There has been a lot of outcry recently that logbook loans should be restricted or even banned in some cases. Whether or not this should happen is something that is up for debate.
In my opinion the answer is no, they shouldn’t be banned but some restrictions are good for the industry. In fact restrictions are already taking place because loan companies are now being watched by the government and action is being taken on companies who flout strict rules.
The rules that have come into force from the FCA are strict and any company that doesn’t meet them can be taken out of business as well as punished financially. The FCA have been known to fine companies for past practices, even if those practices aren’t carried out by the company any more . This means that even if some companies have cleaned up their act, they could still be asked to pay back consumers they have taken money from dishonestly.
Large companies mean large fines
For companies with a large customer base, this means huge back payments for mistakes they have made in the past. This could potentially put some lenders out of business. Just look at the PPI scandal where companies have been forced to set aside billions of pounds in payments to customers they have taken money from.
This is very good news for the consumer as they are now protected, and some could potentially receive money back from lenders that have mislead them in the past.
The argument as to whether lenders should be restricted has almost certainly been answered, lenders have been restricted by the FCA already. If they don’t follow the FCA’s guidelines they won’t be allowed to trade any more, it’s that simple.
Could more be done?
The restrictions on logbook loans do seem to go far enough. Banning the loans surely wouldn’t be the right thing to do as it would mean people would search for another alternative, possibly an illegal one. This just moves the problem on elsewhere, it doesn’t remove the fact that the demand for loans is always going to be there.
It isn’t until consumers learn more about the dangers of taking out loans and the possibility that they can find themselves in debt that the demand for loans may fall. This is something that will take many years to implement but it will help society if it is.
Lets not just take these loans away altogether, lets see how well the FCA clean up the industry and at the same time teach people about the dangers of debt.