PCP car deals seem dangerously risky

It is natural, but not wise, to push the memory of the chaos caused by sub-prime mortgages to the back of a dark cupboard. The greed and stupidity behind that whizz did trans-generation damage to public finances. Despite that it must be hoped the relevant lessons were absorbed — but were they?

The culture behind that pillaging played out this week when it was announced Australia is preparing criminal cartel charges against that country’s third-biggest bank and underwriters Deutsche Bank and Citigroup over a $2.3bn share issue. It is not necessary to travel to the antipodes to see another example of what seems to be fast-and-loose lending.

Earlier this week the Competition and Consumer Protection Commission launched a campaign on personal contract payments (PCP) car financing. The campaign is to ensure that customers fully understand their obligations and pitfalls inherent in the product. At the end of 2017, there were 126,249 PCP agreements worth €1.5bn. Six years earlier only 14,000 agreements were in place. Fianna Fáil finance spokesman, Michael McGrath, warned the campaign did not address the “glaring hole” that PCP customers are not protected by Central Bank regulations, or that potential users capacity to repay debt is not always considered.

These weaknesses must be quickly resolved and the banks warned that if these schemes go the way of subprime mortgages then they need not call the taxpayers’ rescue service.