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Are banks calling in Bounceback loans ?

Clients have received letters from their banks asking for evidence that the loans were legit.

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Has anyone else started receiving letters from banks challenging the validity of bounce back loans drawn over a year ago? These are asking for evidence of turnover (loans were supposed to be 25% of turnover) and of how the loans were used.

It is tempting to say I told you so...

Replies (32)

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By Paul Crowley
14th Oct 2021 21:01

No client has yet mentioned any such letter.
Which banks are writing?

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Replying to Paul Crowley:
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By arnold28
14th Oct 2021 23:42

Lloyds

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Replying to arnold28:
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By Paul Crowley
15th Oct 2021 08:24

Much appreciated
Worrying, as that means the main big four are likely to be fairly consistent.
Based on accounts prepared to date everyone eligible to get one got one. With one exception being the client that I referred to in my first ever post

https://www.accountingweb.co.uk/any-answers/bounce-back-loan-declined-0

Not much left on that thread as it got quite cantankerous and seriously moderated.
Based on that experience I amaze myself that I ever bothered contining to post

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Replying to Paul Crowley:
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By rmillaree
15th Oct 2021 09:17

"Worrying, as that means the main big four are likely to be fairly consistent."

I would be worried if the banks werent doing checks in this regard !!!

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Replying to rmillaree:
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By Paul Crowley
15th Oct 2021 11:00

As I understand it banks merely asked for the turnover figure, not accounts, as the turnover figure was set and therefore most traders would not have accounts in line with qualification date
With mine I just entered my figure
Who knows if bank checked that to my bank current account?

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ALISK
By atleastisoundknowledgable...
14th Oct 2021 21:48

Had Starling call in a BBL when a client filed a DS01 … I had get to say “told you so”.

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Replying to atleastisoundknowledgable...:
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By Paul Crowley
14th Oct 2021 21:52

Client obviously told the bank, as required before filing DS01

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Replying to Paul Crowley:
ALISK
By atleastisoundknowledgable...
15th Oct 2021 18:48

Paul Crowley wrote:

Client obviously told the bank, as required before filing DS01

Errrrr ... Yeaaaah … let’s go with that.

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Replying to atleastisoundknowledgable...:
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By Open all hours
15th Oct 2021 08:06

Hope Starling get round to the company which was granted a BBL even though it was not formed until February 2020.

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Replying to Open all hours:
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By legerman
15th Oct 2021 11:22

Open all hours wrote:

Hope Starling get round to the company which was granted a BBL even though it was not formed until February 2020.

Perfectly legitimate. Criteria was must be in business prior to March 2020.

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Replying to atleastisoundknowledgable...:
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By I'msorryIhaven'taclue
15th Oct 2021 09:09

Were Starling just going through the motions of calling in the BBL, or are they chasing hard? (For example, do you feel the bank might manoeuvre to have transactions reversed for eg preferential creditor treatment or possible misuse of BBL?)

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Replying to I'msorryIhaven'taclue:
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By rmillaree
15th Oct 2021 12:22

"Were Starling just going through the motions of calling in the BBL, or are they chasing hard? (For example, do you feel the bank might manoeuvre to have transactions reversed for eg preferential creditor treatment or possible misuse of BBL?)"
Per comments posted on an earlier thread if those comments were correct (??)- the issue is that the banks MAY not covered by the government if there is not a formal winding up procedure for the company. Note i have no idea if that posted info is correct - there was a thread a couple of weeks back going into that issue in more detail. If that is the case i would expect its a materially % higher chance that banks simply wont let these DS01's go through- ball though is then in their court whether they want to start insolvency proceedings themselves - i can imagine there will be quite a few businesses stuck in limbo though if that is the case. If the bank are playing clever though you would expect that they will lose less by engaging insolvency firm and paying them as compared to losing the loan - then again it may be bad publicity for them going down that route.

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Replying to rmillaree:
Lisa Thomas
By Lisa Thomas
15th Oct 2021 14:34

Yes that's what we have been told, but nothing concrete yet - just that the government will not (currently) accept dissolution as evidence the Bank have taken all steps to recover the debt.

If this is true and does not change we expect to see a spate of Bank's forcing compulsory Liquidations upon the debtors.

I have heard the bank are going into full recovery mode from this month...I don't think publicity will matter any more - they need to recover the BBLs.

FYI The Banks will not be able to engage and appoint private IPs via the CVL route - they will have to force companies into liquidation via the compulsory liquidation in Court, where the Official Receiver will initially be appointed Liquidator.

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Replying to Insolvency Practitioner:
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By I'msorryIhaven'taclue
15th Oct 2021 15:01

So if anyone is going to look to implement possible clawbacks of "misused" loans and the like then it's less likely to be the Starling banks; but more likely the Official Receiver?

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Replying to I'msorryIhaven'taclue:
Lisa Thomas
By Lisa Thomas
15th Oct 2021 15:19

I would think so because once the company is Liquidated the bank can recover its debt from the government so I can't see why it would have an interest.

It's going to be down to the Liquidator and HMRC.

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Replying to Insolvency Practitioner:
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By Justin Bryant
15th Oct 2021 15:45

That's right and of course the OR as Liquidator will act via an IP (e.g. a law firm) and as has been said here before there probably aren't enough IPs in the country to deal with all these dodgy/fraudulent BBL claims (there must be 1,000s if not 10,000s), as action under IA 1986 (and/or CA 2006) against directors ain't quick or simple.

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Replying to Justin Bryant:
Lisa Thomas
By Lisa Thomas
15th Oct 2021 15:55

I'm not sure what you mean by the OR will act via an IP or what you mean by a law firm?

