A number of parliamentarians and other figures gave their take on the current state of the credit sector at the Parliamentary Briefing hosted by Credit Strategy magazine.
John Glen MP, the Economic Secretary to the Treasury, began by explaining the support offered by the Financial Conduct Authority to borrowers in the form of payment holidays and other arrangements, and the support offered by Government to businesses, such as furlough schemes and loan schemes.
He urged the credit sector to maintain consumer access to a range of appropriate products as consumers themselves sought to get on the road to financial recovery.
Next, he mentioned the ‘no interest’ loans scheme the Government is piloting, as a possible alternative to high-cost credit for people on low incomes.
Finally, he mentioned that the new breathing space scheme commences in May, with providers required to provide 60 days’ breathing space to borrowers in financial difficulty. For borrowers who are receiving mental health treatment on the NHS, the breathing space period will instead last for as long as their treatment continues, plus an additional 30 days.
Steven Coppard, Deputy Director of the Government Debt Management Function – Fraud, Error, Debt and Grants at the Cabinet Office, began by stressing the slogan ‘Fair Debt Outcomes For All’. He said there must be no undue pressure on people to repay, but providers must also not jeopardise the goodwill of those who do repay on time.
He noted the contradiction seen during the pandemic of record credit card repayments set against some genuine cases of severe financial hardship.
Mr Coppard said it was vital that firms had skilled staff who regularly speak to customers, in order to achieve fair outcomes all-round. Firms must also build trust, so customers aren’t afraid to make contact with their credit providers.
His final remark was ‘get people out of debt, not debt out of people’.
Julian Knight MP, chair of the All Party Parliamentary Group on Alternative Lending, said that never before had we had such a clear advance warning of a rise in unemployment as we do now. He expects unemployment to peak at between 7% and 8% and says this gives the alternative lending sector the chance to prepare for an expected increase in the number of defaults.
Sue Chapple, chief executive of the Chartered Institute of Credit Management, said she expected a sustained period of business insolvencies, rather than a “sudden tsunami”.
Yvonne Fovargue MP, chair of the All Party Parliamentary Group on Debt and Personal Finance, remarked on StepChange’s data showing that 15 million people – almost one-third of the adult population – have experienced a direct negative effect as a result of Covid-19.
She said that not everyone will be returning to employment on 100% of their previous salary, and that she was especially concerned about those who were already in problem debt prior to the pandemic and whose difficulties have only got worse.
Ms Fovargue quoted data from the Money Advice Service, who expect eight million people to be in need of debt advice by the end of this year.
She wants a government-backed loans scheme to be set up for those in problem debt, and says she awaits developments regarding the ‘no interest’ loans. She suggested that these could use ‘student loan’ style repayments, where repayments are only required when income reaches a defined level.