Government to Ban Log book loans?
The concept of this style of loan goes back to Victorian times and the Bills of Sale Act in 1878 and its amendment in 1882, which enables the item on which a loan is secured to be seized and sold if the borrower defaults. What is more the borrower can still be pursued if there is any shortfall when the item is sold.
In modern times this has been translated into a means of borrowing money against a vehicle, a car or a motorbike, resulting in the loss of your vehicle, without a court order, if you default on the repayments to the loan company. In the year ending March 2009 there were nearly 40,000 Logbook loans made, worth £30 million.
More can be found on this method of borrowing money, how it works and its pros and cons at Debtwizard guide to Log Book Loans.
However over the past 4 years more than 1,000 people have complained to the Office of Fair Trading about these loans and the CABx have seen cases where borrowers have been subject to unfair or misleading sales practices.
"Bureaux have seen cases where lenders pursue shortfalls after sale aggressively, including putting people's homes at risk through the use of charging orders - a second chance at securing a previously secured debt," explained David Harked the Bureaux chief executive, saying it was high time such loans were banned.
The government too are saying that Logbook lenders are unfair and charge too much. "They were developed in the days of Charles Dickens and don't meet 21st century consumer standards," said consumer minister Kevin Brennan.
"Complaints relate to the lack of protection available to people if they fall into arrears, unfair collection practices, the complex and confusing nature of the language used in the agreements and the excessively high cost of the loans," said a government spokesman.
Consequently the Department for Business Innovation and Skills (BIS) is carrying out a 12 week consultation on what it calls the "archaic" and expensive method of borrowing, after which the practice is expected to be banned.