In his recent article on The Guardian, Bowcott Owen highlighted the risks facing many used car buyers today. Over the last decade, the number of logbook loans has increased so much. Because even those with poor credit score can qualify for the loans, many people rush to borrow without focusing so much on their repayment capability. The laws that guide logbook loans make it easy to access loans but fail to protect the used cars sold with loans attached to them.
In one of the cases, James Watson bought a van in fall of 2016 only to have it repossessed by a logbook dealer a week later. When he reported his car had been stolen, the police told him that it had been repossessed by a logbook loan company to recover loan balance. The company pointed that the loaned stopped communicating with the lender after paying only a small amount. Watson ultimately lost his money.
The current laws are archaic and insensitive to buyers
Bowcott correctly argues that the current laws are insensitive to used car buyers. Logbook loans are regulated by Bill of Sale Act of 1878 that allowed people to use their property as collateral. The law was amended in 1882 but remain very insensitive to buyers. Though the law requires that all logbook loans be registered in the high court, private buyers rarely check whether the vehicle under consideration is under any order. Therefore, once the original owner defaults on payments, the lender can repossess and sell the car to recover his money.
The need to review the law
Just like Bowcott observes, the logbook loan borrowers and used car buyers need extra protection. Under the current law, the lender requires you to adhere to the loan agreement specifically to meet monthly repayment without failure. If you fail to remit the agreed amount on a monthly basis, the lender will add penalties and repossess the car. The danger does not end here. The lender can even take you to court if the car is sold but fetches less than the loan balance.
Some possible legislative solutions
- The lender should not sell the car without involving the court and the borrower.
- The car should not be sold if the lender had paid more than 1/3 of the total amount.
- If the borrower is unable to continue paying the loan, the vehicle should be sold competitively so that the owner remains with the amount on top of the loan balance.
- The law should make the current listing of cars with loans and check mandatory before the sale of used cars.
While everybody has a right to take a loan using personal property such as vehicles, the law has remained silent on the risk to buyers on the property with loans. While every logbook loan must be registered with the high court, private buyers rarely check because they anticipate the law will protect them. It is, therefore, very important that current law on logbook loans and sale of used cars is reviewed to protect car owners and buyers.