A rising number of hard-up people in South Holland are falling foul of logbook loans – being dubbed “the new payday loan”.
Logbook loans are loans secured on your vehicle – anything from £500 to £50,000 depending on the value of the car.
You can keep on using your vehicle as long as you repay the loan, however they are expensive and risky and should be avoided where possible.
They are readily available on the internet or the high street.
South Holland Citizens Advice Bureau says the prevalence of the loans have been growing slowly, with more and more people seeking help after being hit with extortionate charges by lenders, repossessions where customers have been left beside the road and even sexual harassment.
Citizens Advice Bureau campaigns officer Emily Jeffrey said: “The industry is rife with bad practice – unsurprising when there is no incentive for lenders to ensure their customers understand the terms or can afford the repayments.
“In fact the very nature of this form of finance could be seen to encourage bad behaviour – why carry out affordability checks if a single missed payments means you get to keep the money and take the car?”
Figures suggest that nationally more than 60,000 logbook loans will be taken out this year – up from 27,900 in 2006.
In 2009 a lengthy consultation was carried out into logbook loans and a recommendation was made that they were banned.
In 2011 a decision was made to introduce a voluntary code, but despite that, three years later the marketplace continues to be dogged by dodgy dealers, exploitation, poor practice and irresponsible lending.
The Citizens Advice Bureau is now calling for the Government to take action.
Emily added: “The message is clear – the voluntary code is not working and the market requires regulation.
“It is vitally important the Government takes action to ensure that logbook lenders cannot continue their poor practices and for this reason Citizens Advice has welcomed the news that the Law Commission has been asked to review the legislation which governs these loans.
“The Government must take action to rectify the balance of power so lenders can no longer simply take cars without warning from innocent third parties, loan money to people they know cannot afford to repay them or use bullying tactics to frighten customers into accepting extortionate charges.”
