Despite identifying thousands of cases of bounce back loan fraud, credit ratings firm Equifax has predicted that fraud levels will be lower than what is currently feared.
Andrew Fielder, a commercial lending expert at Equifax UK, said that according to the firm’s analysis the data shows at present that the levels of application fraud are likely to be as low as 0.5 per cent for BBLS.
“This is most likely because many lenders dealt primarily with current customers, meaning they would be less likely to be hit by application fraud, with checks having already been carried out,” he said.
“Clearly any amount of fraud is too much, but this method seems to have greatly mitigated the risk.
“The BBLS is helping a portion of businesses stay in existence, with only 12 per cent of all businesses that have taken out a BBL spending more money than they are generating every month. It certainly would appear companies have used the loans as intended.”
As of 21 February, £45.6bn had been loaned via the 100 per cent state-backed support scheme, which ends on 31 March and will be replaced by the 80 per cent government-backed recovery loan scheme.
Equifax has found that 6,644 companies have taken out multiple facilities under the bounce back loan scheme (BBLS), which breached the rules.
The credit ratings agency revealed that one company had 30 agreements under the BBLS, 3,097 businesses had taken out BBLS facilities with multiple lenders and 1,114 companies used multiple lenders to acquire a balance greater than £50,000.
However, despite this the firm has predicted a lower level of fraud than previous forecasts, such as the National Audit Office expectation that £31bn of loans taken out under the Covid-19 support schemes will have to be written off.
Andrew Fielder, a commercial lending expert at Equifax UK, told The Times the analysis “shows at present, the levels of application fraud are likely to be as low as 0.5 per cent”.
The Treasury is creating a Taxpayer Protection Taskforce to crack down on fraudsters exploiting government support schemes.
Chancellor Rishi Sunak allocated £100m for the taskforce in his 2021 Budget, following concerns of fraud in the government-backed loan schemes, particularly BBLS.