Empty wallet: The National Audit Office estimates that £ 26 billion of bounce back loans will never be paid back
The banks on Main Street will handle the overdue repayments of bounce-back loans themselves and abandon plans for an agency to handle Covid-19 emergency loans.
The banking industry has decided that a collection agency would only make it harder to deal with bounce-back loan debt, which the Times said has gone bad.
The government itself estimates that almost two-thirds of bounce-back loans may never be paid back, costing the Treasury Department £ 26 billion.
> See also: Banks can call in debt collection agencies to get back unpaid bounce-back loans
UK Finance, the banking trade organization, conducted a feasibility study last year to create a vehicle to oversee collections from lenders who participated in the bounce-back loan program.
The proposed agency was designed to ease pressure on banks that, given the size of the £ 45 billion program, were concerned that they would be able to collect bounce-back loan debt. The banking industry hoped that a single industry could ensure consistent treatment of small business borrowers, avoid a repeat of the post-2008 financial crisis SME lending scandals and protect individual lenders from criticism.
Though plans for a formal debt collection agency have been all but abandoned, talks about a looser agreement on common standards for debt recovery continue, according to the Times.
> See also: Almost two-thirds of bounce-back loans could go bad, government says
And the government has put out “clawback protocols” that set out expectations of how banks should behave when repaying loans. The state-owned British Business Bank, which manages the bounce-back loan program, will also oversee the collection activity.
UK Finance told the newspaper: “The detailed design of a collective approach to debt recovery is still under development. This would provide a consistent approach to handling outstanding bounce back loans. However, individual lenders may want to express their own opinion on recoveries. “
Read on about Bounce Back Loan Debt
What support does the government offer for coronavirus companies?
Comments are closed.