Government urged to protect PCP customers

Concerns have been expressed by consumer advocates that motorists may not fully understand the agreement to which they sign up to under PCP contracts. File Picture.

The Government has been urged to finally legislate for personal contract plans (PCPs) in order to protect consumers whose ability to pay may be vulnerable due to Covid-19 disruption.

Finance minister Paschal Donohoe said it was the intention of the Government to publish a bill “as soon as possible” that would strengthen consumer protections in relation to PCP agreements.

However, Cork East TD Sean Sherlock, who has previously claimed that the amounts owed by Irish consumers in relation to PCPs are “staggering”, said the Government was dithering on the proposed bill.

PCP is a form of hire purchase where the consumer typically pays a deposit of up to 30% and makes regular monthly payments, usually for three years.

They are then presented with options such as handing the car back to the dealer, paying off a last, so-called “balloon” payment to own the car outright, or paying a new deposit and beginning another contract.

Although popular in Europe and the US, and increasingly so in Ireland, concerns have been expressed by consumer advocates that motorists may not fully understand the agreement to which they sign up.

However, a study by the Competition and Consumer Protection Commission (CCPC) in 2018 found that PCPs “worked well for the vast majority of traders and their customers”. More than one-third of new cars are bought using PCPs, the CCPC found.

A report by Michael Tutty, a senior Department of Finance official and then-member of the Irish Fiscal Advisory Council, in 2018 on PCPs recommended that further consumer protections be introduced.

In particular, it recommended that the provisions of the Central Bank Consumer Protection Code, which requires lenders to assess the suitability of the product for the consumer and also the ability of the borrower to repay the debt over the duration of the credit agreement, should be extended to hire purchase and PCP agreements.

Hire-purchase providers, or entities who underwrite hire-purchase agreements, are not currently required to seek authorisation from the Central Bank or the Competition and Consumer Protection Commission (CCPC) for agreements such as PCPs.

Hire-purchase agreements are not subject to the Consumer Protection Code that is regulated by the Central Bank.

At the end of February this year, the outstanding amount of car finance consumer credit advanced to households by Irish resident banks by way of PCP was €1.171bn, with 62,078 PCP contracts.

Mr Sherlock said the Tutty Report had been around long enough and it was now time to act.

Covid-19 has changed the landscape when it comes to many consumers and their potential ability to repay the loans, he added.

“Legislation has been promised on this since November 2019. The Tutty Report was completed in October 2018. This is a live issue for thousands of customers who have no forbearance on their PCP loans. The issue of applying affordability criteria and credit checks need to be strengthened.

Thousands of people will now be caught because they lost their jobs and may not be able to keep up with loan repayments. 

"The question arises as to whether such contracts allow for payment breaks or reductions in monthly repayments. We need to see the legislation now and it needs to be implemented so as to cover these types of eventualities,” the Labour Party TD said.

Motor dealers insist that PCPs are safe for customers and that they have no issue with legislation being introduced.