Clock ticking for logbook lenders after Citizen Advice spotlight

Logbook loans are to be put under scrutiny following a Citizens Advice campaign to change the law.  The Law Commission has today announced that bills of sale – the official term for logbook loans – will be included in its law review.

New evidence from Citizens Advice, released this week, revealed that people with logbook loan debts have twice as many debts as other borrowers – ten loans compared to five.

Citizens Advice Chief Executive Gillian Guy said:

“The current law on logbook loans belongs in the history book. The archaic rules provide a loophole for lenders to overload people with debt and take cars from innocent people.  Citizens Advice has been calling for a change in the law to protect people taking out logbook loans and the Law Commission review is a chance to banish these bad practices.

“The same protections given to those who take our hire purchase agreements should apply to logbook loans. That would mean lenders can no longer take away someone's property without going to court.  It would also stop innocent second hand car buyers having their car taken away because, unbeknown to them, there was a logbook loan attached.”

New findings released this week by Citizens Advice are from an analysis of more than 23,000 cases of significant debt problems handled by bureaux between April and September 2013, 127 of which involved a log book loan. The findings show, on average:

• Logbook loan debts were worth more than double that of payday loan debts (£2,500 compared to £1,000).
• People with logbook loans had a total of ten debts, including other forms of credit, that’s double the number of loans held by all debt clients (five).
• 57% of clients with logbook loans also had one or more other type of high cost credit.
• 37% of clients with logbook loans also had one or more payday loan.
• The total amount of debt across all loans for people with logbook loans was £13,500.

The new research also finds that 40% of people who took out a logbook loan are in work, with 33% unemployed and 27% not working due to things like caring responsibilities or ill-health.

In April this year, Citizens Advice found the number of logbook loans taken out this year could reach 60,000; a rise of 61% on 2011.

Research released by Citizens Advice in February, which looked at problems experienced by people who had taken out a logbook loan, found:  

• 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.

Notes to editors:

1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
2. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
3. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
4. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
5. Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014  service statistics see our quarterly publication Advice trends
6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.