Logbook loans
What is a logbook loan?
This type of loan is secured against a vehicle, normally a car, where the ownership belongs to the lender until the loan has been fully repaid. The customer will still be able to use the vehicle, but if they don’t pay back the loan, the lender can then take away the vehicle and sell it.
Even though a logbook loan is a form of finance involving vehicles, it works differently to other types of car finance, such as hire purchase agreements and conditional sale agreements. A key difference is that the finance company is not supplying the customer with a vehicle; this means that they are not responsible for the vehicle’s quality.
How the loan works
With a logbook loan, the customer will sign a credit agreement and a bill of sale. The lender will then give copies of these to the customer. A bill of sale is a certificate of the transfer of property to another party. In these cases the vehicle’s ownership transfers over to the lender, so the customer needs to already own the vehicle before they take out the logbook loan.
Types of complaint we see
Providing credit by means of a logbook loan is generally an activity we can consider a complaint about, as long as the complaint is brought to us by an eligible complainant. Generally, complaints are brought to us by the customer themselves.
But there are some limited circumstances where we will consider a complaint from a third party. Our rules say that we can consider a complaint brought to us from a person who the financial business has tried to recover payment from under a credit agreement or consumer hire agreement.
Complaints we get from customers include:
- Mis-sale/misrepresentation of the agreement
- Unaffordable or irresponsible lending
- Disputes over fees and charges
- Third parties buying vehicles with a logbook loan attached
- Financial difficulties
- Debt recovery
- Repossession of the vehicle
- Consumers being unable to take personal possessions out of their vehicles when they are repossessed
Handling a complaint like this
When you receive a complaint involving a logbook loan, you should reply to your customer within eight weeks, as set out in relevant time limits.
If you don’t reply within the time limits, or the customer disagrees with your response, they can bring their complaint to us. We’ll check it’s something we can deal with, and if it is, we’ll investigate.
We’ll expect you to be able to show us that you’ve investigated the complaint thoroughly and that you have reflected carefully on the circumstances.
Find out more about how to resolve a complaint.
What we look at
We look at each complaint on an individual basis To reach a decision about what’s fair and reasonable, we'll take into account relevant rules and guidance produced by the regulator, law and industry best practice. We’ll then decide what is a fair outcome for that specific case.
If there are disagreements about the facts, we’ll make our decision about what probably happened using evidence provided by you, your customer and relevant third parties.
You can find more detailed information about some of the considerations we think about below:
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Lenders need to make sure that they are lending responsibly and make appropriate affordability checks before they lend to a customer. There’s no set list of checks that a lender should complete, but the checks they make need to be proportionate to the individual circumstances of the customer. When we look at a complaint and consider what’s been proportionate, we’ll look at things like:
- The type of credit – in particular the fact that the customer could lose their vehicle if they can’t keep up the repayments
- The size of the loan and the repayments
- The financial position of the customer at the time when they sought out the credit
- The customer's credit history – this includes any indications that the customer is experiencing or has experienced financial difficulties
- What the lender knew or should have known about the customer – this includes any particular vulnerabilities that would have made them less suitable for this type of loan
If we think that the lender didn’t make proportionate checks, we’ll consider what information they would have found if they had. This usually comes from asking the customer for the ‘missing’ information. We’ll then think about whether the lender was still reasonable to have given the credit to the customer.
You can find out more about our guidance on how we deals with complaints about unaffordable lending.
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We’ll check the terms of the agreement to make sure the lender is permitted to apply fees and charges. Even if they are, we’ll need to consider if the lender has applied these fairly. This’ll be on a case by case basis, and we’ll take into account the individual circumstances of the complaint.
We’d expect the lender to work with their customer to try and resolve any payment problems before taking action, such as repossessing the customer's vehicle.
There’s also a code of practice (section 4.7) set out by the Consumer Credit Trade Association (CCTA) that logbook loan lenders should think about when they deal with customers experiencing financial difficulties.
We have more guidance on how we deal with these kind of complaints on our ‘financial difficulties’ page.
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If a logbook loan has ‘defaulted’ – where the terms of the agreement have been broken and the lender decides that there’s no way the customer can get back on track – there’s a code of practice (section 4.8) set out by the Consumer Credit Trade Association (CCTA) that lenders need to think about when they carry out debt collection and enforcement. When we look at these types of complaints, we’ll take this into account to help us decide if the lender has acted fairly.
We’d expect a lender to try and engage with their customer first to try and put things right before taking and selling the vehicle.
Putting things right
If we decide you’ve treated the customer unfairly, or have made a mistake, we’ll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn’t happened. We may also ask you to compensate them for any distress or inconvenience they’ve experienced as a result of the problem.
The exact details of how we’ll ask you to put things right will depend on the nature of the complaint, and how the customer lost out. We may tell you to change the amount that’s owed, or to refund the customer, or make arrangements so that the customer can pay more easily or pay compensation, depending on what’s happened.
Find out more about understanding compensation.
Case studies
Tim is unhappy about his logbook loans, which he feels were unaffordable
Logbook Loans
Emma contacted us about the distress she experienced, when she couldn’t pay a logbook loan which she said was unaffordable
Logbook Loans
My lender has said it'll take my car, because I can't afford to repay my logbook loan
Logbook Loans
Business Support Hub
If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub. Our Business Support Hub can give general information on how the ombudsman might look at a particular complaint. We also offer guidance on our rules and how we work.
Find out how to contact the Business Support Hub.
Useful resources
Find out more information about the Consumer Credit Trade Association's (CCTA) codes of practice.
Information for consumers
If you’re a consumer looking for information on how we can help with a complaint, you can read more about this on our dedicated information about making a complaint about logbook loans. Or to make a complaint to a business or to us, read more about how to complain.
