The Credit Services Association has issued a stern response to claims from Debt Charities in the UK. Charities have made audacious requests that all Debt Collection activity be halted and billions written off in Public service debts.
The CSA, which is the trade body for the debt collection industry has sent a letter to the Government, warning of the consequences of agreeing to such.
The Credit Services Association says it’s members return around £4 billion to the UK economy every year. This is the equivalent of building five brand new hospitals.
Some £400 million of the amount collected every year is on behalf of small Businesses.
If the Government were to agree to the Debt Charities requests, this would potentially write off billions of pounds of debt. The CSA is urging a collaborative approach by coming up with policies that deal with a specific and clearly defined problem.
It warns that agreeing to the debt charities requests will present additional issues that the CSA argues will only make matters worse.
Debt charities have requested that the chancellor to write off £10bn worth of outstanding council tax and social security debts. It also requests a “debt freeze” for people struggling to manage on low incomes.
Many of the Debt Charities were signatories in a letter to the Chancellor Rishi Sunak. The letter carried warnings that millions of low-income households face a “deepening debt trap” that will be impossible to climb out of without government intervention.
“Those facing redundancy, loss of wages or other payment difficulties because of Covid-19 must be entitled to an immediate freeze on unsecured debt payments, similar to the mortgage holiday extended to homeowners, with no interest accumulated during the repayment holiday,” they said.
But Peter Wallwork, CSA Chief Executive, said: “Now is the time for clear heads and clear thinking.
“We need to resist calls for wholesale changes which may look like the answer but fail to take into account the bigger picture and the wider impact on society and our economy. We need to help the greatest number we can but in such a way that doesn’t damage the credit/customer ecosystem irrevocably.”
CSA members act on behalf of nearly all of the major financial institutions, banks, credit card companies and the Government. But its members also manage more than 750,000 commercial accounts, mostly on behalf of small businesses.
Peter Wallwork says the danger is that lines are becoming blurred: “When organisations call for a halt to collections or even writing debts off altogether, they will be doing untold damage to our country’s small business community, many of whom are already under pressure to survive.
“With estimates that as many as 800,000 may fail in the next four weeks, this is not the time to prevent them from recovering cash owed to them on the grounds of some spurious moral reasoning.
“While calls for further action from Government are understandable, and outwardly show compassion, it is imperative that the full consequences of any such action are properly understood.”
He says he has already written to all 250 CSA members to urge them to show additional forbearance where it is needed. So far he has been delighted with the way the Debt Collection firms have responded.
“Many of our members had already taken proactive action to support their customers so it wasn’t a case of us telling them what to do but more them telling us what they’d already done,” he said.
