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From The Times:
https://www.thetimes.co.uk/edition/b...tors-dlb0c2f73
Universal credit has no benefit for Cabot debt collectors
Cabot Credit Management, Britain’s biggest debt collector, has paused its £1 billion flotation. The problem, unforeseen when Cabot was limbering up to list earlier this year, was that Peter Crook, chief executive of Provident Financial, was a director.
Now Mr Crook has stepped down from his own improvident company as well as from the board of Cabot. So it needs to find a new independent director before floating. Cabot is likely to press ahead next month. The timing could be awkward because that is when the government will roll out its universal credit more widely.
Conceived as a good idea to simplify the complex and inefficient benefits system into one payment, there is widespread fear among charities and even civil servants that the new credit will push thousands of people into a spiral of debt because of the way it will be paid.
As well as the suffering that could bring to those depending on it, businesses that lend to and collect debt from people on low incomes could face problems.
In areas where universal credit has already been trialled, such as Croydon, councils have found that rent arrears have risen.
There are two problems: the first is that when someone starts to receive the credit, it can be six weeks or even more in some cases before any payment is made. The second is that the payment is monthly.
Many customers of doorstep lenders and debt collectors make repayments from their benefits. This means that unlike mainstream banks, these businesses are largely recession-proof because unemployment rates do not matter much to their arrears as benefits continue to flow.
Universal credit could change that, because it may not just be a case of one late payment while someone waits for the benefit to start. People who have never been behind may suddenly find themselves in arrears, risking a rapid ratcheting up of interest and a wider destabilising of their finances.
The fact that the payment is monthly could also be problematic for debt collectors’ model of collecting weekly, often just after payday, as it increases the risk that the money may be spent up front and not spread out to meet financial obligations.
Cabot, whose portfolio of outstanding debts stands at £2.5 billion, may well be carefully run. But investors may question whether now is the time to take a punt on its business.
Cabot Credit Management, Britain’s biggest debt collector, has paused its £1 billion flotation. The problem, unforeseen when Cabot was limbering up to list earlier this year, was that Peter Crook, chief executive of Provident Financial, was a director.
Now Mr Crook has stepped down from his own improvident company as well as from the board of Cabot. So it needs to find a new independent director before floating. Cabot is likely to press ahead next month. The timing could be awkward because that is when the government will roll out its universal credit more widely.
Conceived as a good idea to simplify the complex and inefficient benefits system into one payment, there is widespread fear among charities and even civil servants that the new credit will push thousands of people into a spiral of debt because of the way it will be paid.
As well as the suffering that could bring to those depending on it, businesses that lend to and collect debt from people on low incomes could face problems.
In areas where universal credit has already been trialled, such as Croydon, councils have found that rent arrears have risen.
There are two problems: the first is that when someone starts to receive the credit, it can be six weeks or even more in some cases before any payment is made. The second is that the payment is monthly.
Many customers of doorstep lenders and debt collectors make repayments from their benefits. This means that unlike mainstream banks, these businesses are largely recession-proof because unemployment rates do not matter much to their arrears as benefits continue to flow.
Universal credit could change that, because it may not just be a case of one late payment while someone waits for the benefit to start. People who have never been behind may suddenly find themselves in arrears, risking a rapid ratcheting up of interest and a wider destabilising of their finances.
The fact that the payment is monthly could also be problematic for debt collectors’ model of collecting weekly, often just after payday, as it increases the risk that the money may be spent up front and not spread out to meet financial obligations.
Cabot, whose portfolio of outstanding debts stands at £2.5 billion, may well be carefully run. But investors may question whether now is the time to take a punt on its business.
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