Consumer credit research: logbook loans

Find out about our research into the logbook loans market, some key findings and what we plan to do next.

A logbook loan is a loan secured on a vehicle where the consumer can continue using the vehicle, but ownership of the vehicle transfers to the lender. 

A valid bill of sale, registered in accordance with the relevant legislation, operates to conditionally transfer the legal ownership of the vehicle to the lender as security for the debt. This does not apply to Scotland.  

Bills of sale convey fewer consumer protections compared to those available for other forms of lending (eg because lenders obtain strong rights of seizure).

Key findings

We found that consumers:

  • perceive benefits of logbook loans in being able to access large amounts of credit without credit checks, with repayments staggered over a long period
  • often have few alternative sources of large amounts of credit
  • tend to come across the product and the lender they choose at the same time, doing little or no shopping around
  • are often unclear about important loan aspects, e.g. the total cost of the loan,  additional charges and the fact that ownership of the vehicle transfers to the lender
  • found communication by some lenders to be misleading and limited
  • say they are often subject to aggressive and threatening behaviour if they experience repayment difficulties
  • often experienced payment difficulties at some point

Our research also shows that providers: 

  • have high APRs, typically 400% or more, plus additional fees and charges
  • appear to rarely carry out affordability checks
  • mainly consider the value of the car when granting a loan online rather than the individual's ability to pay
  • consider employment status as more important than the value of the car when granting a loan in branch
  • report that they abide by the trade-body Consumer Credit Trade Association's (CCTA) code of practice, but noted there are numerous other lenders who do not
  • see repossession as a last resort
  • argue that low complaint levels, low repossession rates and high-levels of repeat custom are evidence of appropriate affordability assessments

What we will do next

Logbook lenders that wish to continue providing logbook loans need to demonstrate how they meet our threshold conditions. These include conditions on suitability (including that a firm’s affairs are conducted in an appropriate manner regarding the interests of consumers) and on business models (including that the firm’s strategy for doing business is suitable for its regulated activities and that its business model is not exploitative of customers). 

Firms that fail to meet our threshold conditions will be unable to satisfy the necessary authorisation standards and will not be allowed to continue trading in the market.

We will also respond to issues through our supervision and enforcement to ensure standards are maintained in the market. 

We will take action where we find evidence of actual or potential consumer harm caused by firms not complying with legal requirements, our Principles for Businesses, or the conduct of business rules in our Consumer Credit sourcebook (CONC).

The Law Commission have recently consulted on the Bills of Sale Acts under which logbook loans are registered. 

Further information

We carried out intensive consumer research to help us understand:

  • what consumers want and expect from the credit market
  • the role that credit plays for consumers in different circumstances and at different points in their lives
  • how credit can either help consumers or lead them into difficulty

You can see in-depth assessments into other areas of the credit market where we have seen potential risks to consumers. These are:

You can also see more detail in our full consumer research report.