UK Brexit opportunities minister Jacob Rees-Mogg has written to Starling Bank to ask how it plans to recover loans that may have been fraudulently claimed by businesses under the government’s bounceback loan scheme.
Banks issued these loans, which are 100 per cent guaranteed by taxpayers, with minimal customer checks to provide emergency support to companies that were struggling during Covid-19 lockdowns.
The government has estimated that of the £47bn lent by all banks through the scheme, up to £5bn could be lost to fraud.
Starling, which was launched in 2014 as an app-based bank without branches, has grown rapidly in the past couple of years, largely as a result of bounceback lending.
Sum possibly lost to fraud from the £47bn lent by all banks through the scheme
In a letter to Starling chief executive Anne Boden seen by the Financial Times, Rees-Mogg said that Starling had the highest exposure of the top 10 bounceback scheme lenders to companies that took loans before quickly being dissolved, a sign of potential fraud.
He added: “I would welcome an explanation as to how you are dealing with this risk and what your specific treatment strategies for debt recovery in this population are, especially in respect of suspected fraud cases.”
The letter also said that Starling had “duplicate loans”, though the rules of the scheme allowed for one loan per company. It added that other banks had “taken proactive action to remove duplicates” but that “Starling has not”.
Starling said it had “fully satisfied the requirements of the [taxpayer] Guarantee and we continue to support the Cabinet Office, BEIS and the Treasury in ensuring that taxpayers’ money is protected.
“We look forward to the publication . . . of a detailed BBLS dashboard which will give additional context.”
The government is preparing to unveil that bounceback loan dashboard, with data including the likely extent of losses from each bank, as soon as this week.
The dashboard is expected to detail the forecast percentage of losses at each bank that issued bounceback loans and an estimate of the sum lost to fraud. It will also show the total amount paid out to each bank to cover losses as part of the state guarantee.
The letter to Starling from Rees-Mogg follows a series of meetings with UK banks. He also launched a new Public Sector Fraud Authority last month, which will work with banks to identify fraud linked to bounceback loans and recover funds.
Starling announced its first annual profits this summer.
According to Lord Agnew, previously the government’s anti-fraud minister, it had lent £23mn by November 2019 but by June 2021 had distributed £1.6bn of bounceback loans.