By, 7 min read* Over $100 billion in government-backed loans are ready to mature* After being burned in 2008, Britain’s banks are hoping to rebuild their reputations* Some small businesses have complained about late payment demands. Reuters, LONDON, July 6 – As the deadline for repaying more than 75 billion pounds ($104 billion) in emergency government-backed loans approaches, Britain’s banks must tread carefully with businesses that were propped up during the crisis. Lenders are promising that this time would be different, as they aim to minimise losses for themselves and taxpayers while also avoiding a repetition of the aftermath of the 2008 financial crisis, when banks were reviled and had to pay millions of pounds in reparations for aggressive debt repayment practices. With the first COVID loan repayments approaching, Britain’s four largest banks have employed more than 750 debt collection experts between them, with training on how to deal with consumers compassionately being provided. Hannah Bernard, Barclays’ head of business banking, stated, “We undertook bootcamp training to make sure they’re all ready to go.” The world will be monitoring how Britain’s banks perform as one of the first big markets to begin collecting state-backed loans from the ECB. When credit difficulties and fraud were taken into consideration, the government estimated that losses on the most popular bounce back loan scheme – which allowed small enterprises to borrow up to 50,000 pounds with few questions asked – might be as high as 60%. While the loans are either 100 percent or 80 percent guaranteed by the government, banks must make all reasonable efforts to collect before the government pays up, and some bankers believe that these costs could result in a net loss on the plan. RESOLVING DISPUTESAccording to senior bankers questioned by Reuters, pure fraud instances appear to be lower than expected. There are other programs that allow most borrowers to extend their payments, but evidence of borrowers’ disagreements is surfacing. Disgruntled consumers’ social media posts, conversations with small firms, and copies of bank letters written to customers obtained by Reuters reveal that some borrowers are dissatisfied with their treatment. Kevin Hollinrake, a legislator and chair of the all-party group for fair business banking, said, “This will be a tremendous test of 2008 proportions.” “Warm words from the banks… from the top haven’t always been matched by deeds at the coalface,” says the author. After ticking a box on an HSBC form inquiring if he was enduring financial difficulties, one doctor in the National Health Service said he was dismayed to see the hoped-for extension rejected and the bank instantly collected full payment. HSBC said it had attempted to contact the customer three times via various methods, and that its online forms made it clear that checking the box meant a deferral would be automatically denied. According to copies of letters given to them and reviewed by Reuters, some bank customers have had the full 50,000 pounds loan amount requested returned within 14 days and have been told they made mistakes in the application or were never eligible in the first place. Only in cases of suspected fraud, according to bankers, would abrupt treatment and requests for rapid restitution be made. They don’t want to jeopardize the notion that the UK’s banks had a ‘good crisis.’ Only a small number of the 60,000 bounce back loans that have come due for repayment at NatWest have missed the first payment, according to Andrew Harrison, interim head of commercial banking. However, industry leaders claim that the closure of hundreds of bank branches in recent years will not facilitate in the resolution of any disputes. “As more businesses suffer, this is the time when the bank should be the sound adviser,” said Richard Burge, chief executive of the London Chamber of Commerce. “I don’t think businesses look at them that way since it was all done by algorithms, so there are no relationships.” ‘EMPATHY TRAINING’ is a term used to describe the process of learning to empathize with It’s possible that the worst is yet to come. “We shouldn’t underestimate the government’s sustained high level of support; the question is how many enterprises can truly survive once it is turned off,” NatWest’s Harrison said. He said that the bank, which has rebranded its ‘debt management operations’ unit ‘financial health and support,’ has hired an additional 150 debt collection workers and applied behavioural science approaches to better understand consumers’ reading ability and remove jargon. HSBC has also employed roughly 200 additional employees and taught them to empathize with consumers, according to Amanda Murphy, the lender’s head of commercial banking. “What we are better at now, and I don’t think it’s just banks, but I think it’s society as a whole,” she added, “is understanding more about vulnerability, the difficulties people face, and the link between one’s career and personal life.” “When someone says, ‘I’ve reached the end of my tether,’ it’s not simply a word,” Murphy explained. Staff has been instructed on how to deal with such situations and refer them to specialised teams, as well as informing clients about independent third-party resources, she said. CRACKS DEVELOP Due to the failure of plans for an industry-wide collection agency, banks will be scrutinized for how they collect loans and, in some cases, how much they charge. The majority of loans were given at low interest rates, making debt payment relatively easy for businesses – including bounce back loans fixed at 2.5 percent – but a considerable portion was given under other programs with no fixed pricing. According to information obtained through a Freedom of Information request by anonymous small business advocate Mr Bounce Back, roughly 3 billion pounds of funds for nearly 17,000 enterprises were charged double-digit interest rates. These increased rates were mostly paid by non-bank lenders who were unable to take advantage of the Bank of England’s low-cost funding. According to Reuters, Tide, a provider of business banking accounts, recently informed small business customers that it could not afford to extend payment deferrals on bounce back loans. “We truly wanted to contribute and are as sad as anyone,” said Oliver Prill, CEO of Tide, who asked the Bank of England to make non-banks eligible for its low-cost funding. The problem now is to prevent undermining all of that good work through the collections process, as the industry has mainly succeeded in sending money to firms that needed it immediately. “No bank wants the industry’s reputation 13 years ago, nobody wants that,” HSBC’s Murphy said. (Lawrence White and Iain Withers contributed reporting; Rachel Armstrong and Elaine Hardcastle edited the piece.)/n
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