Labour’s call to outlaw ‘outdated’ log-book loans

Date published: 14 January 2010

Councillors lend support to consumer protection
K to outlaw so-called log-book loans — when money is lent against the value of a car — will be supported by Labour councillors at the next Oldham Council meeting.

Labour leader Jim McMahon and Failsworth West Councillor Glenys Butterworth are calling on the Government to speed up the abolition of rules which allows repossession of vehicles and goods without a court order.

And in a notice of motion going to the council meeting on February 3, they say the out-of-date practice, which dates from 1882, needs urgent reform. Log-book loans work because the money-lending company keeps the V5 log-book for the vehicle, after seeing the MOT and insurance certificate.

Borrowers sign a credit agreement, but a bill of sale temporarily gives the lender ownership of the vehicle until the loan is paid.

If the borrower defaults, the lender can take possession of the car and auction it.

The bill of sale means the usual protection that the Consumer Credit Act provides — that cars cannot be seized without a court order — is removed. The motion states: “The practice of allowing repossession of vehicles and goods without a court order gives no consumer protection.

“It leaves those who can least afford it without the basic protection in law that consumers enjoy for most other financial services.

“In Oldham, lenders have set up shops offering log-book loans which charge interest of over 1,000 per cent and which target the most vulnerable and financially-excluded people in the borough.

“This council resolves to call upon the Government and the borough’s MPs to resolve this as a matter of urgency to prevent the continuation of an unethical and immoral practice which has affected hundreds of people across the borough.”


Labour councillors are also calling on MPs to support an early-day motion in the House of Commons, following the court ruling which ended the Office of Fair Trading challenge on bank charges for unauthorised overdrafts.

The Supreme Court ruled that banks and building societies were legally entitled to charge penalty fees for unauthorised overdrafts.

The Labour councillors want the borough’s three MPs to support the motion, and are calling on the council to write to the Government, to protest at the disproportionate penalty charges levied on customers.