Logbook loans under the FCA spotlight

Logbook lenders – who offer loans secured against vehicles, which can then be repossessed if payments are missed – have been warned by the Financial Conduct Authority that they must “dramatically raise their standards” if they want to continue to operate as regulated financial services providers.

In a new consumer credit research report, the FCA sets out evidence that some logbook loan companies carried out few or no affordability checks, with some applicants being encouraged to use misleading information on forms.  Some lenders did not offer key information such as the APR or total amount to be paid, while others failed to mention that missed payments could lead to the repossession of their car because ownership of the vehicle transfers to the lender.

The same research also looked at debt management plan providers.  Evidence again cited of “poor firm behaviour”.  This included a lack of proper training for advisers, poor or incorrect advice, no clear distinction between sales and advice, and a lack of clarity about the charges involved in a debt management plan.

The report also included research into payday lending. Highlighted findings included lenders often sending unwanted marketing messages such as emails, texts and phone calls; limited checks on applicants and lenders actively encouraging borrowers to rollover or extend a loan.  

To read the FCA press release, click here

For the full report, click here