A new report by the Credit Services Association (CSA) says that taxpayers could be saved huge sums if debt collectors are allowed to take on a bigger role in collecting unpaid coronavirus loans. The trade body is calling for an investment in BBL Engagement Scheme and use of professional collections agencies to ensure fair and consistent approach to sensitive recoveries
The CSA says that a consistent policy for the repayment or recovery of Business Bounce Back Loans (BBLs) and the use of professional debt collection agencies to ensure best practice and forbearance could make a £6bn difference to the public purse.
The report also calls for the Government to invest in a dedicated ‘BBL Engagement Scheme’ and provide a warranty against fraud in the event that debt is sold on at some future date.
In the document ‘Squaring The Circle: Setting the strategy for UK Business ‘Bounce Back’ Loans collections’ the report’s authors set out the need for best practice on forbearance and standards of engagement to be adopted by the British Business Bank and HM Treasury and how a consistent policy towards collections is crucial and should be determined as soon as possible. The report’s authors also recommend the creation of a BBL ‘Engagement Scheme’ of around £10 million annual investment over the next three years to engage with customers, which could yield anything between £3bn – £6bn in additional returns to the Exchequer. (The investment should be seen in the context of a reported £42 million spent on the FCA’s campaign heralding the deadline for claims against miss-sold PPI.)
They believe that if the Government pursues an active collections strategy consistently, it could save the taxpayer the equivalent of the NHS’s annual capital budget allocation. Government should also use established, professional collections agencies, rather than attempting to ‘re-invent the wheel’.
CSA Chief Executive and co-author of the report Chris Leslie says that some estimates suggest more than half of BBLs may not be repaid in full: “When such vast sums of taxpayer money have been lent to business in the expectation it will eventually be repaid, Ministers have a responsibility to pursue an effective – as well as a sensitive – approach to recovering that debt,” he says.
“Engaging in dialogue with and understanding the circumstances of those SMEs who have taken out Bounce Back Loans will take particular skills. If the Treasury adopts the approach we recommend, not only can it tailor forbearance according to need, it can recoup perhaps £6bn more than it might do otherwise – saving the equivalent of the annual NHS hospital building budget for the taxpayer.”
Co-author and CSA Head of Policy Henry Aitchison agrees she said “We’re concerned at some estimates suggesting between 35% and 60% of these loans may not be repaid in full. The Government must therefore be clear and consistent in its policy towards collections and communicate regularly with SME customers.”
“An approach that works with a borrower and is sensitive to their individual circumstances inevitably yields better returns which will be important for the taxpayer and reflects the highly unusual situation which the BBL scheme was designed to ameliorate.”
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