Banks loot bills to recover Covid loans: cash seized from hundreds of companies in battle to stop fraud in bounce back scheme
- HSBC, Barclays, NatWest and Lloyds Banking Group have all started freezing business accounts linked to suspected fraud
- They have seized amounts of up to £ 50,000 from hundreds of customers’ accounts
- Since its launch in May last year, more than 1.43 million repayment loans up to £ 50,000 each have been issued
Banks are looting corporate accounts to recover emergency loans obtained fraudulently, The Mail on Sunday may reveal.
HSBC, Barclays, NatWest and Lloyds Banking Group have all started freezing business accounts related to suspected fraud.
They have seized amounts of up to £ 50,000 from hundreds of customers’ accounts.
Grab: HSBC, Barclays, NatWest and Lloyds Banking Group have all started freezing corporate accounts linked to suspected fraud
The radical move to tackle criminal activity comes after the National Audit Office – the government’s spending watchdog – warned last year that taxpayers had to pay a bill of up to £ 26 billion to cover fraud and defaults on Chancellor Rishi Sunak’s flagship. .
More than 1.43 million repayment loans of up to £ 50,000 each have been issued since the scheme was launched last May as a lifeline to get businesses back on their feet after the initial Covid lockdown.
A letter to an HSBC customer, seen by The Mail on Sunday, revealed that it had formally terminated a ‘bounce back loan agreement’ and demanded that the customer ‘promptly repay all amounts advanced to you.’
The bank told the customer that a clause in the agreement meant that he did not need permission to dive into the company’s checking account to get some of the money back.
This completely legal tactic is sometimes used by banks to collect overdue credit card or loan debt from customers who have deposited money.
Banks are expected to exclude any state aid the company has received when calculating how much to impose.
A banker said that “several hundred” such letters had been sent only by their bank.
Bounce back loans are 100 percent backed by the taxpayer, which means that banks don’t bear any risk if the money is never paid back.
Companies can borrow up to £ 50,000 with no interest or capital repayment due during the first year. An interest rate of 2.5 percent kicks in over ten years. £ 43.5 billion has been on loan so far since May.
To hand out the money quickly, banks were told to borrow with limited checks, meaning companies would self-certify their income. Business customers needed a checking account with the bank to receive the money loans.
Now banks are under increasing pressure to get rid of fraudsters. According to a source from Whitehall, the Treasury issued a stark warning to banks last Thursday to remind them of the importance of fraud controls.
The Mail on Sunday revealed last August that greedy entrepreneurs, criminal gangs and rogue landlords were exploiting loopholes in the plan.
Some applied for multiple loans, while others had used the money to buy expensive sports cars and finance lavish home improvements.
In an example of fraud, a lender saw “hundreds of applications submitted from the same address.”
In October, a survey by the National Audit Office concluded that up to 60 percent of loans may not be repaid due to fraud and default. That represented a sum of £ 26 billion at the time.
In most cases, money is not recovered from the business accounts until the suspected fraud has been fully investigated.
Banks came under fire after the 2008 financial crisis for their harsh treatment of small business customers and they are eager to prevent another scandal.
A Treasury spokesman said: ‘Our loan schemes have provided a lifeline for thousands of businesses in the UK – helping to survive the pandemic and protecting millions of jobs.
“We have focused this support to help those who need it most as quickly as possible and we will not apologize for this.”
The spokesperson said the Treasury has taken action to minimize fraud, noting that banks use anti-money laundering and fraud controls, as well as transaction monitoring.
Any fraudulent filing could be prosecuted, punishable by imprisonment or a fine or both, the spokesperson added.
A replacement for the clawback loan scheme is likely to be budgeted for in March.