Consumers left with 'staggering amounts' of debt from PCP car sales

Labour TD Sean Sherlock told the Irish Examiner that the regulation of PCP car financing by the Central Bank, "appears on the face of it, to be characterised by a light-touch approach".

Consumers have been left with "staggering amounts" of debt from entering into so-called "personal contract plans" (PCP) to drive new cars.

Labour TD Sean Sherlock asked finance minister Paschal Donohoe for a breakdown of the number of PCP loans currently in operation in Ireland, as well as the cumulative total of those loans.

The answers were worrying, especially in the context of the Covid-19 pandemic and the financial hardship it has caused, the Cork East TD for Labour said.

Mr Donohoe replied that the Central Bank's latest data available for the total car finance market in Ireland - which includes both Irish resident banks and non-banks - is to the end of September 2019. 

"At that time, there were 76,153 PCP loans outstanding representing a total outstanding stock of almost €1.457bn," he said.

The Central Bank also publishes data on a regular basis on the types of car finance provided to households specifically by Irish resident banks, Mr Donohoe said.

"The latest data published by the Central Bank indicates that, at the end of February 2020, the outstanding amount of car finance consumer credit advanced to households by Irish resident banks by way of PCP was €1.171bn. This related to 62,078 PCP contracts," he said.

Mr Sherlock told the Irish Examiner that the regulation of PCP car financing by the Central Bank, "appears on the face of it, to be characterised by a light-touch approach".

"The amount of monies involved is staggering. There does not appear to be a protocol in place that protects consumers in the event of loss of income that allows for reduced payments. 

"We need clearer communications from the Central Bank about this sector and the impact of such financing for the wider economy," he said.

The Central Bank said that providers of hire purchase agreements, including PCP agreements, are not currently required to be authorised by it, and are thus not subject to the requirements of the Consumer Protection Code 2012. 

A spokesman said: "The Department of Finance is working on legislation to provide for an authorisation regime for hire purchase providers, and the Central Bank continues to engage with the Department of Finance in this regard.

"The Central Bank of Ireland continues to closely monitor the impact of Covid-19 on households and firms. 

"We encourage all borrowers who may be facing financial difficulties to engage with their lender as soon as possible."