What is a logbook loan?
This type of loan is secured against a vehicle, normally a car, where the ownership belongs to the lender until the loan has been fully repaid. The consumer will still be able to use the car, but if they don’t pay back the loan, the lender can then take away the vehicle and sell it.
Even though a logbook loan is a form of finance involving vehicles, it works differently to other types of car finance, such as hire purchase agreements and conditional sale agreements. A key difference is that the finance company is not supplying the customer with a vehicle; this means that they are not responsible for the vehicle’s quality.
How the loan works
With a logbook loan, the customer will sign a credit agreement and a bill of sale. The lender will then give copies of these to the customer. A bill of sale is a certificate of the transfer of property to another party. In these cases the vehicle’s ownership transfers over to the lender, so the customer needs to already own the car before they take out the logbook loan.
Types of complaint we see
Providing credit by means of a logbook loan is generally an activity we can consider a complaint about, as long as the complaint is brought to us by an eligible complainant. Generally, complaints are brought to us by the customer themselves.
But there are some limited circumstances where we will consider a complaint from a third party. Our rules say that we can consider a complaint brought to us from a person who the financial business has tried to recover payment from under a credit agreement or consumer hire agreement.
Complaints we get from customers include:
- Mis-sale/misrepresentation of the agreement
- Unaffordable or irresponsible lending
- Disputes over fees and charges
- Third parties buying vehicles with a logbook loan attached
- Financial difficulties
- Debt recovery
- Repossession of the vehicle
- Consumers being unable to take personal possessions out of their vehicles when the car is repossessed
If you're unsure and want some more information, call our technical desk.
What we look at
We look at each complaint on an individual basis, taking into account relevant rules and guidance produced by the regulator, law and industry best practice. We’ll then decide what is a fair outcome for that specific case.
You can find more detailed information about some of the considerations we think about below:
Lenders need to make sure that they are lending responsibly and make appropriate affordability checks before they lend to a consumer. There’s no set list of checks that a lender should complete, but the checks they make need to be proportionate to the individual circumstances of the consumer. When we look at a complaint and consider what’s been proportionate, we’ll look at things like:
- The type of credit – in particular the fact that the consumer could lose their car if their can’t keep up the repayments
- The size of the loan and the repayments
- The financial position of the customer at the time when they sought out the credit
- The customer’s credit history – this includes any indications that the customer is experiencing or has experienced financial difficulties
- What the lender knew or should have known about the customer – this includes any particular vulnerabilities that would have made them less suitable for this type of loan
If we think that the lender didn’t make proportionate checks, we’ll consider what information they would have found if they had. This usually comes from asking the consumer for the ‘missing’ information. We’ll then think about whether the lender was still reasonable to have given the credit to the consumer.
You can find out more about our guidance on how we deals with complaints about unaffordable lending.
Fees, charges and financial difficulty
We’ll check the terms of the agreement to make sure the lender is permitted to apply fees and charges. Even if they are, we’ll need to consider if the lender has applied these fairly. This’ll be on a case by case basis, and we’ll take into account the individual circumstances of the complaint.
We’d expect the lender to work with their customer to try and resolve any payment problems before taking action, such as repossessing the customer’s car.
There’s also a code of practice (section 4.7) set out by the Consumer Credit Trade Association (CCTA) that logbook loan lenders should think about when they deal with customers experiencing financial difficulties.
We have more guidance on how we deal with these kind of complaints on our ‘Financial difficulties’ page.
If a logbook loan has ‘defaulted’ – where the terms of the agreement have been broken and the lender decides that there’s no way the consumer can get back on track – there’s a code of practice (section 4.8) set out by the Consumer Credit Trade Association (CCTA) that lenders need to think about when they carry out debt collection and enforcement. When we look at these types of complaints, we’ll take this into account to help us decide if the lender has acted fairly.
We’d expect a lender to try and engage with their customer first to try and put things right before taking and selling the vehicle.
Putting things right
If we decide to uphold a consumer’s complaint, we’ll base our decision for what the lender should do on the individual circumstances of the case. We may tell the lender to change the amount that’s owed, refund the customer, make arrangements so that the customer can pay more easily or pay compensation, depending on what’s happened.
Find out more about understanding compensation.
My lender has said it'll take my car, because I can't afford to repay my logbook loan
Resources for businesses
You can call our technical desk for more information and advice on a complaint you've received.
Find out more information about the Consumer Credit Trade Association's (CCTA) codes of practice.