There has been a growing popularity in the use of log book loans, or bills of sales to give them their correct title, amongst consumers who need to borrow relatively small amounts of cash over a short period of time. Due to the nature of log book loans, they are usually predictably considerably more expensive than conventional personal loans.

As the name suggests, a log book loan is one which is secured on a borrower’s car, with the lender taking the ownership documents, or log book as security for that loan.

Bills of sales were first introduced in 1878, but probably due to the lack of availability of loans from traditional sources such as banks, they have seen a growth in popularity over the past couple of years or so and it is estimated that there have been around 40,000 log book loans granted between April 2008 and March 2009 with a total outstanding loan balance of around £30 million.

There have been many horror stories about people who have taken out log book loans in an emergency situation, only to find that they are unable to repay the debt and see it increase to such a level that they owe more than their car is worth. As a result of such stories and a growing number of consumer complaints regarding these loans, the Department for Business, Innovation and skills has proposed that log book loans should be banned.

The Consumer Minister Kevin Brennan said “These bills of sales are archaic and allow vulnerable people’s goods to be seized without a court order. They were developed in the days of Charles Dickens and don’t meet 21st Century consumer standards. They can encourage people to slip even further in to debt rather than taking control of their finances. We must consider all the options, but it seems they don’t fit easily into a modern consumer regime, which should allow honest businesses to thrive and offer adequate protection for consumers.”