NFDA welcomes reform of logbook loan rules
The National Franchised Dealers Association (NFDA) has welcomed proposed reforms of outdated laws to help protect used car buyers.
The Law Commission recently highlighted the fact that someone who buys a second-hand vehicle used by the previous owner to take out a logbook loan can unexpectedly find themselves losing the vehicle or having to pay off the loan.
Meanwhile, borrowers who miss payments can swiftly face repossession of their vehicle as well as a rapidly increasing outstanding loan and high charges -- even if they have already paid off most of their loan.
Every year thousands of borrowers and buyers of second-hand vehicles fall victim to such 'unfair' loans because the law does not protect them, the Law Commission said.
In a report published on Monday, the Commission recommended changes to the law that would make this form of lending fairer for borrowers and offer greater protection to people buying used vehicles that are still subject to these loans.
The proposed reforms would give borrowers more time to pay without the vehicle being repossessed, and allow them to end the agreement by handing over the car without being liable for the remainder of the loan.
To protect car buyers, the reforms would ensure that when a private individual buys a vehicle in good faith and without knowing that it is subject to a logbook loan, they would become the owner of the vehicle and would not be liable for the loan.
Sue Robinson, director of the NFDA, said: "Logbook loans have long been an issue for dealers as these types of loans do not have to be recorded on the vehicle date registrations. This means that vehicles can be easily sold by a dealer without the clear title -- which means the vehicle could be repossessed from a new buyer.
"Today's announcement means that in the future, all vehicles with a logbook loan will have to be recorded on the vehicle register."