"Logbook loans" set for law changes

UK ministers are to act on reform proposals to remove the buyers of secondhand vehicles having them repossessed due to the laws around logbook loans.

Logbook loans enable borrowers to use their car or van as security for a loan. Over the last 10 years their use has rocketed – but if payments are missed borrowers can face swift repossession.

Those who buy secondhand in good faith can also unexpectedly find themselves losing the vehicle or having to pay off somebody else’s loan.

Following recommendations by the Law Commission for England & Wales in September 2016, Economic Secretary to the Treasury Simon Kirby has confirmed planned changes to the law.

These would give borrowers and buyers similar protections to those offered by hire purchase law:

• Borrowers would have more time to pay: a borrower who is temporarily unable to pay but has already repaid more than one third of the loan could stop lenders repossessing the vehicle without a court order.
• Borrowers could end the agreement: a borrower who cannot make any more payments would have the right to hand the car back to the lender and not be liable for the remainder of the loan.
• Buyers of secondhand vehicles would be protected: where a private individual buys a vehicle in good faith and without knowing that it is subject to a logbook loan, they would become the owner of the vehicle and would not be liable for the loan.

Stephen Lewis of the Law Commission commented: “This is great news for car buyers. Every year many were unwittingly purchasing secondhand vehicles at risk of repossession due to unfair logbook loans."

He added: “I’m pleased that the Treasury has agreed and acted swiftly to put the brake on this out of date legislation. We’re drafting a bill which we hope will be introduced into Parliament next autumn to change the law by 2019.”