Empathy bootcamp? UK banks want to demand repayment of $ 105 billion in COVID loans

By Lawrence White and Iain Withers

LONDON (Reuters) – With more than 75 billion pounds ($ 104 billion) in repayment time due to state-backed loans, Britain’s banks need to take a delicate path with pandemic businesses.

Faced with attempts to limit losses for themselves and taxpayers, but also when they avoid repeating the effects of the 2008 financial crisis, when banks refused and forced them to pay millions of pounds for their debt repayment tactics, lenders pledged this time. it will be different.

With the arrival of the first COVID loan repayments, the four largest banks in the UK have hired more than 750 experts to collect debts from them and are training them to manage customers sensitively.

“We’ve done bootcamp training to make sure everyone is ready,” said Hannah Bernard, head of business banking. Barclays (LON :).

As one of the first major markets to start collecting state-backed loans from the pandemic, the world will look at how UK banks will behave.

According to the government’s initial estimates, small business loans that allowed small businesses to borrow 50,000 kilos could result in losses of up to 60% due to credit problems and fraud.

Even if the loans are 100% or 80% guaranteed by the government – limiting the financial pain that banks can have – they have to make every effort before the state pays them and some bankers have said that these costs can lead to an overall loss. scheme.

CONFLICT TREATMENT

So far, senior bankers interviewed by Reuters have said the total fraud cases appear to be lower than expected. There are also schemes that allow most borrowers to extend their payments, but evidence of conflict with lenders is emerging.

Messages that have upset customers on social media, interviews with small businesses, and copies of letters sent to customers by banks and viewed by Reuters show that some borrowers are happy with the treatment.

“It’s going to be a big test of the proportions for 2008,” said lawmaker and business group chairman Kevin Hollinrake of the business banking party. “I’m very worried, the warm words from the banks … because from the top they haven’t always mirrored the actions taken on coal.”

A National Health Service doctor, who was granted a bounce loan for a private practice, told Reuters after being asked if the box on the HSBC form was experiencing financial difficulties, he was upset when he was denied the extension he had hoped for. and the bank immediately took full payment.

HSBC has said it has tried three times to contact the customer through various channels, and its online forms make it clear that ticking the box will automatically rule out delays.

Other bank customers have received the full amount of the £ 50,000 loan requested within 14,000 and have made mistakes in the application or have not been a candidate in the first place, according to copies of letters sent by Reuters.

Bankers have said that violent treatment and immediate return requests will only occur in cases of alleged fraud. They do not want to jeopardize the perception that British banks have had a “good crisis”.

Of the initial wave of 60,000 recovery loans charged for a return to NatWest, only one percent of single digits have failed to make the first payment, said Andrew Harrison, the interim head of business banking.

However, the removal of hundreds of bank branches in recent years will not help resolve any disputes, business officials said.

“When it’s time for more companies to start fighting it’s time for the bank to be a sound consultant and I don’t think companies look that way, it’s all done through algorithms, so there’s no relationship,” Richard Burge said. Director General of the London Chamber of Commerce.

‘EMPATHY TRAINING’

The real pain is yet to come.

“We shouldn’t underestimate the high level of government support, and after shutting down, the question is how much business can actually last,” Harrison told NatWest.

The bank, which has renamed the “debt management operations” unit “financial health and support,” has hired 150 more employees to collect the debt, and has used behavioral science techniques to better understand customers ’reading skills and remove jargon.

HSBC has also hired 200 more employees and trained them to empathize with customers, said commercial bank lender Amanda Murphy.

“Now what we do is better, and it’s not just the banks, I think society understands more about the vulnerability, the stress that people have and the connection between one’s business and personal life,” he said.

“If someone tells me‘ I’m about to end my bond, ’that’s not just a sentence,” Murphy said.

He said that in this case the staff is trained to manage and direct specialized teams, as well as to make the client aware of the independent resources of third parties.

CRACKS APPEAR

When plans to make a collection organization for the entire industry fall through, banks will look at how they charge loans and in some cases how much they charge.

Most of the loans were granted at low interest rates, as companies are relatively easy to supply debt (including rebounds fixed at 2.5%), but there was a significant portion provided in other non-fixed price schemes.

More than £ 3bn for nearly £ 17bn in businesses was charged at double-digit interest rates, according to data collected by the anonymous small business campaign Mr Bounce Back at the request of Freedom of Information.

These higher rates were mainly charged to non-bank lenders, who were unable to take advantage of cheap financing from the Bank of England.

Business bank account provider Tide recently told small businesses it would not delay paying customers on bounce loans because it could not pay, Reuters reported.

“We really wanted to help and we’re just as disappointed as anyone,” said Oliver Prill, CEO of Tide, who asked the BoE to open its cheap funding to non-banks.

As the industry largely managed to get the money it needed quickly, the challenge now is to undo all that good work through the collection process.

“No bank wants the popularity that the industry wanted 13 years ago, no one wants that,” HSBC’s Murphy said.