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Replying to Insolvency Practitioner:
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By Justin Bryant
15th Oct 2021 16:16

The OR as liquidator will normally (if the amounts are big) instruct an IP to investigate the behavior of the directors of the (compulsorily liquidated) bust company using information powers under ss234, 235 & 236 of IA 1986 and many IPs are lawyers who work at law firms.

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Replying to Justin Bryant:
Lisa Thomas
By Lisa Thomas
18th Oct 2021 10:16

I disagree. The O.R will keep most cases inhouse and will only farm out on the rota to a private IP if a statutory deadline is looming, or there is a technical issue.

Otherwise they will only appoint an IP if the majority of creditors vote/request it.

There are many Solicitors who specialise and deal with insolvency however very few Solicitors have an insolvency appointment taking license.

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Replying to Insolvency Practitioner:
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By Justin Bryant
18th Oct 2021 11:19

Well, that's not my experience if, as I said, the amounts are big (>£1m say) and it's tax (or otherwise HMRC) related (i.e. HMRC have presented the winding-up petition). I'm a lawyer and I know plenty of IP lawyers, who write books on the subject etc.

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Replying to I'msorryIhaven'taclue:
ALISK
By atleastisoundknowledgable...
15th Oct 2021 18:54

I'msorryIhaven'taclue wrote:

Were Starling just going through the motions of calling in the BBL, or are they chasing hard? (For example, do you feel the bank might manoeuvre to have transactions reversed for eg preferential creditor treatment or possible misuse of BBL?)

It was a ‘application to dissolve is a breach of terms, repay now’ type of letter and they blocked the application with CoHo. Obviously the letter was bulked out with legals and quoted broken T&Cs, which they would do even if just going through the motions. Hard to say what their intention is, the letter was about 3 weeks ago.

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Replying to atleastisoundknowledgable...:
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By I'msorryIhaven'taclue
18th Oct 2021 11:17

I suppose a bank is bound to block a strike-off; and equally well do everything in its power to obtain repayment - or at last go through the motions of appearing to - if that bank is to rely upon the Government guarantee.

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By sanjay100
15th Oct 2021 10:11

I know so many people that overclaimed on the bounceback loan (not clients). It will be interesting what happens but probably nothing. They should have done their due diligence before giving away the cash bonanza.

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By ireallyshouldknowthisbut
15th Oct 2021 12:19

I remain shocked that the bank of England is going to unwrite these loans when the banks failed to make even really basic checks of eligibility.

The banks charged highly inflated fees for issuing these and yet did nothing for them.

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Replying to ireallyshouldknowthisbut:
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By adam.arca
15th Oct 2021 12:53

So what you're saying is that the banks operated like, erm, banks.

Not defending them btw, just surprised that you're surprised.

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Replying to ireallyshouldknowthisbut:
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By arnold28
15th Oct 2021 17:24

Thank you to all who have responded. Just to be clear, in the letters I have seen, the companies are still trading and are repaying the loans. It is possible that if the banks are having to write off loans they are now under pressure to examine the entire portfolio and justify their (lack of) due diligence.

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Replying to arnold28:
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By I'msorryIhaven'taclue
18th Oct 2021 11:11

Sounds as though the banks are gathering intel in readiness for the anticipated slew of defaulters.

Because the loans were effectively self-certifying it's an opportunity to suck applicants into reaffirming the bases upon which their claims were calculated; and I can certainly see how asking recipients to provide ammunition with which to hang themselves by listing how their BBLs may have been spent on directors would be a worthwhile exercise.

I guess the banks' objective might boil down to identifying those BBLs that the Government will indemnify, and those that disqualify themselves.

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Replying to I'msorryIhaven'taclue:
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By Paul Crowley
18th Oct 2021 11:26

Good points
But if the banks are looking to reclassify the loans then the guarantee is given away.
Surely all they can do is call the loan back in, which seems pointless to me if the loans are being repaid.
As such this seems a pointless excercise to me

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
18th Oct 2021 11:45

Hard to call, isn't it!

If the banks are looking to classify the loans into those that are likely to be covered by the guarantee and those that are doubtful - say because the director's bought himself a new motor - then it would at least give the banks the opportunity to assess those doubtfuls for the risk of eventual default and salvage what they can by pulling their loans now.

I may be suffering from skewed vision: I'm working on two companies currently, each with a BBL, who were struggling to survive at the beginning of Covid and both might ordinarily have folded by now. Each is effectively dependent on its BBL to repay its loan instalments - a sort of sinking fund that will run out of cash funds at some stage - and each has racked up a £10k + s455 charge for o/d DLAs. Each appears to be gradually transferring significant portions of its turnover to a Phoenix.

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By jwill76
24th Nov 2021 09:06

Barclays are now doing the same.

My boss has made me aware that Sole traders/partnerships are being called into branch for meetings regarding the legitimacy of their BBL's.

Two clients have told us recently, both happen to be with Barclays. One was a Sole Trader who moved to a Partnership and this is what the bank are questioning.

Not sure on the T&C's with this bank, but I'm sure most firms are happy they did not assist with this and SEISS!

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Replying to jwill76:
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By Paul Crowley
24th Nov 2021 10:30

It would be Barclays
My guess is they misunderstood the memo

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Glenn Martin
By Glenn Martin
24th Nov 2021 15:20

I wonder if this depends if they are been paid as they should or for those that have deferred payment or welched on the repayments.

I suspect a blind eye will be turned on those that bigged up their turnover to get a higher as long as its paid back.

A hard line does seem to be drawn for Director disqualification as I have seen a few for 10 years + for BBL abuse although what does that actually mean as getting banned may well not bother them unless they do something to recover the money.

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