Banks were 'banned' from making checks on Covid loan applicants

2022-12-06

Banks were ‘banned’ from making credit checks on Covid loan applicants during pandemic, MPs hear

Major lenders were not allowed to run checks on applicants to the loan scheme
The emergency Bounce Back Loan scheme aimed to stop businesses going bust
In total £46.6billion was given out, with £1.1b now flagged as suspected fraud

Banks were ‘forbidden’ from assessing whether or not firms could repay taxpayer-backed Covid loans before handing them the money, MPs were told yesterday.

Bosses of major lenders said it was ‘incredible’ they were not allowed to run usual credit or affordability checks on applicants to the Government’s emergency Bounce Back Loan scheme.

The process was fast-tracked to prevent businesses hit by lockdown curbs going bust, the public accounts committee heard, but stopped banks being able to prevent huge amounts of fraud.

In total £46.6billion was dished out, with £1.1billion now flagged as suspected fraud and billions more in arrears.

Banks were ‘forbidden’ from assessing whether or not firms could repay taxpayer-backed Covid loans before handing them the money, MPs were told yesterday (file image)

Taxpayers’ cash is used to refund banks over unpaid loans.

But Sarah Munby, Permanent Secretary at the Department for Business, Energy and Industrial Strategy, insisted the loans – worth up to £50,000 – were ‘relatively small’.

Anne Boden, the founder of Starling Bank, told MPs: ‘The incredible thing that we have to think about was that this scheme didn’t include any credit checks.’

She added: ‘So you were obliged to do fraud checks but all the credit checks, you were forbidden from doing.

Anne Boden, the founder of Starling Bank, told MPs: ‘The incredible thing that we have to think about was that this scheme didn’t include any credit checks’

‘If you did a credit check, that was not the spirit of the scheme, not allowed by the scheme.

‘By not doing credit checks, you really had no way of determining whether those loans are going to be repaid.’

Ms Boden went on: ‘If we had done credit checks we could have eliminated almost all of the fraud.’

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