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bounce back loan cheats : Up to 55% of applications were potentially fraudulent


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https://www.thisismoney.co.uk/money/markets/article-9021167/Fraud-fears-spark-ban-business-accounts.html

Britain's biggest banks have stopped opening new current accounts for small businesses after finding as many as half the applications may be fraudulent. 

HSBC, NatWest and Lloyds Banking Group confirmed they no longer accept applications from new business customers. 

Barclays is offering newcomers appointments to open accounts – but not until February due to high demand. Smaller banks including Virgin Money and Metro Bank have also pulled down the shutters. 

An estimated 27,000 suspicious loan requests, with a total value of more than £1.1billion, had been blocked by lenders by November, the Public Accounts Committee watchdog was told last month.

Another watchdog, the National Audit Office, warned that up to £26billion of the bounce back loans that were issued may end up being written off because of fraud and defaults. 

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Ha. Was saying this in May and a lot of you were saying it was nonsense they had great controls.. 

Total garbage. When the scheme launched anyone with a shell could get 10 loans no less so £500k of taxpayers cash in 24 hours. They were not even checking if you already had a loan at another bank before accepting the application. 

£4.5billion to organised crime (as per the NAO) and counting. 

Will be fun paying it back. 

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Pretty disappointing to read how bad the scale of fraud is, money could have been put to so many better uses, if only some simple checks were enforced. Also shows how society in general, peoples ethics and morals are going down.

Goverment run by the tabloid press. 

They were shouting businesses need the cash within 24 hours so couldn't possibly wait for fraud checks to come through in 2 weeks. 

Anyone involved with a buisness in even the most basic way knows that's nonsense. Even with £0 in the bank...what's the worst that can happen in 2 weeks? You get some angry calls from suppliers and defer payment.. Court's weren't even functioning due to lockdown so you couldn't be declared insolvent. 

 

But nope.. Rush the cash out the door.. 24 hours. Someone else's so why bother to check if the application is real. 

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Ha. Was saying this in May and a lot of you were saying it was nonsense they had great controls.. 

Total garbage. When the scheme launched anyone with a shell could get 10 loans no less so £500k of taxpayers cash in 24 hours. They were not even checking if you already had a loan at another bank before accepting the application. 

£4.5billion to organised crime (as per the NAO) and counting. 

Will be fun paying it back. 

How can you get 10 loans of £50k

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Goverment run by the tabloid press. 

They were shouting businesses need the cash within 24 hours so couldn't possibly wait for fraud checks to come through in 2 weeks. 

Anyone involved with a buisness in even the most basic way knows that's nonsense. Even with £0 in the bank...what's the worst that can happen in 2 weeks? You get some angry calls from suppliers and defer payment.. Court's weren't even functioning due to lockdown so you couldn't be declared insolvent. 

 

But nope.. Rush the cash out the door.. 24 hours. Someone else's so why bother to check if the application is real. 

+1, Yes they panicked 

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Ha. Was saying this in May and a lot of you were saying it was nonsense they had great controls.. 

Total garbage. When the scheme launched anyone with a shell could get 10 loans no less so £500k of taxpayers cash in 24 hours. They were not even checking if you already had a loan at another bank before accepting the application. 

£4.5billion to organised crime (as per the NAO) and counting. 

Will be fun paying it back. 

Youll have to wait and see.

That does not match what Ive heard.

Businesses had to be trading and had a bank account previously.

Its very hard to open a new bank account these days.

Business bank accounts are even harder.

A shell would not have got nay money.

Where theres has been fraud is lots of tiny hobby/UC businesses suddenly getting access to a business loan, which theyve took.

These will be easy to claw back.

 

 

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I don’t believe the banks were giving out loans unless there was cash flow in the account.  It’s never been that easy to setup a business account anyway, you have to go into branch with ID.  So I’m not convinced there are many businesses that can walk off with the money.  I have no doubt that many went for the max loan without the required turnover but they will just have to pay it back.  I was surprised that many took the 50k and rushed to spend it, possibly thinking it was free money.  By the same token many business owners took mortgage holidays and then were barred from loans by their banks.  It suggests many business owners are not that financially literate.  

