Plans to create a Nationwide Debt Collection service to recoup unpaid covid Business support loans have hit a brick wall according to latest reports.
£45 Billion pounds have been lent to Small Businesses to help them through the pandemic over the last year by UK banks.
In total 1.47m loans were issued by Commercial Lenders with a government guarantee. The programme will see recipients start to pay 2.5% interest from May.
Lobby Group Uk Finance had been heading discussions on a shared solution involving specialist outsourced Debt Collection but this was met with scepticism by some of the lenders.
Some of the Larger Lenders such as Lloyds and HSBC have since changed their stance on a centralised debt collection unit.
The UK’s National Audit Office has already said that the covid loan support scheme could be facing losses of up to twenty-six billion due to commercial fraud, small business insolvency and bankruptcies.
Large banking groups have already hired extra debt collection call centre staff to help with recouping the support loans. Smaller lenders are bracing themselves for financial hits from the fall out of the scheme.
Smaller Commercial Lenders are said to be weighing up options to outsource their debt collection as they are unable to finance the creation of special debt collection teams to tackle the problem.
A source said that lenders involved in the scheme would be subject to a basic framework or code of conduct in relation to recovering loans given up the covid support scheme.