During these extraordinary times, governments in several countries were quick in supporting consumers facing a tough economic crisis. Households and businesses alike are increasing their already all-time high debt levels due to the worlwide spread of the coronavirus. How will businesses handle their outstanding loans and invoices and what lies ahead for debt collection after coronavirus?
In the United States, almost 4% of mortgage borrowers have stopped making their payments in March and April as more states go in lockdown and a record 17 million individuals file for unemployment. At the same time, credit exposure is increasing, both for businesses and households.
In some European countries, mortgage freezes are mandated by the state. Several banks have suspended credit card charges and other loan repayments. Even debt collection agencies have decided to suspend demands from debtors until the economy can breathe again. In the United Kingdom, the FCA has announced plans to order banks to offer support, including interest-free overdraft, payment holidays, and ensuring credit scores are unaffected. Energy bills and utilities may also be temporarily suspended.
“The nationwide shutdown of the economy to slow the spread of Covid-19 continues to create hardships for millions of households, and more are contacting their servicers for relief,” Mike Fratantoni, MBA’s chief economist, said in a statement.
However, debts are not cancelled, but postponed. When the crisis is over, trillions of dollars of unpaid debt and accrued interest fees will have to be collected, renegotiated or written off. It is hard to speculate what the post-covid world will look like, but businesses need to prepare for when the time comes.
It is paramount to be in contact with customers and debtors as soon as possible, even without a formal repayment demand or an injunction. By building a positive relationship with a customer, chances to collect any outstanding amount greatly increase. With rising levels of unemployement and insolvencies, senior creditors should make sure to be properly represented to claim their rights.
Use CollectionHub to handle your debt collections after coronavirus
Hiring a debt collection agency can relax the burden on your employees and accounting department, and also ensures higher success rates. CollectionHub is a SaaS platform that lets you upload, assign and collect any outstanding debt with zero stress. with over 400 collection agencies in 132 countries, CollectionHub is the largest network of credit management firms in the world and has the ability to renegotiate or collect debts faster than any regular agency. It is your ideal partner for debt collection after coronavirus.