for a change in the law to stop lenders taking a borrower’s car, without first obtaining a court order, and for the rules which apply to hire purchase agreements to apply to logbook loans. Changes to the law also need to protect second hand car buyers by putting an end to drivers losing their car without prior knowledge of a loan.
Citizens Advice Chief Executive Gillian Guy said: “Logbook lenders are on the rampage. Lenders have been cashing in on people’s difficulties getting credit as they struggle to make ends meet. Aggressive behaviour and excessive charges are pushing some people to bankruptcy.
“The law needs to change. Rules that allow lenders to take cars without warning and from people who haven’t even taken out the loan should be confined to the history books.
“Regulators and Government have quite rightly put payday lending in the spotlight but it is important other forms of credit are also subject to a strong crack-down and toxic forms of lending aren’t allowed to flourish.”
Evidence from Citizens Advice, released earlier this year, found one in five people who reported a problem to Citizens Advice about logbook loans had had their car repossessed despite not being the original borrower.
The average loan reported to Citizens Advice is £1,286 but some people had borrowed as much as £19,000 and people had paid up to eight times the original loan by the time they got help from Citizens Advice.
The evidence from earlier this year also finds:
14% experienced harsh debt collection practices
28% were not treated fairly or appropriately by the lender
8% were hit with high charges for defaulting on their loan
17% had not had the terms of the loans clearly explained in a way they understood
9% had a lack of proper checks to make sure the borrower could repay
17% had their car taken away despite not being the original borrower.