Source · Select Committees · Public Accounts Committee
Recommendation 5
5
It is unacceptable that the Department has no plans to recover outstanding debt after lenders...
Conclusion
It is unacceptable that the Department has no plans to recover outstanding debt after lenders have pursued borrowers for up to 12 months. There is no minimum term that lenders are required to pursue borrowers for payments. Lenders are not expected to continue to pursue borrowers after 12 months. Lenders can claim on the government guarantee before the end of the 12-month period if they have conducted what they consider to be a “sufficient and robust level of recoveries” and have concluded that no further payment is likely. The Bank and the Department assert that lenders could pursue overdue payments for longer than 12 months if they chose to do so, and believe it would be in the borrower’s commercial interest to repay if they want to maintain their bank account with that lender. The Department was also not in a position to state what the shortest time period had been for a lender to claim their guarantee. We are concerned that this presents an overly optimistic view about lenders’ incentives to recover funds and how the Bank’s lender assurance programme would work towards recovering unpaid loans beyond this 12-month period. The Department has, however, agreed to consider alternative approaches to recovering loans. Recommendation: The Department should, as part of its Treasury Minute response, set out its strategy for collecting overdue payments after the lenders have completed their 12-month requirements. In addition, the Department should write to the Committee and provide further information on what the shortest time period has been for a lender to claim on their guarantee to date and how this compares to the average.
Government Response
Not Addressed
HM Government
Not Addressed
5: PAC conclusion: It is unacceptable that the Department has no plans to recover outstanding debt after lenders have pursued borrowers for up to 12 months. 5a: PAC recommendation: The Department should, as part of its Treasury Minute response, set out its strategy for collecting overdue payments after the lenders have completed their 12-month requirements. 5.1 The government agrees with the Committee’s recommendation. Target Implementation Date: Winter 2022 5.2 The Guarantee Agreement for the BBLS stipulates that lenders should pursue recoveries for up to 12 months after they have made an initial repayment demand or up until the point at which their business-as-usual recovery processes would conclude. As repayment plans may be negotiated during the 12-month period following a repayment demand being issued, lenders’ recovery efforts might well continue for considerably longer in many cases. Any recoveries made after a lender has made a claim must be paid to the Guarantor in accordance with the terms and conditions set out in the Guarantee Agreement, even if these recoveries are made after the 12-month period has elapsed. 5.3 Additionally, the department’s long term BBLS counter fraud strategy – currently in development – will address the Committee’s recommendation regarding the department’s strategy for enforcement and recoveries in cases of suspected fraud. The strategy will take into account additional funding secured in the Chancellor’s Spring statement to bolster counter fraud work and response: £13.2 million for the National Investigation Service; additional £11 million for the Bank and £9 million for the Cabinet Office’s Data Analytics Programme.