In Focus Consumer Credit


Left-right: Andrew Jackson; Chris Leslie; Disha Sawlani; Fiona Ibbotson; Gary McCready


How can collections cope with the financial fallout in the new year? Even if a vaccine is found, are you ready for the financial problems when government supports are removed? SS: I think that we have all been looking at this and even before went towards a second lockdown, maybe back in June and July we looked at what would happen when the furlough scheme came to an end, but then it was pushed out again. The fallout is inevitable because furlough has kicked that can down the road; there has been a respite. But now when I look at the situation across the UK, you have areas where they thought that they were going back to work, whether the hospitality sector and shops felt that things might be going back towards normal, but as of today, all of a sudden they may have stayed in tier 3 or moved to a tier 2 where there are significant restrictions. How is that going to play out? Speaking to many of our mom and pop


investors, their own homes are at risk now because they have shortfalls on their loans or their bridges, they are using credit cards and personal funds to finish projects. The knock-on affect is that nobody is buying houses – there are some going, but not as many as you would expect, because we have had lockdown so people could not do visits. So whilst mom and pop are using the credit cards and personal loans to get through the project, they are now in a position where they may not be able to sell for another six to eight months, and that puts them in a greater financial issue because their own homes are on the line. So you really do see a huge burst of a


bubble coming, although in my industry I would say it will be the end of the first quarter of start of the second quarter next


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is falling into arrears? How organisations manage those customers will be vital.


The fallout is inevitable because furlough has kicked that can down the road; there has been a respite


year because anything happens, because people will get through Christmas.


KE:We have been surprised by the number of customers who are returning to contractual payments, who seem to be taking deferral schemes and then seemingly make payments. It is becoming ever more clear that those


customers could be taking deferrals elsewhere and shifting money around so that they are making payments to us, but that is going to be very short term, and longer term – maybe not until March next year when the furlough scheme runs out, the excitement of Christmas drops off, and all the spending and credit cards that have been keeping people propped up run out – that is when people will really start to struggle. I think that we will be in a position where,


apart from freezing interest and the usual tools up our sleeves, we are going to be talking about much longer term forbearance as there will be people who have no means of paying for a very long time. This is the calm before the storm and it is certainly leading my interest, for example, in technology.


JH: There is a significant question here, are we going to see more of the same – that is to say, a greater volume of debt from the same customers as before the crisis – or will we get a shift in the profile of customer who


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KB:We are finding that we have travel agencies which are waiting for people to be able to travel. They have switched their focus to key-workers, so we are currently having a fair amount of key-workers coming into the hotels but this is only applicable to certain locations due to local logistic hubs. We are also seeing companies beginning to fail. A high profile account which has hit us recently was Café Nero who have just entered into a CVA. The amount we were owed was not small but having listened to the first creditors meeting, I realised that the sum we were owed is next-to-nothing compared with the large rents they have not been paying for many months. So we are now seeing the start of this pandemic business failure: we are seeing smaller travel agencies going out of business because they just cannot manage their cash burn. We are seeing some of the mom-and-pop


businesses who would supply the hotels, unable to continue. And, although we went through a huge issue of literally closing the doors of the hotels and going from a turnover of millions to nothing overnight, we made sure that we paid our suppliers what they were owed, which was only fair. It was a difficult time for our new owners who only came into owning the hotels in December last year and have literally been keeping our heads above water. We are very fortunate to have been in this position, one that many others in our sector have not had.


SS: It is interesting to consider whether the dynamic will change, whether we will get a different cohort of people who are suddenly in debt; and I think it will. It is changing


January 2021


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