Originally written by Timothy Adler on Small Business
Banks may outsource repayment of Bounce Back Loans gone bad to external debt collectors because the task will prove too overwhelming inhouse.
The government itself estimates that nearly two thirds of Bounce Back Loans may never be repaid, costing the Treasury £26bn.
Government and the banks are talking about establishing a panel of debt collection agencies that would all follow an agreed code of practice.
>See also: HSBC will not accept any more Bounce Back Loan applications
According to the Times, government officials have already contacted debt collection agencies including Arrow Global to see whether they would chase unpaid Bounce Back Loans. Only when the agency has exhausted chasing repayment would the bank then claim on the 100-per-cent state guarantee.
Lenders say they would have to hire hundreds of staff and build dedicated loan recovery call centres to cope with the volume of bad debts.
Bounce Back Loans are due to start being repaid in May.
Of course, high street lenders have outsourced bad debt collection for years. The collection agency chases the bad loan on a contingency basis, keeping a percentage of any loan repaid as a fee. A large percentage of businesses owing banks money settle immediately once