Few financial products have a legal history as long as the logbook loan. The core paperwork dates from the reign of Queen Victoria, while the rules on who can lend, and how, have been rewritten in the last decade or so.
Rather than a strict timeline, V5 Solutions has organised this guide around the questions borrowers ask about where logbook loans came from and why they work the way they do.
Why Does a Victorian Law Still Apply?
A logbook loan in England and Wales is secured using a Bill of Sale. This type of security was designed in the 1800s so that people could raise money against personal possessions while continuing to use them. Two statutes still govern it: an Act passed in 1878 and an amending Act passed in 1882.
The rules they set are strict. A Bill of Sale must be drawn up in a prescribed form, signed in front of a witness and registered with the High Court within seven clear days. If those steps are not followed correctly, the document can be void. This is why, for most loans, an agent meets the borrower in person to witness the signing.
The law has been questioned many times. The Law Commission recommended replacing it with modern legislation, and a draft Goods Mortgages Bill was published in 2017. The following year, the government chose not to proceed, so the Victorian framework continues to apply.
What about Scotland?
The Bills of Sale Acts have never applied in Scotland. Scottish customers of V5 Solutions take out a Hire Purchase agreement instead, signed online. Some loans elsewhere in the UK are set up the same way.
Where Does the Name Come From?
Bills of Sale were originally used over all sorts of goods. As cars became common household assets, lenders increasingly took security over vehicles. The vehicle's registration certificate, the V5C, is often called the logbook, and the name stuck. It is a slightly misleading label, because a responsible lender does not need to hold the V5C. V5 Solutions never takes your logbook or spare key.
Who Regulates Logbook Lenders?
For many years, the Office of Fair Trading issued the licences that lenders needed under the Consumer Credit Act 1974. On 1 April 2014, that role passed to the Financial Conduct Authority, which supervises firms more closely and can take action against those that break its rules.
Today, any logbook lender must be authorised by the FCA. Key protections include:
- clear pre-contract information so you can compare the cost;
- a duty to check affordability before lending;
- fair treatment if you fall behind with repayments; and
- the right to take an unresolved complaint to the Financial Ombudsman Service.
From 31 July 2023, the Consumer Duty added an overarching requirement for firms to deliver good outcomes for retail customers, including fair value and support that meets their needs.
How Have Lending Decisions Changed?
In the past, the value of the vehicle was often the main consideration. Modern lending looks closely at whether the borrower can manage the repayments. At V5 Solutions, an underwriter reviews bank statements and speaks to each applicant by phone before a decision is made, looking at both affordability and vehicle value.
Technology has made the process quicker too. Online applications, soft searches for personalised quotes, digital signing for Hire Purchase agreements and bank transfer payouts mean that most customers receive their money within 24 working hours of their application. Each stage is set out on our how it works page.
What Does This Mean for Borrowers Today?
Logbook loans are now far more tightly regulated than they once were, but the basic trade-off remains. You are borrowing against your vehicle, and it is a costly form of credit. Our guide to what a logbook loan is covers the costs, risks and alternatives in more detail. If you are struggling with existing debts, free advice is available from National Debtline and Citizens Advice.
Your car may be repossessed if you do not keep up repayments on a loan secured against it.
