Logbook loan company unfit to hold credit licenceOffice of Fair Trading wins tribunal hearing

18 November 2011

Car and money

If you get into financial difficulties repaying a logbook loan you could lose your car and still have to pay any shortfall

The UK's biggest logbook loan business, Log Book Loans Limited, has lost an appeal against the removal of its consumer credit licence by the Office of Fair Trading (OFT). The company behind Logbook Loans, Nine Regions Limited (NRL), has also had its licence removed.

Log Book Loans admitted that thousands of letters had been sent to borrowers in the name of a firm called Adams Spencer & Phillips (Legal Services) Limited ('ASP') falsely threatening to take legal action on behalf of NRL. ASP actually had no employees and was not a body or individual authorised to bring legal action on behalf of NRL

The First-tier Tribunal found that employees of NRL had called customers pretending to be employees of ASP. The company had also sought to deceive third parties such as solicitors acting for borrowers, as well as the Financial Ombudsman Service.

Log Book Loans can seek permission to appeal the decision of the First-tier Tribunal to the Upper Tribunal (Administrative Appeals Chamber).

What is a logbook loan?

Logbook loans are secured on vehicles such as cars and motorbikes. If the borrower defaults, the loan company can seize the vehicle without going to court. Even after the vehicle is sold the borrower can still be pursued for any shortfall.

Office of Fair Trading welcomes Tribunal ruling

David Fisher, Director of the OFT's Consumer Credit Group said: 'The OFT welcomes the Tribunal's decision to strike out the companies' appeals. The decision confirms our view that these companies are unfit to hold their consumer credit licences. Intentionally deceiving debtors as part of a debt collection policy is an extremely serious matter, which calls into question a licensee's fitness. We expect businesses licensed by the OFT to treat all their customers, including those in arrears, fairly and transparently.'

An insidious form of secured loan

Which? debt expert Martyn Saville commented: 'The OFT is to be applauded for removing Log Book Loan Limited's credit licence. Pursuing vulnerable consumers with false threats of legal action is despicable.

'In my opinion, logbook loans are one of the most insidious forms of payday loan. Not only do they charge very high interest rates (478% in the case of Log Book Loans Limited), but they're secured against an asset, in this case your car, putting your vehicle at risk if you get into financial difficulties.

'Take as an example an 18-year-old who has received a car for their birthday. While they may struggle to obtain a loan from a high-street bank, using their car as security for a logbook loan could increase their chances of being accepted. However, most teenagers have minimal experience of handling credit and a failure to repay the loan on time could lead to the loss of the vehicle, as well as being pursued for any shortfall.'

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