Logbook loans set to soar by 61%

Citizens Advice calls for a change in laws around logbook loans to protect consumers

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.

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.

Notes to editors:

1. Citizens Advice calculated that log book loans could reach up to 60,000 this year by multiplying the number of loans registered in the first two months of this year by six, to give a twelve month estimate.
2. Citizens Advice analysed 117 logbook loan client cases recorded in bureaux from 1st February 2011 to 7th January 2014 and 145 client cases recorded through the consumer helpline from 1st April 2012 to 6th January 2014.
3. This year the Citizens Advice service celebrates its 75th anniversary. We’ve planned a year of activity running from January to December 2014. Contact the press office to find out more.
4. 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.
5. 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.
6. To find your local bureau in England and Wales, visit www.citizensadvice.org.uk. You can also get advice online at www.adviceguide.org.uk
7. You can get consumer advice from the Citizens Advice consumer service on 08454 04 05 06 or 08454 04 05 05 for Welsh language speakers
8. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.6 million problems from April 2012 to March 2013. For full 2012/2013 service statistics see our quarterly publication Advice trends
9. Citizens Advice service staff are supported by more than 22,000 trained volunteers, working at over 3,000 service outlets across England and Wales.