The Money Shot – logbook loans and saving shame

Image of car being towed
Beware of logbook loans...
"Citizens Advice Bureau is said to have been inundated with reports of frightening repossession visits and instructions to repay the balance of the loan"
  • | by Kristian Dando

Desperate times call for desperate measures. And there have been an awful lot of desperate people over the past few years.

This has meant the seemingly unstoppable rise of ‘last-resort’ lending. Payday loans have caught the most headlines, and the most flak – deservedly so, some would argue.

The Financial Conduct Authority (FCA) has already started the process of cleaning up the world of short-term loans. Now, the oft-murky ‘logbook loan’ industry is in its sights.

Logbook loans, if you haven’t encountered them yet, are a form of finance where the borrower obtains money by handing over the logbook of their car to a lender.

In most cases, the borrower still gets to use the car they’ve used to secure the loan. But if they don’t keep up with the repayments, the car is taken from them.

A new FCA report has revealed that poor practice is rife in the logbook loan market. Lenders are said to be shirking affordability checks, employing high-pressure tactics and failing to properly tell people the potential consequences (including, amazingly, the whole ‘vehicle repossession’ thing) if they don’t keep up with payments.

There’s also the issue of second-hand cars on the road which are sold to innocent people but which still have logbook loans outstanding. Lenders are notoriously ruthless in their attempts to recover the balance, and the Citizens Advice Bureau is said to have been inundated with reports of frightening repossession visits and instructions to repay the balance of the loan, even though the car’s current owner doesn’t have anything to do with it.

The extent of the tactics employed by some of these lenders really is shocking. “A 34-year-old mother from the south-east came to us for help after her car was repossessed by a bill of sale lender on her way to work at Gatwick airport ,” said Citizens Advice chief exec Gillian Guy earlier this year. “A tow-truck driver had blocked her car, reached through the car window to take the keys and then taken the car without allowing her to remove her possessions. She was left on the roadside in the rain. When she paid to get the car back she found it had been damaged and drained of petrol.”

Perhaps fittingly, the FCA has taken the robust stance of “change, or else”.

Christopher Woolard, director of policy, risk and research at the FCA, said: “People who use logbook loans are often in difficult circumstances with few other borrowing options. The last thing that should be happening is for them to be squeezed yet more or even threatened, but that is what our research has found.

“Logbook lenders should consider this as fair notice to improve and put their customers first or we won’t hesitate to take action.”

Have you had an experience with a logbook lender? Tell us about it on Facebook or Twitter.

News in brief

Kirstie Allsopp said some things about women, houses, university and babies, which culminated in what might just be the worst rap beef ever.

The Queen’s address to Parliament earlier this week saw a fair bit of finance-related fun, including plans for saucy-sounding ‘Dutch’ pensions.

A base-rate rise looms ever-closer on the horizon, with George Osborne ominously instructing the Bank of England that it “should not hesitate” in taking action to cool the housing market. has revealed that 22% of British consumers intend on making a contactless payment this year.

HMRC has revealed that a Premier League football club was ordered to pay arrears of over £27,500 to over 3,000 workers after it made deductions for uniforms and travelling time for staff working in hospitality.

On Covered mag this week

Abbie Laughton-Coles  lifted the lid on the dirty tricks estate agents don’t want you to know about.

Fancy a big slice of ‘awwww’? Then take a look at these incredible tales of pet heroism.

Kristian Dando reported on the latest twist in the PPI saga.

There was this piece on helmets and leathers. Ooo-err!

Here are a few factoids regarding credit scores.

And finally

Are you an irredeemable tightwad? If so, we want to hear from you.

You could win £1,000 (yes, a grand!) if you confess your saving shame to us in our exciting #savingshame contest.

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Join us NEXT WEEK for another THRILLING instalment of the MONEY SHOT.