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I don’t believe the banks were giving out loans unless there was cash flow in the account.  It’s never been that easy to setup a business account anyway, you have to go into branch with ID.  So I’m not convinced there are many businesses that can walk off with the money.  I have no doubt that many went for the max loan without the required turnover but they will just have to pay it back.  I was surprised that many took the 50k and rushed to spend it, possibly thinking it was free money.  By the same token many business owners took mortgage holidays and then were barred from loans by their banks.  It suggests many business owners are not that financially literate.  

I suggest you have a look at the NAO report to what happened... 

Normally I don't tick a box to get a loan of £50k. That is exactly what happened in the panic. 

They prioritised speed (24 hours) above all else. Normal banking and logic didn't apply. 

In basic summary :

"Once government decided to support small businesses facing cash flow problems owing to the pandemic, it moved very quickly to set up a scheme. It prioritised one aspect of value for money – payment speed – over almost all others and has been prepared to tolerate a potentially very high level of losses as a result. These losses can stem from businesses wanting to pay back loans but finding themselves unable to, through to organised criminals taking out loans with no intention of ever paying them back."

https://www.nao.org.uk/report/bounce-back-loan-scheme/

Edited by captainb
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Youll have to wait and see.

That does not match what Ive heard.

Businesses had to be trading and had a bank account previously.

Its very hard to open a new bank account these days.

Business bank accounts are even harder.

A shell would not have got nay money.

Where theres has been fraud is lots of tiny hobby/UC businesses suddenly getting access to a business loan, which theyve took.

These will be easy to claw back.

 

 

Again you are falling into what should have happened rather than what actually did. 

Yes, she'll companies logically should have got £0. It's fraud. 

In reality they were awarded loans. 

Whats the scale? We don't know for sure.. However "more than one or two" given its finally forcing ID checks at companies House. 

Worth nothing that after the horse had left the stable they tightened the rules.. Around July. 

 

https://www.google.com/amp/s/amp.ft.com/content/7a5e51c0-d04e-4a35-8ccb-7733556e46c3

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I suggest you have a look at the NAO report to what happened... 

Normally I don't tick a box to get a loan of £50k. That is exactly what happened in the panic. 

They prioritised speed (24 hours) above all else. Normal banking and logic didn't apply. 

In basic summary :

"Once government decided to support small businesses facing cash flow problems owing to the pandemic, it moved very quickly to set up a scheme. It prioritised one aspect of value for money – payment speed – over almost all others and has been prepared to tolerate a potentially very high level of losses as a result. These losses can stem from businesses wanting to pay back loans but finding themselves unable to, through to organised criminals taking out loans with no intention of ever paying them back."

https://www.nao.org.uk/report/bounce-back-loan-scheme/

It’s not news that organise criminals tried for loans, what is not true is that anyone could get a loan.  Sure some would be able to cheat the checks but it remains to be see how many.  What I object to is the automatic drama created in the absence of actual facts, especially the implied idea that business got free money, it’s not free, needs to be paid back with interest.

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It’s not news that organise criminals tried for loans, what is not true is that anyone could get a loan.  Sure some would be able to cheat the checks but it remains to be see how many.  What I object to is the automatic drama created in the absence of actual facts, especially the implied idea that business got free money, it’s not free, needs to be paid back with interest.

erm...welcome to 2020 and the 'post truth' world.

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It’s not news that organise criminals tried for loans, what is not true is that anyone could get a loan.  Sure some would be able to cheat the checks but it remains to be see how many.  What I object to is the automatic drama created in the absence of actual facts, especially the implied idea that business got free money, it’s not free, needs to be paid back with interest.

If you read the report estimate is £4.5billion to organised crime. Not £200 from a cashpoint. 

As for needs to be paid back, agreed in general, however the issue is how the scheme is structured. 

