After recent media and
government attention, the practice of drivers raising finance
through so-called ‘logbook loans’ has come under tighter control –
although it will not be banned altogether.

The start of February saw a
new code of practice for bill of sale lending introduced by the
Department for Business, Innovation and Skills, after it rejected
the idea of an outright ban.

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The code requires bill of
sale lenders to register their interest in vehicles with an asset
finance register company, such as HPI.

BIS has also introduced a
measure of consumer protection similar to that afforded to people
using hire purchase, by extending the concept of ‘innocent
purchaser’ to those who unknowingly buy goods with a bill of sale
against them.

Bills of sale have come under
critical scrutiny recently and, because they are almost always
against motor vehicles, have acquired the catch-all term of
‘logbook loans’.

As recently as two weeks ago,
a 5 Live Investigates broadcast on BBC Radio 5 Live
highlighted the plight of a first-time used car buyer who, after
saving up and paying the £1,100 asking price to a garage, was
confronted by a demand for £600 for an unpaid ‘logbook loan’ which
the previous owner of the vehicle had failed to repay.

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This story has a happy ending because the lender in this
case agreed to take just £200 to settle the debt, and repaid that
in full after the BBC started investigating the matter. Several
consumer groups reacted angrily after the broadcast however, with
some calling for bills of sale to be banned altogether.