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Bounce Back Loan fraud five times higher than normal as criminals infiltrate the system

Time 9 months ago

Bounce Back Loan fraud has been ‘five times higher’ than typical levels, bankers have told the Treasury Select Committee.

Around one per cent of Bounce Back Loans have been taken out fraudulently with criminals using a number of ways to get access the government-backed cash.

Bosses at Lloyds and Santander told MPs on the Treasury Select Committee that they’d seen a number of problems with Bounce Back Loan applications.


David Oldfield, chief executive of Lloyds Commercial Banking, said his bank has seen three per cent of applications rejected, with two per cent of those approved later turning out to be fraudulent. 

He said: ‘That’s about five times higher than we would normally see.

‘We take fraud very seriously. I think we would all recognise that the design of that scheme was a trade-off versus the checks that we would be doing. We do screen every application.’

The government introduced the Bounce Back Loan scheme at the height of the pandemic, covering 100 per cent of the loans and urging banks to ensure lending could be made quickly – relaxing checks on each business making claims.


Most applications were carried out with a single web-based form and the cash – up to £50,000 – was deposited as soon as the next day.

Car Dealer reported earlier this year on a dealer in Scotland who was subject to a Bounce Back Loan scam when a customer took out a loan in the dealer’s name and attempted to pass off the cash in the firm’s account as funds he had sent to pay for the car.

Many other car dealers have reported a surge in luxury car purchases from business people using the Bounce Back Loans to fund a new vehicle or place a deposit on a luxury car.

Susan Allen, chief executive of retail and business banking at Santander UK, said that of the 150,000 bounce back loans taken out with it, ‘about one per cent’ were fraudulent.

Amanda Murphy, head of commercial banking at HSBC, said: ‘We’ve seen criminals this year repurpose their infrastructure and amend how they interact with us looking to exploit the fears of what comes with pandemics, particularly around the supply of PPE. We’ve captured some fraud in that area.’


She said high levels of requests for loans had prompted the bank to completely overhaul its operations, handing out £14bn and offering 250,000 capital repayment holidays on loans and mortgages.

The panel of witnesses to the committee – who also included Paul Thwaite, chief executive of commercial banking at NatWest Group, and Anne Boden, chief executive of Starling Bank – also suggested around 25 per cent of loans are likely to never be repaid.

However, all said it was ‘too early to say’ how high it could be.

Millions of firms have relied on the Bounce Back Loan Scheme to stay afloat during the coronavirus crisis. Launched in May, it provides loans of between £2,000 and £50,000, and has been extended to January 31.

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Many car dealers took out the loans and used the cash to buy stock as the repayment rates are far more favourable than usual bank funding.

The government previously implied the scheme could end up costing taxpayers between £15bn and £26bn, partly because of criminals, but also because of defaulted loans.

At the last count, £42.2bn of Bounce Back Loans have been provided to businesses.

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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