Over £1bn of fraudulent bounce back loan applications

Up to £1.1bn of fraud via the government’s bounce back loan scheme (BBLS) was identified in first six month of its operation, according to evidence supplied to the public accounts committee (PAC)

In a letter to the PAC, which has been looking at the operation of the BBLS, Catherine Lewis La Torre, chief executive of the British Business Bank, has provided fraud statistics across all BBLS lenders, as of 20 October.

These show 26,933 fraudulent loan applications have been detected, with a value of £1.1bn.

The data has some limitations, as one lender has not submitted information and the methodology may be refined in subsequent reporting.

The scheme was announced on 27 April to quickly provide loans of up to £50,000, or a maximum of 25% of annual turnover, to registered and unregistered small businesses to support their financial health during the pandemic.

Preliminary estimates from the Department for Business, Energy and Industrial Strategy (BEIS) and the British Business Bank suggested  that as a result of credit and fraud risks 35% to 60% of borrowers may default on the loans, based on losses observed in previous programmes which are most similar.

Analysis by the National Audit Office (NAO) calculated that assuming the scheme lends £43bn, this would imply a potential cost to government of £15bn to £26bn, but said the  estimates were highly uncertain.

The British Business Bank has been asked to provide monthly updates on fraud issues.

Earlier this month the government announced that the BBLS, along with two other support schemes, the coronavirus business interruption loan scheme (CBILS) and the coronavirus large business interruption loan scheme (CLBILS) will be extended to 31 January 2021. This extension also applies to the Future Fund, which provides support for innovative start-ups.

It was also announced that eligible businesses will be able to ‘top up’ existing Bounce Back Loans should they need additional finance.

Further reading:

British Business Bank letter to PAC

5
Average: 5 (4 votes)
Subscribe