Source · Select Committees · Public Accounts Committee
Recommendation 16
16
After the initial interest-free period, borrowers will need to make repayments (capital and interest) to...
Conclusion
After the initial interest-free period, borrowers will need to make repayments (capital and interest) to the end of the loan period, in line with their loan agreement.40 There is a high likelihood that some businesses who wish to re-pay the loans will simply be unable to do so. UK Finance informed us that TheCityUK Recapitalisation Group estimates between £20 billion and £23 billion of ‘unsustainable business debt’ is expected to stem 32 Qq 57, 58 33 Letter of 3 November 2021 from the British Business Bank, para 4] 34 Q 61 35 Q 61 36 Q 24 37 Q 39; C&AG’s Report, para. 3.13 38 Qq 38, 40 39 Q 42 40 C&AG’s Report, paras 20–21 12 Covid-19: Bounce Back Loan Scheme from all UK government guaranteed lending schemes. And there are further cashflow demands for businesses on the horizon including: VAT and other taxes which have been deferred; loan repayment holidays; and interest free periods ending. Thus, Government expects that many SMEs will struggle to pay back what they owe when payments are due.41 The Department explained to us that when a borrower does not repay the loan, this will appear in their credit history and affect future borrowings.42
Government Response
Not Addressed
HM Government
Not Addressed
5: PAC conclusion: HM Treasury has not yet finalised the rules lenders need to follow to ensure overdue loans are repaid. 5: PAC recommendation: HM Treasury should ensure that the recovery rules are confirmed prior to repayment, and that they are uniform in their fair and thorough recovery of loans. 5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 The government has worked closely with UK Finance and accredited Scheme lenders to develop a consistent, industry-wide approach to the collection and recovery of the loans. Guidance has now been shared with accredited lenders by the Bank. In addition, the government has engaged with the Financial Conduct Authority and the Prudential Regulation Authority to ensure that the guidance aligns with the relevant regulations. 5.3 As the Committee will appreciate, it would not be appropriate to publish this guidance. To do so would notably risk educating criminals about the approach to the collection and recovery of loans, therefore compromising the processes by which lenders go about recovering funds.