There are not many loan concepts out there, which are facing as much of a controversy as are logbook loans. In recent times guarantor loans and also payday loans were the topic of FCA increased risk assessment for consumers study, but also the FCA conducted a research regarding the Bill of Sale lending. During that research, plenty of interesting facts came out into the light, particularly the overall conduct by lenders and consumers, their thinking procedures and their lending practices in general. The results only confirmed what was initially perceived as problematic and are currently under additional scrutiny, because the public right now is asking for an even stronger involvement of authorities with this particular loan concept.
Consumers are simply trying to get to money without serious knowledge what they are getting themselves into. The consumers, who mostly apply for a Bill of Sale loan, or logbook loan, are very often at the end of their wits and cannot get any money elsewhere, except through a payday loan but the amount they can get there is way too low. Furthermore, a logbook loan allows them to have smaller payments for a prolonged amount of time, which seems easier to manage. Most of the time, the borrowers have no idea about the horrid APR rates, the exact amount they would pay back, all the negative sides of a logbook loan or that they should look out for and shop around for the best deal at a place with a certificate by the FCA.
The lenders, on the other hand, are way too quick with shovelling out the cash, they do not check if their consumers will be able to pay them back at all, almost no affordability checks are being made and it seems that most loans are given out so they can revolve and incur additional fees and costs. Many are no CCRA members, have not agreed to the code of conduct and possess no certificate by the FCA. The APR rates are 400% and higher, they do not care if the borrower has the actual money available to pay them back, moreover, they encourage them to be even “creative” when filling out the loan application. There are hidden fees galore, like car inspections and handling fees, they almost never even mention the cooling-off period and similar.
Much to the chagrin of the FCA, the regulatory measures imposed a few years ago do not seem to function, largely because the consumers simply seem not to care. Plenty of lenders are available and have their business re-authorised in January of 2015, trying to conduct legal and proper business. On the other hand, there are still way too many shady lenders, who still appropriate all the means that were the subject of the initial investigation. Consumers seem only to care to get into the possession of money, without really trying to find a better deal or to gather sufficient information, before they sign off their vehicle. For that very reason, FCA will soon impose restrictions to conducting business to lenders who do not meet their threshold conditions. The set standards will be enforced and maintained and consumers will be protected, despite their apparent ignorance of dangers that loom within the Bill of Sale.