Car buyers beware - Log book loans

Veni Vidi Vici

Well-known Member
Just seen this on Watchdog. Apparently due to the financial crisis many companies are now offering log book loans. This means people can use their car as collateral when taking out a loan. The problem is people are selling their car on before clearing their loan. This means the new buyer can have the car seized and you will have to pay the balance of the others persons loan to get the car back. And this is entirely LEGAL and the log book loan may not show on any HPI check.

That's because in England and Wales log book loans aren't covered by modern-day consumer law. They come under a very different law: the 19th Century 'Bills of Sale Act'. The Victorians introduced it to stop people from defrauding lenders when taking out loans. In those days, you couldn't secure it against something like a car.

BBC - Watchdog: Inherited a log book loan? You're not alone...
 

paulyoung666

Distinguished Member
i always thought the lender kept the logbook for the car , having said that the logbook is not proof of the owner , only the keeper iirc , log book loans have been around for years , good heads up though :smashin:
 

Veni Vidi Vici

Well-known Member
i always thought the lender kept the logbook for the car , having said that the logbook is not proof of the owner , only the keeper iirc , log book loans have been around for years , good heads up though :smashin:

Yeah I knew about log book loans but didn't realise they don't always show on HPI checks (its voluntary for the loan company to register this). So anyone buying a second hand car can do all the checks they want and still have its repossessed. Shocking really.
 

campy mccamper

Well-known Member
i always thought the lender kept the logbook for the car , having said that the logbook is not proof of the owner , only the keeper iirc , log book loans have been around for years , good heads up though :smashin:

I see a lot of cars for sale these days without log books. As soon as I hear that you need to apply for the log book I walk away.
 

imightbewrong

Distinguished Member
I'm confused - from that link:

If a company fails to register the existence of finance on a vehicle within 24 hours, then the buyer gets the same protections as if Higher Purchase existed on the car, so it could not be re-possessed from the person who later bought the car. The debt would still be outstanding and would remain the responsibility of the original debtor.

So what's the problem?

Edit: Although I don't know how much faith I have in a report talking about 'Higher Purchase' agreements :-S
 

gamingboy

Well-known Member
How would you be affected if you purchased from a dealer who traded in the car?

Say Ford, BMW, AUDI etc.

As they sold the car on to you, the dealer wouldn't be responsiible, or would they because they sold something that they were not entitled to?

This must have happened surely.
 

Greg Hook

Moderator & Reviewer
Confused how this works though, as the new red V5 logbook clearly states that having the logbook does not confirm ownership of the car.
 

Kebabhead

Distinguished Member
As they sold the car on to you, the dealer wouldn't be responsiible, or would they because they sold something that they were not entitled to?

This must have happened surely.

The dealer would be responsible as you cannot sell something you do not own
 

Kebabhead

Distinguished Member
Confused how this works though, as the new red V5 logbook clearly states that having the logbook does not confirm ownership of the car.

They also take your insurance cert and MOT (where applicable) cert

Still easy to get duplicates though
 

gamingboy

Well-known Member
Sounds like they'd take the car and you would have a legal battle on your hands.

Which would come down to the owner who traded the car in I guess.
 

Veni Vidi Vici

Well-known Member
In England and Wales log book loans aren't covered by modern-day consumer law. They come under a very different law: the 19th Century 'Bills of Sale Act'. The Victorians introduced it to stop people from defrauding lenders when taking out loans. In those days, you couldn't secure it against something like a car.

http://legalproonline.com/used-car-...uld-you-be-the-victim-of-a-logbook-loan-scam/

What some scammers are beginning to do is take out a Logbook Loan secured against their vehicle (which by law then gives the Logbook Loans company ownership of the car). Because of the simplicity and speed of Logbook Loans the person could have the money within 24 hours. From there these scammers bring in another accomplice who will buy the car from the person, what this aims to do is to hide the fact that a logbook loan has been taken out on the car as the new owner (the accomplice) doesn't have the loan and he can say the logbook had been missing or even just not provide it to the company.

Now from there is when the scam becomes harmful to the public, the accomplice will then try to sell the car on to an unsuspecting victim. HPI checks can sometimes show up the Logbook Loans but they don't always work or some people don't even take out HPI checks so once the car is bought, the scammers have their loan and money from the sale of the car and the victim is left with letters from the company saying they are going to come and repossess the car.
 

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