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Banks are building teams of debt collectors in anticipation of a large wave of credit defaults once payment holidays and coronavirus state aid schemes come to an end in the autumn, Telegraph Money can reveal.
Some high street banks are putting together teams of outsourced contractors of up to 250 people at a time to chase unpaid bills. Others have already set aside profits to offset losses or are consulting on how to deal with anticipated large-scale redundancies, which will lead to people not being able to pay back what they owe.
Andrew McIntee of New Street Group, a recruitment firm working on building debt collection teams for two of the big high street banks, said lenders were particularly concerned that customers would stop paying credit card debts and other loans, while prioritising making their mortgage payments.
“We are seeing a lot of demand from banks for staff to prepare for a wave of consumer lending defaults, with car finance a new area of significant risk,” he said. Banks have become more exposed to car finance in recent years, as it has ballooned into a near-£50bn industry.
The Government is paying the wages of almost nine million employees under the Coronavirus Job Retention Scheme. The furlough scheme, which is designed to stop firms struggling in the pandemic from laying off staff, comes to an end in October. A further 2.5 million self-employed people are also receiving help, while banks have approved 1.8 million temporary mortgage payment holidays. This is on top of 1.5 million payment holidays for credit card debt and personal loans, according to figures from UK Finance, the banking trade body.
Once this support is removed, millions facing redundancy will likely be unable to pay. The rate of unemployment is predicted to double to around 8.5pc come October, according to the Office for Budget Responsibility, the official forecaster.
A number of firms, including airlines and most recently car brands Aston Martin and Bentley, have already laid out plans to cut thousands of jobs.
Claims for Universal Credit are already at record levels, with 1.5 million people applying between March and April, six times more than the same time last year.
Mr McIntee said he could not disclose the banks the firm was working with, owing to client confidentiality. But only two of the main retail banks – Lloyds Group and Barclays – said they were not actively hiring new staff to deal with anticipated defaults.
Sources close to the preparations said firms wanted to be seen to be helping customers during the crisis and were looking to keep their debt collection plans under wraps. They said all banks would be preparing in some way, including seeking advice from big consultancy firms on how best to deal with the downturn.
Natwest Group, which incorporates RBS, said: “We are anticipating an increased number of customers needing our support during these difficult and unprecedented times and are proactively working to ensure we have the right number of skilled people to serve our customers.” It has approved around 200,000 mortgage holidays.
Santander said: “We are constantly reviewing our resourcing plans to ensure that we have the right support available for our customers.”
The Spanish bank has provided 225,000 mortgage holidays to its British customers, on top of 45,000 payment holidays for credit card holders and borrowers of personal loans. It has a £13.2bn exposure to car finance, credit cards and other unsecured credit, where there is no asset to use as collateral, making up 7pc of its total retail lending.
Lloyds, which incorporates Halifax and Bank of Scotland, took £1.4bn from its profits to cover loans that might not be repaid, it said in April. It is Britain’s biggest mortgage lender.
Until now, some banks had been redeploying staff from other departments, including human resources and purchasing, to help cope with debt management, Mr McIntee said. But these staff must soon return to their usual duties as lockdown is eased and working life begins to creep back to normal levels.
Lenders are eager to get trained staff in place with the skills to deal with responsible debt collection and recognise vulnerable customers, he added.
HSBC declined to comment.
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