Lenders stop £ 1.6bn of rebound loan fraud

Lenders stop £ 1.6bn of rebound loan fraud

UK lenders have prevented nearly £ 1.6bn of fraudulent claims against government-backed bounce-back loan programs, recently released figures show.

The British Business Bank, which administers the program for the Treasury, said 43,958 loan attempts were blocked because they were suspected of being fraudulent claims.

This is a small portion of the nearly £ 46 billion that has so far been loaned out under the scheme, which has been set up to primarily support small businesses during the Covid-19 crisis .

Under the scheme, companies could borrow up to £ 50,000, based on turnover, at a fixed interest rate of 2.5%. About 1.5 million businesses have received loans.

Bounce loan applications are still being accepted by banks until the end of March, but numbers have slowed in the past six months.

Since mid-September, around 500,000 rebound loan applications have been submitted, up from around 1.5 million between May and September last year.

It has proven to be the most popular of the government Covid-19 support loans, in part due to the speed and ease with which the loans are made and the low interest rates.

However, there are many concerns about how much money may never be returned.

In October, the National Audit Office said the government’s best estimate was that between 35% and 60% of borrowers could default on their loans.

It could cost taxpayers around £ 28bn at current lending rates as the Treasury has pledged to reimburse banks for any money outstanding.

Most of these sums will likely be lost because companies will legitimately not be able to reimburse them. However, the Cabinet Office has estimated that between 0.5% and 5% of the value of bounce loans may have been fraudulent, or up to £ 2.3 billion.

The latest figures come from a letter to the Public Accounts Committee from Catherine Lewis La Torre, managing director of the British Business Bank.

She warned that the way banks collect data on the level of fraudulent claims that have been blocked is flawed, so the numbers could change.

In November, it was revealed that banks had halted 26,933 rebound loans worth £ 1.1 billion due to fraud concerns.

Robert P. Matthews