Lenders stop £1.6bn in bounce back loan fraud
Nearly 44,000 fraudulent applications have been turned away by banks
British lenders have prevented nearly £1.6 billion in fraudulent claims against the Government-backed bounce back loan schemes, recently released figures show.
The British Business Bank, which administers the scheme for the Treasury, said that 43,958 attempted loans had been blocked because they were suspected to be fraudulent claims.
It is a small part of the nearly £46 billion which has so far been lent under the programme, which was set up to support mainly small businesses through the Covid-19 crisis.
Under the terms of the scheme, firms could borrow up to £50,000, based on their turnover, at a flat interest of 2.5%. Around 1.5 million firms have been given loans.
Applications for bounce back loans are still being accepted by banks up until the end of March, however numbers have slowed down in the last six months.
Since the middle of September around 500,000 bounce back loan applications have been submitted, compared with approximately 1.5 million between May and September last year.
It has proven the most popular of the Government’s Covid-19 support loans, in part because of how quickly and easily loans are made, and the low interest rates.
However, worries have been rife about how much money may never be paid back.
In October the National Audit Office said the Government’s best estimates were that between 35% and 60% of borrowers might default on their loans.
This could cost taxpayers around £28 billion at current lending rates, as the Treasury has promised to reimburse banks for any money not paid back.
Most of this will probably be lost due to businesses legitimately being unable to pay it back. However, the Cabinet Office estimated that anywhere between 0.5% and 5% of the value of bounce back loans may have been fraudulent, or up to £2.3 billion.
The latest figures comes from a letter to the Public Accounts Committee from Catherine Lewis La Torre, the chief executive of the British Business Bank.
She warned that the way the banks collect data on the level of fraudulent claims that have been blocked is imperfect, so the figures could change.
In November it was revealed that banks had stopped 26,933 bounce back loans worth £1.1 billion over fraud worries.