Recommendation 12

The Scheme requires lenders to pursue borrowers for missed repayments for up to 12 months after the issue of a formal demand. The Department initially told us that lenders had to wait until after the 12 month period to make a claim on the guarantee.25 However, it wrote to us after our evidence session to confirm that lenders do not have to wait until the 12 month recovery period has elapsed in order to make a claim. It explained that lenders were permitted to claim under the guarantee within a “reasonable period” after the date on which they had made an initial repayment demand.26 As part of our inquiry on the Department’s Annual Report and Accounts, we asked the Department to clarify the arrangements. The Department told us that there was no minimum term that lenders were required to pursue borrowers. It explained that although it expected in most cases lenders would pursue borrowers for “many months” before claiming on the government guarantee, lenders can claim before the end of the 12-month period if they have conducted “sufficient and robust level of recoveries” and no further payment is likely. Lenders are not required to continue to pursue borrowers after 12 months, although the Department noted that there would be some situations where lenders did so if, for example, a repayment plan had already started27