The UK's logbook loans industry has been called upon to ensure it is offering the best standard of care to its customers following an investigatio…
The UK's logbook loans industry has been called upon to ensure it is offering the best standard of care to its customers following an investigation by the Financial Conduct Authority (FCA).
According to the FCA's research, individuals that typically use the services of these lenders already find themselves facing considerable amounts of debt, with the average logbook loan borrower facing additional borrowings of between £15,000 and £30,000.
In addition, the study showed that these borrowings are often made up of multiple individual debts and in many circumstances individuals have also exhausted any alternative credit options before turning to logbook loan providers. As a result, these are extremely vulnerable people.
Director of policy, risk and research at the FCA Christopher Woolard said: "People who use logbook loans are often in difficult circumstances with few other borrowing options. The last thing that should be happening is for them to be squeezed yet more or even threatened, but that is what our research has found."
The investigation follows similar research into the industry by Citizens Advice that was published earlier this year, which found that, despite a voluntary code of practice for the sector that was introduced in 2011, it appears many lenders are failing to live up to this.
Overall, 14 per cent of clients that Citizens Advice spoke to who had taken out a logbook loan in the past said they had been exposed to "harsh debt collection practices", while eight per cent were hit by "high charges" following a default on their loan.
In addition, 17 per cent of respondents who had their car repossessed by a logbook lender were not the same individual who had originally taken out the loan against the vehicle.
Addressing these key concerns should now be a priority for lenders up and down the country, as the FCA is keen to ensure all finance providers are following a code of best practice that places the needs of the borrower at the forefront of business thinking.
Individuals faced with mounting debts should talk to a financial professional regarding their circumstances, as there may be more options open to them to help to get their finances back on track than they originally realise.
Posted by James Francis