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The stability of ion velocity distributions in magnetized plasmas is studied under conditions where the plasma has an E0 × B/B2-drift with respect to a neutral background. Charge–exchange collisions can give rise to velocity distributions having the form of a ring or a loss-cone that can become linearly unstable. Sometimes the distributions have distorted forms and a stability analysis is not straightforward. Numerical simulations offer the most convenient method of a stability analysis in such cases. By numerical simulations using a particle-in-cell code that includes collisional interactions we demonstrate the formation of such velocity distributions and study the instabilities associated with them. We observe the saturation of the linear instability by quasi-linear velocity space diffusion. The parameter dependence of the instability conditions is illustrated by examples. The results are relevant for explaining some of the low frequency oscillations observed in the lower parts of the Earth's ionosphere (E- and F-regions), where collisions with neutrals are abundant. The results are important for laboratory experiments as well. [ABSTRACT FROM AUTHOR]