Thousands of cars seized due to previous loans
Thousands of innocent motorists face having cars taken due to unpaid debts by previous owners
June 18, 2014
People are losing vehicles bought legitimately where previous owners have borrowed against the value of the vehicle and failed to pay it back. Watchdogs at Citizens Advice have condemned the practice by lenders which sees legitimate owners of cars being held responsible for the debts of previous owners as ‘legalised theft’.
The problem is set to soar due to increasing use of finance and in particular logbook loans. An estimated 60,000 logbook loans are set to be taken out this year, up 61% since 2011.
A survey by Citizens Advice of 874 drivers who had bought a second-hand car found that nearly two-thirds did not check if the car had an outstanding loan attached whilst 44% had never even heard of a logbook loan.
Recent research by the Financial Conduct Authority (FCA) said the average size of a logbook loan is £1,000 but that some can be as high as £50,000. The FCA, which recently took over regulation of the consumer credit market, warned firms offering logbook loans earlier this month that it will put them out of action if they do not ‘dramatically’ improve their standards. It found evidence of poor behaviour including little or no affordability checks being carried out and some loan applicants being encouraged to manipulate details of their income.