New consumer protections on PCP 'cannot come quickly enough'

More than one-third of new cars are bought under PCPs in Ireland. File picture

The forthcoming legislative bill to enshrine consumer protection regarding so-called "personal contract plans" (PCP) into law "has never been greater" and "cannot come quickly enough".

That is according to a cross-party selection of TDs, who were speaking during a debate on the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Bill 2021, which will extend the the Central Bank’s Consumer Protection Code to cover hire purchase and PCPs.

PCP is a form of hire purchase where the consumer typically pays a deposit on a vehicle 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.

Motor dealers, such as Cork's Blackwater Motors, have insisted PCPs are safe for customers and they have no issue with legislation being introduced to protect consumers.

A study by the Competition and Consumer Protection Commission (CCPC) in 2018 found 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 2018 report by Michael Tutty, a senior Department of Finance official and then-member of the Irish Fiscal Advisory Council, on PCPs recommended further consumer protections be introduced.

Second stage of bill

During the second stage of the bill this month, which allows for debate and the potential for other measures to be added, TDs spoke of how more consumer protection was needed.

Sinn Féin TD Martin Kenny said: "In the past number of years, there has been an explosion in the PCP market. The number of PCPs for car finance alone between December 2014 and February 2020 increased by 528%, while the total outstanding credit in the PCP market by 2020 stood at €1.7bn, which represents a 573% increase since December 2014."

This sharp rise in the PCP market and PCP credit has raised justified concerns regarding financial stability and consumer protection, he said.

Labour TD Ged Nash said PCPs now represent a quarter of all car financing loans by outstanding number and nearly 40% in terms of outstanding value.

"These are staggering numbers, yet until now there has been no apparent protocol or system put in place to protect consumers, for example, in the event of loss of income and to allow for reduced payments in such circumstances. Regulation of these entities cannot come quickly enough."