The UK Government has confirmed that out of the £47 billion distributed through the Bounce Back Loan (BBL) scheme, £1.1 billion of these loans are suspected to be fraudulent.
A statement from the Department for Business, Energy, and Industrial Strategy noted, “It is unfortunate that some have taken the decision to take advantage of this vital intervention by defrauding the scheme for their own financial gain. The government has always been clear that anyone who sought to do so is at risk of prosecution.”
Several digital banks are among those suspected of issuing these fraudulent loans, with Metro Bank flagged for £7.24 million and Starling Bank for £91.97 million.
When contacted for comment, Starling stated: “Throughout the term of the BBL Scheme and subsequently, Starling took a strong and proactive stance to protect taxpayers’ money, as well as to support our customers in repaying their loans. We are assisting customers through the Pay as You Grow scheme and are actively pursuing recoveries.”
Starling emphasized that a significant number of its BBLS customers were relatively new businesses, which typically have a higher probability of failing than more established entities. In contrast, many large banks primarily lent to longstanding customers, taking on few new business clients. Starling maintained open channels for new businesses and implemented robust fraud detection processes, promptly defaulting on loans when fraud was suspected and initiating recovery actions.
This development follows Jacob Rees-Mogg’s public questioning of Starling Bank regarding BBL recovery efforts. Additionally, the bank’s founder Anne Boden threatened legal action after facing criticism from Lord Agnew earlier in the year.
Traditional UK banks reported a significantly higher proportion of suspected fraud in their BBL loans, with Lloyds accounting for £304.80 million and Barclays for £259.41 million. Notably, Lloyds and Barclays issued some of the largest bounce back loans, amounting to £8.5 billion and £10.7 billion respectively.
The government report also revealed the status of these loans in terms of defaults. It indicated that £3.2 billion remains in outstanding balance on loans in arrears that have not yet progressed to default; £1.4 billion is in outstanding balance on loans that have defaulted but have not yet been claimed; and £2.6 billion remains outstanding for loans that have been claimed but are not yet settled.
The BBL scheme was launched in May 2020 and represents the largest of the three government-related business loan initiatives, offering loans of up to £50,000 with repayment schedules of six or ten years.