Last Friday, the Office of Fair Trading (OFT) welcomed a Tribunal's decision to strike out appeals submitted by the UK's biggest logbook loan business, Nine Regions Limited and Log Book Loans Limited, who trade under the name Log Book Loans. In around October 2009, the OFT made a decision to revoke the licences, and in around November 2009, Log Book Loans appealed the decision. It was this appeal which was struck out.
Logbook loans are a type of finance, where usually small amounts of money are loaned, and then secured on vehicles such as cars and motorbikes, through a Bill of Sale. These agreements are regulated by the Consumer Credit Act 1974, and therefore a company must have a licence to be able to grant the loans, and then to collect them in.
The loans usually attract a high interest rate. Customers are not always aware of the true cost of the whole loan. If the borrower defaults, the loan company can seize the vehicle without having to get a Court order, as a result of the Bill of Sale. If the vehicle is then sold, and there is a shortfall, the customer can still be pursued for the shortfall.
The OFT asked the Tribunal to strike out Log Book Loans' appeals because of evidence that emerged during the appeal hearing. Log Book Loans admitted that thousands of letters had been sent to borrowers in the name of a firm called Adams Spencer & Phillips (Legal Services) Limited (ASP), falsely threatening to take legal action on behalf of Nine Regions Ltd.
According to the OFT report on their website, the tribunal found that:
- the letters were sent to give borrowers a false impression that ASP was a body authorised to carry on activities as if it were a firm of solicitors, such as the conduct of litigation
- ASP actually had no employees and was not a body or individual duly authorised to bring legal action on behalf of NRL
- deceptive practices included that between September 2009 and April 2010, employees of NRL called customers pretending to be employees of ASP
- the ASP letters were part of a deliberate deceit
- the deception was played out, not simply in front of customers but also with third parties such as solicitors acting for borrowers, as well as the Financial Ombudsman Service.
David Fisher, Director of the OFT's Consumer Credit Group said:
'The OFT welcomes the Tribunal's decision to strike out the companies' appeals. The decision confirms our view that these companies are unfit to hold their consumer credit licences. Intentionally deceiving debtors as part of a debt collection policy is an extremely serious matter, which calls into question a licensee's fitness. We expect businesses licensed by the OFT to treat all their customers, including those in arrears, fairly and transparently.'
As solicitors specialising in disputed consumer credit agreements, Stephensons as a firm, and myself, have dealt with many clients over the past few years, who have had loans with Logbook Loans. Many have been assisted in either reducing the amounts owed, or in some circumstances, having the balances of loans written off.
The Tribunal’s decision is refreshing, and is very welcome news for consumers everywhere. The decision will affect hundreds of people across the country who still have these loans. If the licences are revoked, it will mean that the companies will likely be wound up. Borrowers must however be aware that this may not be the end of their debt, as Log Book loans could sell the debts to another company.
I must make it clear that Log Book Loans can still seek permission to appeal the decision of the First-tier Tribunal to the Upper Tribunal on the grounds that there has been an error of law. If they do this, Log Book Loans will be able to continue to trade under their licences until the end of the appeal period.
A copy of the full decision by the First-tier Tribunal can be found on their website, at the following link www.consumercreditappeals.tribunals.gov.uk/decisions.htm.
If you have a Consumer Credit Agreement, whether with Log Book Loans or any other company, we offer a fixed fee assessment service. You should contact our specialist Consumer team on 01616 966 229 to speak to one of our advisors.
By consumer solicitor, Heather Korwin-Szymanowska