The expression “a pound of flesh” has been defined as something to which someone is strictly entitled though which it is ruthless to demand.
This might ring a bell if you have had dealings with a logbook lender.
Aggressive behaviour, sexual harassment and death threats are just some of the brutish tactics logbook lenders used to intimidate customers, according to evidence recently released by Citizens Advice.
What is a logbook loan? Also known as a Bill of Sale loan, basically it is a high cost loan secured against a personal asset – usually a car. Imagine someone finding it difficult to make ends meet who cannot obtain credit in the form of a bank loan or second mortgage. Desperation might be one reason a person in this position takes out a loan secured against a car despite interest rates which are routinely as much as 400% APR.
Citizens Advice analysed 261 logbook loan cases which were reported between February 2011 and January 2014. The analysis revealed evidence that voluntary practices for the industry introduced in 2011 are being flouted. One in five of those analyzed have had their car repossessed despite not being the original borrower. As it stands, cars sold with a logbook loan against them can be repossessed by the lender even though the new owner did not take out the loan or had known about it. Citizens Advice wants this practice to be reversed and is calling on the Financial Conduct Authority and Government to require lenders to get a court order before they can take away someone’s car and to stop repossessions of cars that have been sold on with loans.
The analysis found the average loan was £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.
A 22 year old man from the South East bought a car on the internet for £1300 and spent an additional £600-£700 on improvements to it. He was given no indication that the car was subject to a bill of sale loan. When he found his car missing one night he thought it had been stolen and reported it to the police. He was informed that his car had been legally repossessed by a logbook loan company. The original owner had taken a logbook loan out on it and then sold it on. The client lost his car and £2000.
A 34-year-old woman in West Sussex on her way to work found her path blocked by a tow truck driver who reached through the car window, took the keys and repossessed the car. The woman was not given time to collect her belongings and was left on the roadside in the rain. After prolonged discussions and having made an initial payment of £500 she was allowed to collect the car only to find that it had been damaged and had considerably less petrol in the tank. She was without the car (which is relied upon to get to work and to transport her disabled son) for a week and as a result lost £200 in wages.
These examples indicate that logbook lenders are out of control. If you have experience of this sort of behaviour, tell your local CAB and become part of our campaign.