UK Debt Collectors Want More To Do With Unpaid COVID Debts
U.K. debt collectors want the government to give them a bigger role in recovering the debts from the 44-billion-pound (about $60 billion) business rescue program, the Financial Times (FT) reported.
The Treasury has faced questions as of late over how to minimize the losses for taxpayers under the scheme.
FT reported that the government provided 100 percent guarantees for banks in order to help encourage them to lend quickly to small- to medium-sized businesses (SMBs) in need due to the pandemic’s economic effects as when they initially began last year.
That scheme has helped around 1.4 million SMBs and was seen as instrumental in saving thousands of them from collapsing under the virus-related lockdowns and people avoiding physical spaces in the months after, FT reported.
However, the lockdowns that have occurred since, including one just put in place in the past week, alongside mass amounts of fraud, will force many businesses to default on their loans, according to FT.
With that, the debt collectors have begun to pressure the government, FT reported, which puts the government in a difficult place, according to Chris Leslie, CEO of the Credit Services Association (CSA), the trade body representing the collections industry.
“It’s a tricky balance to strike — you’ve got to support these [SMBs] but at the same time you have taxpayers to be concerned about,” Leslie said, adding that the difference is “between recovering 15p in the pound and 30p in the pound [on defaulted loans] — when you see the scale of this, that’s a big chunk of taxpayer money.”
He also said that the private debt collection industry, regulated by the Financial Conduct Authority (FCA), has usually treated borrowers more fairly than the government, which has been accused before of overly heavy-handed tactics against those who don’t pay on time.
PYMNTS reported last year that the U.K. government’s losses from the pandemic could hit 23 billion pounds (about $31 billion) due to the loans.