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Bounce Back Loan fraud rates fall again

In previous posts in October 2020 and January this year, I have queried the fraud and loss rates on Bounce Back Loans.


Today, the Government reports that suspected fraudulent loans at £1.1 billion, or 2.3% of total loans. That's down from the Department for Business current estimate of 7.5%, and their previous estimate of 11%, or £4.9 billion.


The announcement comes with an 'explanation' that 'The [British Business Bank's] fraud and error loss estimate relates to its projections over the life of the scheme whereas what is reported in the current data is the suspected fraud identified by lenders as at 31 July 2022'. That's really odd! Is the suggestion that loans that weren't taken out fraudulently will, somehow, become fraudulent in the future? Or is it that the participating banks' figures can't be trusted?


Not only is the fraud level far below the Government's original forecasts but just because an application is fraudulent (e.g. turnover exaggerated) it doesn't mean it won't repay.


The overall loan performance statistics are more difficult to interpret, with 71% of loans performing or fully repaid. The Government originally forecast losses of 35% to 60%, later reduced to 37%. Of course, that all depends now on what happens with support for energy costs and other inflation for SMEs.


This is not to defend fraud, of course, but rather to say (again) that the vast majority of UK SMEs were not out to defraud the nation in the worst moments of the pandemic - despite a scheme that was rushed through without time to adequately prepare fraud checks.


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