Discretionary Commission Arrangements - Compaints and refunds


Varooma (registered company name Greenlight Credit LTD) is based in South London, was founded in 2011, and specialise in offering short term finance to consumers by way of Logbook or V5 loans. As I write this, Varooma state on their website that they are “currently acting as a broker not a lender” – they are passing details on to Logbook Money Limited. There have been many complaints against Varooma, along with other logbook loan providers, and if you read on, you will be able to see why!

What is a Logbook/V5 loan?

A logbook loan is a form of secured lending whereby if you own a car, motorbike, or van, and it is free of finance, you can release the equity in the form of a loan. The vehicle acts as security against the loan until it is fully repaid. The principal benefit of a logbook loan is that the owner of the vehicle continues to use their vehicle for the term of the loan (provided loan repayments are made on time and in full), even though they have transferred ownership of their vehicle to the logbook lender.

How does it work?

The procedure for a logbook loan application is pretty similar to that of a standard personal loan, in that it is a loan contract between you the borrower, and the lender.

If you are offered a loan, you will be required to sign a loan credit agreement, and a Bill of Sale. This is important as in England, Wales, and Northern Ireland (not Scotland), a Bill of Sale is recognised by law as a certificate of the transfer of property to another party, in this case, the lender, and they remain in legal possession of your vehicle until you have paid off the entire loan - the borrower only keeps physical possession. So, you would not be able to sell the vehicle as you technically do not own it.

Once the loan has been paid back in full, the associated Bill of Sale becomes void, and the vehicle’s legal ownership reverts to the borrower. It is worth mentioning that the bill of sale must be registered to the High Court by the lender if it wishes to repossess your vehicle.

Are Logbook Loans expensive, and who might want one?

Logbook loans are very expensive (see example below); those who have poor credit scores, who own a vehicle, and who need a relatively large amount of credit quickly are typical customers. As many logbook loans providers do not perform a credit check, it easy to understand why this would appeal to someone struggling to borrow via a more conventional route.

Loans range in size from around £500 to £50,000, although the average amount is around £1000; of course, the amount that can be borrowed will depend on the value of the vehicle – most lenders offer between 50-60% of the value.

The typical Annual Percentage Rates (APRs) are 400% or higher, making logbook loans extremely expensive as a form of credit. So, for example, if you borrowed £1,500 and paid £55 a week for 78 weeks, the repayment would be over £4,250 in total! So, to borrow £1,500, the interest paid would be over £2,750 – pretty shocking when you look at the cold hard figures.

Complaints and criticisms about Varooma

Let’s first look at what Varooma charges to borrow from them; from their own website they give a representative example as follows: “Borrow £1300 over 18months; rate of interest 120% (fixed)p.a.; representative 442.66APR; total amount payable £3640”.

This means that you would end up paying £2,340 in interest – it seems hard to understand why anyone would sign up to pay almost twice the amount of the loan in interest, but I believe that lenders know that there are a lot of people struggling to make ends meet, and so can charge accordingly as many people do not realise just how much they will end up paying.

Many customers have complained that Varooma, along with other logbook loan lenders, have lent to them when it was clear that they could not afford it (deemed “unaffordable or irresponsible lending”).  As credit checking is not a high priority (presumably because the lender will have a vehicle as collateral) the lender will not have the full picture of the customer’s financial situation, including any indications that there are financial difficulties.

Other complaints are that the lender did not make it clear that if the customer did not keep up with repayments, they could ultimately lose their vehicle. Some customers also complained that they had no idea how much interest they would end up paying, as the lender went through all the details too quickly, and only emphasised the monthly (or weekly) payments that seemed manageable.

Many customers have complained and tried to get refunds and compensation due to these factors, along with disputes over fees and charges, and also repossessions of vehicles with no warnings/allowances for the debt to be paid, or customer’s being unable to take possessions out of their vehicles when the car is repossessed.

Another more disturbing area of complaint that is emerging is third parties buying vehicles with a logbook loan attached, and the FOS are starting to look into these in terms of compensation.

Case studies have been published where customers have contacted their lender to say their circumstances have changed, and they cannot make the repayment date, or to ask if they can reduce the payment due. Instead of the lender working with the customer to try and resolve the payment problems, the customers have had their vehicles repossessed with no warning.

In any case, in the event of missed payments, the creditor should issue a default notice, giving the borrower 14 days to bring the account up to date. The account will be considered defaulted if this is not done, and the lender can take further action – like repossession, which in itself will incur charges payable by the customer.

When making a complaint, the lender’s behaviour in these sorts of circumstances will be scrutinised to see if they have abided by the code of practice set out by the Consumer Credit Trade Association (CCTA) when debt collecting or repossessing.

Before anyone considers taking out a logbook loan, they should check to make sure that the lender is a member of the CCTA, so that they are protected by its codes of practice.

Redbridge Finance can help anyone who feels they have been treated unfairly and has a claim against Varooma. If you feel that Varooma lent you money when it was obvious that you could not afford the size of loan or the repayments, then we can assess your claim to see if you were mis-sold the loan. If you are currently struggling to make your repayments, it is worth checking with us to see if you could be entitled to a refund. If you are, then Redbridge Finance will make a claim for a full refund of all the interest and charges. Visit www.redbridgefinance.co.uk and sign up to see if we can help you.