CM September 2020

NEW
FEATURE
TECHNICALLY SPEAKING
PHONEY WAR
Insight and comment from the CICM Technical Committee
AUTHOR – Sean Feast FCICM
THE full impact of COVID-19
on both the consumer and
commercial debt collection
industry is yet to be felt, and
no-one can predict with any certainty
what happens next. But even if half of
the guesswork proves to be true, many
hundreds of thousands of consumers
will be plunged into debt by the end of
the year, and a not dissimilar number of
businesses may also go to the wall.
Experts within the CICM’s Technical
Committee met virtually in July to
report on and share their knowledge and
insight of various Bills, consultations,
calls for evidence, and other such
Government-led programmes that will
have a direct or indirect impact on
creditors and the credit community.
Within the consumer debt space, a
Phoney War was likely to lead to a very
real battle for survival among a group
of the most hard-pressed consumers.
Committee members from the advice
sector and collections industry said that
high volumes of debt were currently
being paid off, and that many consumers
were clearly taking advantage of
payment holidays (or monies that they
might have spent during lockdown) on
settling their debts.
Within the advice sector especially,
an initial surge in calls to the various
support lines had quickly abated, and
at least one reported that demand was
currently running at about a third of its
total capacity. Customers were actively
seeking to pay off their debts, borrowing
from friends and family if necessary to
do so, perhaps in preparation for a long,
hard winter that might follow along with
the fear of losing their jobs.
INSOL-
PINCH POINTS
This lull before the storm is not expected
to last. Certain ‘pinch points’ – the end
to the furlough scheme and a shift in
attitudes to forbearance – could be
the tipping points. The re-engagement
of enforcement action on August 23
was always going to arouse negative
press and has done, and there were
concerns over the lifting of rent arrears
convictions and what this would mean to
the total consumer debt picture.
An interesting point was also made
about the blurring of lines between
‘consumer’ and ‘commercial’ debts,
especially when it came to the owner/
directors of small businesses who could
find themselves falling between two
stools in how they are dealt with.
Whereas there was understandable
debate about
VENCY
the impact of the current
crisis on consumers, there were similar
concerns expressed about the new
Corporate Insolvency and Governance
Bill (see Credit Management July/August
2020) and how it was going to impact
creditors.
MORATORIUM CONCERNS
Of particular concern is the moratorium
and to what extent it may be open to
abuse. The moratorium effectively allows
an insolvent business a period of 20
business days grace during which time
creditors are not able to enforce any
action to recover what’s owed. Worse
than this, creditors cannot discontinue
from supplying product/services to said
failed/failing business if that product (or
service) is considered ‘essential’ and if
refusing to supply would jeopardise the
potential rescue of the business in the
insolvency process.
The Technical Committee
acknowledged that in continuing to
supply an essential product, the creditor
would, in theory, be given priority status
for any future payments, but that the
risk seemed disproportionate to the
reward. Some could see a scenario where
deliveries might mysteriously go astray
or be indefinitely delayed. Others were
concerned that the IPs themselves would
have to do quite a bit of background
TECHNICAL COMMITTEE MEMBERS
Glen Bullivant FCICM ..............................................Chair of CICM Technical Committee
Alan Brown MCICM .................................................................................................formerly BP
Amir Ali FCICM .....................................................................................................................CCUA
Julian Roberts ....................................................................................................................... HSBC
Joanna Carnell MCICM(Grad) .................................................................................Trust Ford
Paula Swain ...............................................................................................................Shoosmiths
Peter Whitmore FCICM ....................................................................................Westcon Group
Debbie Nolan FCICM(Grad) ............................................................................................. Arvato
Mike Sargeant MCICM ...........................................................Retired, formerly Baker Tilly
David Kerr FCICM ............................................................................... Insolvency Consultant
Matthew Davies ........................................................................................................ UK Finance
Lauren Carter ......................................................................................................Vantage Credit
Stephen Cowan FCICM ......................................................................................... Yuille & Kyle
Alistair Chisolm .............................................................................................................. Payplan
Andrew Macdonald FCICM ........................................................... formerly Matthew Clark
David Thornley FCICM(Grad) .....................................................FortVale Engineering Ltd
Hans Meijer FCICM ............................................................................................................Coface
David Sheridan FCICM .....................................................................................Arc Europe Ltd
Pamela Mulcahy ...........................................................................................Marston Holdings
Glyn Powell FCICM ............................................................................The Best Start Club Ltd
work in advance to assess whether a
failing business could be saved or sold
and would face undoubted criticism if
they subsequently took an appointment
having previously said that a recovery
was possible.
‘Creditor Beware’ appeared to be
the watchword, along with advice to
review current Terms and Conditions
where appropriate to protect your
future position, mindful, however, that
circumstances change and T&Cs could
become fast out of date.
A report was received on the
performance of the courts during the
lockdown period, with the process being
described as either ‘blisteringly quick
or glacially slow’. A similar report was
heard from the Banks who are concerned
about future competition post-COVID
with particular reference to alternative
lenders and what happens when the
various support schemes begin to
unwind.
Perhaps more alarming was a report
on the future of Business Information
and the unintended consequences of
payment holidays, rental holidays, delays
in filing company accounts etc and
how they would impact future credit.
The quality, integrity and credibility of
business information going forward is
going to be a severe challenge for the
information providers with regards to
what extent their information is current
and reliable.
Advancing the credit profession / www.cicm.com / September 2020 / PAGE 8