People argue that nothing in financial matters can be viewed as black or white. There are plenty of areas that can be gradually placed between black and white and thus a greyscale picture of financial possibilities has been established. Unfortunately, when viewed in terms of legality, greyscale is seldom being perceived as legal and very often deemed criminal by definitions of law. With new schemes popping up every day, the legislative bodies do not manage to follow up on all the changes quickly enough and therefore sometimes greyscale legality remains in effect for a prolonged time, until a governmental body finally stomps down on the whole circus and bring in some regulation. This is currently happening with logbook loans.
The Financial Conduct Authority has started an offensive in 2014, when it came to light that most logbook loans are given to people who have bad to worse credit rating and that such loans are constantly rolled over in order to facilitate payments that were actually impossible to meet, at least by these people who were given the loan in the first place. It appeared that initially nobody bothered to check if the applicants were able to pay at all, including no verification of employment or other obligations, which resulted in the initial inability to pay back loans already pre-existing, automatically resulting in loans being rolled over several times, before cars were taken possession of. Such practice increases the initial loan amount significantly and the payment that applicants wind up being billed for extremely exceeded the one they signed up for.
Lender that were found continuing such practice after a FCA warning were not issued a proper conduct license, when time came up for renewal in January 2015. Furthermore, FCA imposed a limit on amounts how often such a loan can be rolled over, with maximum being three times. Additionally, the FCA also imposed that the final amount charged cannot exceed the original amount agreed upon in the first application, including interest. This second FCA limitation activity seems to have done the trick, because the amount of consumer complaints registered with the FCA amounted to just the half of the number registered at the same time last year.
FCA is continuing to look into the Logbook loans, which seems to be warranted, since that the market share of logbook loans has exponentially increased and doubled in the last 10 years. Furthermore, there are still too many lenders that have not applied the code of practice and possess not valid FCA license. Companies that provide services seem to not properly advertise what such a loan actually entails and they take advantage of people who seem unable or unwilling to shop around and inquire if the lender is truly a legit business. For that very reason, threshold conditions have been imposed and any company that does not ensure proper standards will be prohibited to continue trading.