The law on logbook loans needs changing, say law-makers and the Citizens Advice body.
Logbooks for vehicles have been used as surety on loans, often at high interest rates, but pose problems when a vehicle is sold on and the new owner faces paying the debt or losing a vehicle.
Citizens Advice is supporting recommendations from the Law Commission’s report on logbook loans including protections for people who buy a second hand car not knowing there is a logbook loan associated with it.
Gillian Guy, Chief Executive of Citizens Advice, said, “Patchy and outdated laws on logbook loans have failed borrowers and consumers.
“High interest rates and charges, as well as aggressive debt collection practices have caused serious financial difficulties for borrowers of logbook loans. But the problems don’t stop there. People who have bought a second hand car not knowing it had a logbook loan attached have been chased for the debts and lost their car as a result.
“It’s good the Law Commission has recognised the difficulties logbook loans are causing by recommending changes to help stop unfair repossessions- although this will need to be monitored to ensure borrowers really are being protected. Writing off debts if the car is now in the hands of another owner will also help motorists avoid losing their cars for someone else’s debt.”
Citizens Advice has been calling for a major reform of the law around logbook loans for some time, and in particular recommended curbs on aggressive debt collection practices, people could end the agreement and return the car if payments become unaffordable and there were protections for those who bought a car not knowing it had a logbook loan.