Banks want to cancel plans for the Bounce Back Loan debt collection agency

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. “

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