Starling defends Bounce Back Loan record

Lenders have recorded at least £1.1bn worth of fraudulent loans from the UK government’s Bounce Back Loan scheme, according to official data published this week. 

The figures, which run up to 31 July 2022, give the most granular incite yet of how the total £46bn of tax-payer backed loans delivered during the coronavirus pandemic are playing out.

In total £263m has been paid out to lenders against loans with a suspected fraud flag since the scheme was launched in April 2022. It closed on 31 March 2021.

Borrowers received a payment holiday for the first year after taking a loan. The interest was paid for by the Government via a Business Interruption Payment. After the year-long payment holiday ran out, borrowers had to start making monthly repayments as well as interest.

Starling Bank, which has come under criticism from Lord Agnew for its BBLs policy in recent months, has flagged £44.65m of loans as suspected fraudulent and fully defaulted. It thinks the total figure of fraudulent loans on its books under the scheme stands at c.£92m.

This figure is more than twice the figure recorded by Barclays Bank, the biggest user of the scheme, accounting for nearly a quarter of the total figure, according to the Times.

Starling accounted for 3.44 per cent of the total drawn value of the scheme, or £1.6bn, compared with 23.12 per cent for Barclays, or £10.8bn.

“We welcome publication of this data. Throughout the term of the BBL Scheme and subsequently, Starling took a strong and proactive stance to protect taxpayers’ money, as well as to support our customers and help them repay their loans. We are supporting customers through the Pay as You Grow scheme and going down a strong recoveries path,” Starling said in a statement to AltFi.

Direct comparisons between Starling Bank and other lenders are difficult, they added, owing to “limitations of the data and the different characteristics of each lender’s customer base”.

“These differences proved to be a great benefit for SMEs at the height of the pandemic, as it meant that companies of all shapes and sizes could be accommodated by different lenders ready to meet their specific needs,” Starling said in a statement to AltFi.

One reason for this more specifically, Starling said, is that a large proportion of its BBLs customers “were relatively “young” businesses, which have a higher probability of failing than more established businesses.” 

Larger banks - Barclays,NatWest, Lloyds, HSBC and Santander made up the bulk of the BBLs lending, accounting for 85.28 per cent of the loans’ total.

“Many of the big banks lent only, or primarily, to their existing customers with whom they may have had a long-standing relationship. They took on no, or very few, new business customers, unlike Starling, which remained open for new business throughout,” Starling said.

“We have excellent processes for detecting fraud and where we suspected fraud we defaulted the loans and commenced our recovery process swiftly,’ it added.