Lenders are getting ready to deal with debt recoveries themselves after it was decided that a collection utility would complicate the business of dealing with the oncoming wave of defaults on £45 billion worth of taxpayer-backed debt.

UK Finance undertook a feasibility study last year on the creation of an organisation that would oversee debt collection on behalf of lenders who took part in the state’s emergency bounceback loan scheme.

The proposed body had been intended to ease the pressure on banks concerned about their ability to collect bounceback debt given the unprecedented scale of the scheme. It had also been hoped that a single agency could ensure consistent treatment of borrowers, to avoid a repeat of the spate of business banking scandals after the 2008 financial crisis and to shield individual lenders from criticism.

However, while talks about a looser agreement to common standards in debt recovery continue, it is understood that plans for a formal collection agency have been all but scrapped, The Times reports.

The bounce back loan scheme has involved £44.7 billion being loaned to 1.5msmall businesses across the UK. Lenders benefit from a 100% state guarantee on the loans but are still expected to pursue those businesses who default on them.

The National Audit Office has warned that taxpayers could lose up to £26bn on the scheme.

With interest repayments due to begin in May, the complexity of setting up a new agency within that time is understood to be among the considerations that have led to its abandonment.

Larger lenders with significant numbers of small business customers are also understood to have been concerned about the complexity of separating government-backed debt with conventional facilities borrowers may have with them.

One lender said the potential benefits of the utility had diminished and that a new structure may simply over-complicate recoveries.

The government has provided “recoveries protocols”, which set its expectations for how banks should behave while recovering loans and the state British Business Bank, which administers the bounceback scheme, will also monitor collection activities.

UK Finance said: “The detailed design of a collective approach to debt recovery is still in development. This would provide a consistent approach to the handling of outstanding Bounce Back Loans, however individual lenders may want to take their own view to recoveries.”