Logbook loan

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A logbook loan is a British term for a bill of sale securing a loan on a debtor's vehicle (with the lender retaining the vehicle's "logbook", or vehicle registration certificate). In a logbook loan transaction, legal title to the vehicle is transferred from the borrower to the lender. Legal title will be retained by the lender until the loan and any outstanding interest is repaid. Borrowers hand the logbook lender the V5C registration document – or “logbook” – but this is purely symbolic and has no legal effect. If the borrower defaults, the logbook lender can seize the vehicle and look to the proceeds of sale for satisfaction of the loan.The structure of the loan means that the lender can repossess the debtor's vehicle without a court order.[1] This distinguishes it from a car title loan, as used in the United States.

Logbook loans have gained notoriety in the United Kingdom due to their often very high interest rates and potentially unfair terms and conditions. Logbook loans are used for people that have bad credit that need cash quickly. Logbook loans can be completed in as little as 24 hours.[2] The applicant must have proof of a steady source of income to be approved for a logbook or V5 loan.[3]

Logbook loans secured by a Bill of Sale are generally for amounts ranging from £500 to £2,000 (sometimes more). The average across the industry is estimated to be £1,000 (based on lenders’ submissions to the consultation), typically repaid over a 6- to 18-month period. APRs vary according to lender but tend to range between 200% and 500%, which is similar to other high-cost credit products where loans are taken out over a similar period (e.g. home credit).[4]

In December 2009, the UK government announced a consultation on whether to outlaw logbook loans.[5] A Logbook Loan may only by issued by a company if it holds a "Consumer Credit Licence".

The loan is secured using a bill of sale. Bills of sale used for security transactions are subject to the document and registration requirements imposed by the Bills of Sale Act (1878) Amendment Act 1882.[6] This legislation allows companies to seize the asset i.e. in the case of non repayment of the loan. Following the consultation, logbook loans were not outlawed, but a voluntary code of practice was introduced.[7]

In 2014 the UK government asked the Law Commission to review the Bills of Sale Acts and their relationship to logbook loans. This has resulted in a consultation paper which was published on 9 September 2015.[8] The paper makes a number of provisional proposals to reform the registration system for bills of sale, and to introduce consumer protection mechanisms for logbook loan borrowers and third party private purchasers of vehicles subject to logbook loans.

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  1. ^ "MLR3C2126 - Legislation: Log Book Loans". HM Revenue & Customs. Crown. Retrieved 1 August 2014. 
  2. ^ "What Is A Logbook Loan?". Retrieved 9 September 2015. 
  3. ^ "Credit nation: Debt levels reach an all time high". Retrieved 1 August 2014. 
  4. ^ "Government Response to the Consultation on Proposals to Ban the Use of Bills of Sale for Consumer Lending" (PDF). gov.uk. Department for Business Innovation & Skills. Jan 2011. p. 48. Retrieved 1 August 2014. 
  5. ^ Bachelor, Lisa (2009-12-22). "'Logbook loans' to be outlawed". The Guardian (London). Retrieved 2010-04-26. 
  6. ^ http://www.legislation.gov.uk/ukpga/Vict/45-46/43/contents
  7. ^ "Citizens Advice evidence on bill of sale consumer lending" (PDF). citizensadvice.org.uk. The National Association of Citizens Advice Bureaux. April 2014. p. 2. Retrieved 11 August 2014. 
  8. ^ http://www.lawcom.gov.uk/project/bills-of-sale/

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