Business

Britain's biggest logbook loans brand active again

Man driving open top car
Image caption Logbook loans allow the lender to seize your vehicle if you default

The BBC has learned that Britain's largest logbook loan brand is active again just days after the firm that owned it went into administration.

Logbookloans.co.uk is now under the new ownership of Hermes Property Services Limited.

It is offering loans at 478% APR secured against the value of a car or motorbike.

The Office of Fair Trading (OFT) had taken steps to revoke the credit licence of the brand's previous owners.

Old laws

With a logbook loan, the lender has the right to seize a vehicle and sell it without going to court if they default on the loan.

Such firms rely on an archaic piece of legislation, the Bills of Sale Act 1878, introduced before cars were even invented. It means that when you take out a loan your car becomes the property of the people lending you the money.

There are dozens of firms which offer this sort of loan. Robert Shaw was a customer of one such company. He described his experience to Radio 4's Money Box programme.

"I borrowed £3,000 and the potential term of the loan was three years, so that could have resulted in me paying £10,500 in interest," he said.

The Department for Business Innovation and Skills estimated that nearly 40,000 bills of sale were registered between April 2008 and March 2009 in England and Wales. That equates to around £30m in loans to customers.

Bills of sale do not apply under Scottish law but they do in Northern Ireland.

Appeals process

The firm with the website logbookloans.co.uk was the biggest player in the field.

As long ago as October 2009 the OFT determined it would revoke the firm's consumer credit licence, effectively closing it down. The ruling said the firm had been sending out thousands of letters to customers in the name of a legal services company, falsely threatening to take legal actions against them.

Just as the process was about to be exhausted last month the two parent companies, Nine Regions Limited and Log Book Loans Limited, went into administration and its brand and loan book was bought by the Hermes Property Services Ltd. The firm already runs a similar company called loans2go.co.uk

The OFT's public register shows that Hermes has applied for the trading name 'Log Book Loans' to be added to its consumer credit licence. But in the meantime the website logbookloans.co.uk appears to be allowing customers to apply for new loans.

The OFT told Money Box that a firm which carries on business under a name not specified in the licence is committing an offence.

Money Box contacted Hermes Property Services Ltd but no one would speak to the programme nor confirm whether the firm was taking loans under the logbook loans brand.

Industry changes

Greg Stevens is the chief executive of the Consumer Credit Trading Association, which represents many logbook loans companies. He said the logbook loan industry was introducing changes following the OFT's action.

He said: "We're looking at one rotten apple in the barrel. We've been working closely with the Department for Business, Innovation and Skills and the OFT to come up with a code of practice which is specific to the logbook loans sector. It will be audited and monitored."

The Department for Business, Innovation and Skills (BIS) had considered imposing a ban on the entire industry but the government felt that could restrict consumer access to credit, reduce choice and push up prices.

(BIS) added that it would be disproportionate to ban an industry because of a few rogue lenders.

A spokesperson for BIS said: "Following consultation, the government concluded that rather than banning these loans, a package of measures based on an industry code of practice, and a plain English consumer information sheet explaining how bills of sale work was the best way to proceed in this market. The vast majority of reputable companies have signed up to the code."

David Sanders is a lead officer for civil law at the Trading Standards Institute and has been following the logbookloan industry for many years. He feels the government has missed an opportunity to take decisive action: "It (the code) doesn't really have any teeth. There are still quite a few companies which are outside the code and we can see no reason why they would feel bound by it."

BBC Radio 4's Money Box is broadcast on Saturdays at 1200 GMT, and repeated on Sundays at 2100 GMT.

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