Citizen’s Advice has claimed that many logbook loan lenders are using “brutish tactics” to recover payments from borrowers. This comes after analysing over 260 client cases in relation to logbook loans reported between February 2011 and January 2014.
The logbook loan industry has boomed in recent years alongside payday loans. Like payday loans, logbook loans have high interest rates and charges but differ by securing the loan against the borrower’s vehicle.
In 28% of cases the organisation found that borrowers had not been treated “fairly or appropriately” by the lender. 17% had their car repossessed despite not being the original borrower.
Citizen’s Advice has accused the logbook loan industry of using “brutish” behaviour after it revealed evidence of high interest rates and “ridiculous” charging structures.
The charity has urged the government and the FCA to require lenders to go to court before they can recover a vehicle and to stop the repossession of vehicles which have been sold on.
The average logbook loan is £1,286 but some have borrowed up to £19,000. In some cases borrowers paid back eight times the original loan amount.
If a borrower fails to repay their logbook loan on time, their vehicle may be repossessed without any official process.
Gillian Guy, chief executive of Citizens Advice, said: “The logbook industry is still in the dark ages and has been getting away with lawless practices. It is absolutely absurd that a firm should be able to take away someone’s possessions without any due legal process.
“High interest rates and lack of affordability checks as well as threatening practices and phantom charges mean logbook loans are a toxic mix of the worst parts of payday loans and unruly bailiffs.”
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