A logbook loan is a form of secured lending in the United Kingdom and is the most common modern example of a security bill of sale. Borrowers transfer ownership of their car, van or motorcycle to the logbook lender as security for a loan. While making repayments borrowers keep possession of their vehicle and continue to use it. When the logbook loan is repaid, the borrower regains ownership of their vehicle. Borrowers hand the logbook lender the V5C registration document – or “logbook” – but this is purely symbolic and has no legal effect. If the borrower defaults, the logbook lender can seize the vehicle and look to the proceeds of sale for satisfaction of the loan. Unlike a car title loan in the United States, the logbook lender can, under English law, seize the vehicle without a court order.
In England, Wales and Northern Ireland, logbook loans are regulated by the Bills of Sale Act 1878 and Bills of Sale Act (1878) Amendment Act 1882. FCA compliant logbook lenders utilise your vehicle as security using a Bill of Sale, granting temporary ownership during the term of an agreed loan. However, the Bills of Sale Act (1878) has no jurisdiction in Scotland, and very few lenders are able to give loans. As a solution, a small pick of lenders have managed to lead the way forward in delivering logbook loan services to Scottish residents. Auto Advance Logbook Loans, were one of the first to introduce the use of a Hire Purchase Agreement to provide secured loans in Scotland whilst protecting the rights of borrowers through the Consumer Credit Act 1974.
Logbook loans and the Bills of Sale Acts have been subject to much criticism. In 2009, a consultation by the Department for Business, Innovation and Skills examined the Bills of Sale Acts and proposed that bills of sale for consumer lending, such as logbook loans, should be banned. The government’s response to the consultation was published in 2011. The response left the Bills of Sale Acts intact and led to the introduction of a voluntary code of practice for logbook lenders.
In 2014, the Bills of Sale Acts were once again examined, this time by the Law Commission for England and Wales. The Law Commission published its consultation paper on 9 September 2015, and a proposal for change in 2017.
- ^Jone, Robert. “Logbook Loans”. USAWebCash. Retrieved 5 September 2016.
- ^“MLR3C2126 – Legislation: Log Book Loans”. HM Revenue & Customs. Crown. Retrieved 1 August 2014.
- ^“Bills of Sale Act (1878) Amendment Act 1882”. legislation.gov.uk. Retrieved 5 September 2016.
- ^“Logbook Loans Scotland, Auto Advance”. Auto Advance Logbook Loans. Retrieved 2018-08-09.
- ^From Bills of Sale to Goods Mortgages (PDF). Law Commission (Report). House of Commons. 23 November 2017. ISBN 978-1-5286-0110-8. HC 495/Law Com No 376. Retrieved 20 August 2018.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.