If you say run a small consultancy buisness with just you as an employee or maybe you and one other called Mr Bloggs consulting ltd, you get the loan. You then try "really hard" to get buis going while paying the £50k to yourself for doing so. 

You then fold the company and set up Mr Bloggs consulting 2.

As there is no personal claim on the debt, that's it happy days. Perfectly legal. 

Obviously doesn't work with larger businesses but the average size that got these loans wouldn't have employees etc to shift.

Banks would never lend to such tiny businesses for that reason without directors guarantees. Whether that's right or wrong depends on your viewpoint, but legally debt recovery on this was always going to be farcical. 

Edited by captainb
Spelling as always phone post
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Also shows how society in general, peoples ethics and morals are going down.

I don't think this has been demonstrated.  Perhaps people's ethics and morals have always been disgraceful?

More generally, I doubt the estimate that so much of the money will not be recoverable.  For example, when student loans came in, a very borrower-friendly terms were bandied about.  A couple of years passed... and the terms were far less friendly... the interest rate had shot-up; deferring payments required the borrower to 'prove' they were not earning (rather than the lender to prove they were) and the student debt was declared 'special' - a debt that could survive bankruptcy.  I would expect that the government to treat borrowers of these emergency loans with similar contempt.  Perhaps they won't?

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I don't think this has been demonstrated.  Perhaps people's ethics and morals have always been disgraceful?

More generally, I doubt the estimate that so much of the money will not be recoverable.  For example, when student loans came in, a very borrower-friendly terms were bandied about.  A couple of years passed... and the terms were far less friendly... the interest rate had shot-up; deferring payments required the borrower to 'prove' they were not earning (rather than the lender to prove they were) and the student debt was declared 'special' - a debt that could survive bankruptcy.  I would expect that the government to treat borrowers of these emergency loans with similar contempt.  Perhaps they won't?

See above. The borrower is the legal entity not the person/director. 

Which leads to the very high level of non recovery estimate. 

If you goto a market stall do you really care if you buy your apples from Joe's fresh veg Ltd or Joe's fresher veg Ltd. 

Joe's fresh veg might just fold with the debt. Joe has no liability for it unlike any other loan a bank would ever give. 

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See above. The borrower is the legal entity not the person/director. 

Which leads to the very high level of non recovery estimate.

I don't doubt that it is possible for a loan to a limited liability company to default in such a way that it is unrecoverable.  This, however, impairs the ability of directors to go on to run other companies in future.  While absolute loss is going to happen fairly often, I think you dramatically over-estimate how often.

I would expect the rate of interest paid on these loans to increase as/when the default rate increases.  I expect that the cost of the bad loans will be bourne by the companies borrowing honestly and diligently repaying.

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I don't doubt that it is possible for a loan to a limited liability company to default in such a way that it is unrecoverable.  This, however, impairs the ability of directors to go on to run other companies in future.  While absolute loss is going to happen fairly often, I think you dramatically over-estimate how often.

I would expect the rate of interest paid on these loans to increase as/when the default rate increases.  I expect that the cost of the bad loans will be bourne by the companies borrowing honestly and diligently repaying.

All of what you say works in a commercial environment. 

None of these loans were commercial in anyway. Hence the ridiculous terms. 

The loan terms on repayment were pushed out even further into the never never recently (6 years IIRC) so while they might change to be more onerous I somewhat doubt it 

As for directors being impaired by having shut down companies previously.. Find one large buisness that hasn't shut down multiple legal entities. Its far from uncommon and doesn't impact a director unless courts get involved. 

Banks will ask for personal guarantees on lending but they always do that for businesses of that size anyway. 

 

None of this is they won't get any money back. They clearly will. Your genuine hairdresser with staff should in theory pay it back. 

My point is the scheme is so badly designed and rushed the estimated 40 to 50% default is reasonable and could have been closer to 10% if they actually thought it through. The £15billion spread will be paid by the taxpayer. 

Edited by captainb
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