Taking out a loan secured on car is an option for many people pressed for cash. Despite the popularity of logbook loans among the British, the Office of Fair Trading and the Consumer Credit Trading Association have taken steps to introduce changes to the industry.
Reasons for the changes
There are a lot of firms that offer loans against cars, some of them not playing according to the rules. One customer shared his experience, “I borrowed $3,000 and the potential term of the loan was three years, so that could have resulted in me paying $10,500 in interest”.
During a few past years, a lot of second-hand car buyers in England and Wales fell victims to imperfect logbook loan laws designed to protect the lender, while the consumer was left to pay off debts of other people. “I took the previous owner to smalls claims court, won the court case and everything but literally did not get anything”, a car buyer complained.
New laws
With certain companies demanding unfair interest rates and a growing number of second-hand car buyers liable for other people’s debts, the Department for Business, Innovation and Skills was considering the possibility of imposing a ban on the entire logbook loan industry, but the government decided not to restrict consumer access to credit.
Greg Stevens, chief executive of the Consumer Credit Trading Association, said, “We’re looking at one rotten apple in the barrel. We’ve been working closely with the Department for Business, Innovation and Skills and the OFT to come up with a code of practice which is specific to the logbook loans sector. It will be audited and monitored”. According to the new code, companies must register finance on cars on an Asset Finance Register within 24 hours.
Even though more than 96% of companies have accepted the code, remember to do all the necessary checks when buying second-hand cars and taking out loans.
