Protecting vulnerable borrowers from unfair logbook loans

The Law Commission, independent law reform adviser to the government, has announced a review of the law relating to “bills of sale” loans, including logbook loans.

In this type of lending, people use the goods they own as security for the loan. For a “logbook loan”, the borrower uses their vehicle as security. They hand over the ownership documents but can continue to use the vehicle.

The law in this area is outdated and complex, and offers little protection to consumers. It has been highly criticised by consumer protection bodies such as the Citizens Advice Bureau. The Commission’s project will consider the growing use of bills of sale in the consumer credit market and, particularly, the question of whether there is adequate protection for borrowers. It will also make recommendations to modernise and simplify the law generally, including for small businesses and sole traders.

Tens of thousands of bills of sale loans are issued every year. They are often used where borrowers cannot access credit from mainstream lenders. The loans can be extremely expensive, with interest rates of up to 500% APR. Lenders have been known to use aggressive behaviour, sexual harassment and death threats to extort payment from borrowers. And borrowers’ vehicles can be seized without notice if they miss just one repayment.

It is not only borrowers who are at risk. It is very difficult to tell whether a piece of property is subject to a bill of sale, and anyone buying a second-hand car may later find it being seized by the lender, without any compensation.

These issues have a disproportionate impact on the most vulnerable in society, who can find it hard to access properly regulated credit, and on small businesses experiencing short-term cash flow problems. A voluntary code of conduct, which came into force in February 2011, seems to have had little impact on lenders’ behaviour.
David Hertzell, Law Commissioner for commercial and common law, said:

“The law covering this area is complex, arcane and out-dated. It imposes unnecessary costs on businesses but fails to give consumers the standard protections associated with other forms of credit, such as hire purchase. The use of this form of lending, which can be unfair and target the most vulnerable, looks set to increase. This area of law needs urgent review. It must be modernised, simplified and made easier to use and understand, And it must give borrowers greater protection.”

This review is one of nine projects the Law Commission is launching for its new 12th Programme of Law Reform.

Notes for editors
1. The Law Commission is a non-political independent body, set up by Parliament in 1965 to keep all the law of England and Wales under review, and to recommend reform where it is needed.
2. Citizens Advice Bureau information on bills of sale can be found at
3. For more details on this project and other projects in the new 12th Programme, visit
4. For all press queries please contact:
Phil Hodgson, Head of External Relations:  020 3334 3305
Jackie Samuel:  020 3334 3648