Gerald Nash (Louth, Labour) | Oireachtas source

I welcome the opportunity to speak on this important Bill. The number of personal contract plans for new cars has sky rocketed since data were first recorded in 2014, from just over 10,000 PCPs then to over 62,000 outstanding PCPs in February 2020. That is an increase of over 500%. Not only has the number of unregulated PCPs risen rapidly, but the outstanding level of PCP debt attached to these car finance loans has also risen, from just €174 million in December 2014 to €1.7 billion in February 2020. That is an increase of 573%. On the basis of the latest data available, PCPs now represent one 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. The lack of regulation over the last few years will have had dire consequences for many individuals and their families over the last 18 months since the outbreak of Covid-19. Many people with outstanding PCP debt in February 2020 would have been hit very hard by the pandemic, with some losing their jobs and others seeing a significant reduction in their income. Unlike with other regulated loans under the Central Bank, PCP customers, many already facing a staggering amount of debt, would have had little recourse and even less protection, with the Competition and Consumer Protection Commission citing PCPs as "among the least flexible forms of finance". A consumer in financial difficulty cannot sell the car without permission from the financial institution or dealership, while those acting as a guarantor may be liable for repayments in the event of a default. Repossessions are also allowed without a court order in cases where less than one third of the PCP is repaid. The so-called final balloon payment that is needed to secure ownership of the vehicle, which is prohibitively expensive at the best of times, would have been nearly impossible for many of those struggling financially during this period.

This also had a direct and noticeable knock-on effect on other second-hand car buyers, with one report last March from Cartell.iehighlighting that there is now a one in three chance of a one-year-old and three-year-old vehicle, respectively, being offered for sale with finance still outstanding. That is extraordinary. This suggests a clear trend of people stuck in PCPs desperately trying to sell cars they can no longer afford. The consequence of this is that many unsuspecting buyers of second-hand car face the prospect of having their new vehicles seized by the lending institutions that are owed money. Lenders are currently legally entitled to take those cars. In such situations, the person who has handed over thousands of euro is left with nothing. In short, ordinary people have been left out of pocket while the unregulated PCPs continue to profit regardless of the outcome.

We very much agree with the intent behind this Bill and what is trying to be achieved. In the aforementioned context, with the impact of Covid-19 and the exponential rise in PCP car financing arrangements since 2014, it is pity that action is only being taken now. I and my colleagues acknowledge the work done in the production of the Tutty report. As FLAC and others have noted, repeated attempts have been made over the years to have this issue addressed but, yet again, when it comes to consumer protection and putting ordinary people before the interests of lenders, we have been very slow to act. The Central Bank will have an important role to play, particularly with regard to the interest rate that consumers may be charged under hire purchase and credit agreements. I am pleased that efforts are being made in section 13 of this Bill to deal with interest rates. We hope to analyse that properly on Committee Stage to try to ensure there is a more robust regime in managing the APR and to ensure we do not have a scenario arising like we have, as others have mentioned, in respect of out-of-control moneylenders.

Regulation should go beyond the mere stating of terms and conditions to a deeper recognition of the power and information disparities between big financial institutions and ordinary people. Many who sign up for these PCP products in some circumstances may not have the wherewithal, whether it is lack of time or lack of knowledge, to properly scrutinise these often deliberately complex arrangements and compelling and attractively packaged products. That relates back to a hobby-horse of mine, which is financial literacy and financial information. We have a job of work to do in this country to ensure people are equipped with the skills and information they need to make informed decisions about complex financial products such as these.

Far too often, people get absolutely nailed because of these kinds of arrangements. In some cases, they have had the wool pulled over their eyes and they may not fully understand what it is they are getting themselves into. We have a responsibility to ensure that financial education and financial literacy are a priority. I confirm Labour Party support for the Bill, which we hope can be further strengthened on Committee Stage. We would like to see it speedily enacted to make sure those with outstanding PCP debt and those who engage in these types of arrangements in future are given the best protection they can possibly have.

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