“We are pleased to see that the government is to reform the legislation that governs logbook loans”, commented Louise Wallis, Head of The National Association of Motor Auctions (NAMA).
Logbook loans are where a consumer takes out finance on their car securing the loan on its V5 or logbook. These are not traditional consumer credit arrangements, but fall under the Bill of Sale legislation. The Bill of Sale is an archaic piece of legislation that dates back to the 19th century and is no longer appropriate for modern use.
Wallis continued, “Logbook loans have been problematic for the auctions and dealers, as well as consumers. Unlike consumer credit, the loans do not have to be settled when the car is sold, and means the new owner of the vehicle can be made to pay any outstanding debt – even if they have not taken out the loan.
“Unlike vehicle finance, these loans do not have to be registered with the credit reference agencies, and so will not show up when a vehicle date check is carried out. This has meant that sellers are unwittingly selling vehicles with un-cleared finance to consumers.
“NAMA has campaigned for many years for a change in this law, and the government is now acting to introduce a new type of loan called a ‘vehicle mortgage’. These will have to be registered with credit agencies, giving sellers better protection. Furthermore, a consumer who unfortunately buys a vehicle with one of these loans will not be liable to the debt from a previous owner.”