€2.7billion car finance bubble needs ‘swift regulation’

ACTION to deal with Ireland’s growing car finance bubble – now more than €2.7billion – is urgently needed, say Fianna Fáil.

Both the Central Bank and the competition authority say that the other body should oversee the sector – leaving a huge unregulated section of the economy.

Fianna Fáil finance spokesman Michael McGrath has called on Finance Minister Paschal Donohoe to intervene and resolve a reported stand-off between the two.

Mr McGrath made the comments yesterday about the hire purchase arrangements which have become hugely popular in recent times.

Combined, they now account for €2.7billion of a total of €3.8billion of car debt.

‘Last month the Competition and Consumer Protection Commission published a report on personal contract plans (PCPs) and recommended strengthening consumer protections. In my view, the most important recommendation was that the Central Bank’s Consumer Protection Code should apply to PCPs.

‘I expected the Government to ensure swift action to implement the report’s key recommendations.’

He said a report in a Sunday paper which stated that both the Central Bank and the CCPC believe the other is responsible for regulating PCPs is ‘a recipe for nothing happening’.

‘In that scenario, consumers and the motor industry, which relies heavily on this form of finance, could be the major losers,’ Mr McGrath said.

The limbo within legislation has led to increased fears that the surge in the number of complex and risky new car finance deals could turn into an unregulated credit bubble.

That, in turn, could lead to major problems in some parts of the economy. In the US, there have been rising fears of a subprime mortgagestyle crash in the car loan industry. Last year, the Wall Street Journal and some economists warned that a crash in the car repayment market could be imminent.