The FCA (Financial Conduct Authority) insists it is not being complacent when analysing the situation of PCP (Personal Contract Purchase) car hire deals in relation to current debt trends. At present, over ¼ of consumer debts are from PCP deals. While the amount of borrowing is high, the FCA insists a PCP is a good debt.
Good debts
Of the £200bn of consumer debt in the UK, PCPs amount to £58bn. With almost 29% of consumer debt in PCPs, it surprises many the FCA is less concerned about it.
In a speech earlier this month, FCA Chief Exec Andrew Bailey protected consumer decisions to take PCPs. He told delegates:
We are not at all complacent about the overall consumer credit situation,
but I don’t regard, for instance, the shift to PCP based lending as per se bad.
It seems to me to recognise the nature of a car as an asset,
that is, consumers are comfortable renting rather than owning the car.
During the same speech Andrew also spoke of ensuring consumers knew exactly how PCPs work as well as understanding the terms. But, overall, an investment in a PCP is thought of as a good debt with long term value.
Recovering good debts
Even good debt can need recovery services. Be it rent, a credit card or a car. Good debt simply means manageable debt used to fund a positive future lifestyle improvement. Good debt only stays 'good' however if it is kept in check. Should a debtor begin to miss payments and fall into trouble, debt can 'turn bad'. Bad debts by nature are more difficult to collect.
As a debt collection firm, we would encourage creditors to look out for warning signs and get expert help if necessary. We provide much more than collection services, often mediating and providing legal support.
Recently we blogged about consumer borrowing reaching an 11 year high. Unsecured, spiralling consumer debt was the risk. While that still remains a risk factor, lenders can still protect themselves. They can do so by offering correct levels of credit to those able to pay. When it comes to car dealerships it is rare to find a dealer who hasn't conducted a thorough assessment of the customer.
We recently blogged about consumer credit being a delicate balancing act. That act could benefit from official government input alongside the existing external body, the FCA.
If however you are a creditor needing payment and early intervention, we are here for you. If you'd like to know more simply call out specialist team on 0800 130 3357. Alternatively you can email enquiries@ayom.co.uk or fill in our contact form here.
AYOM Collections can provide expert recovery as well as mediate and credit check debtors for you. Speak to us to see what we can do for you.