December 1, 2021

Were you mis-sold your Bounce Back Loan?

"The Government back the lender; they are not a guarantor for the borrower. That is not stated on the GOV.UK website"

The GOV.UK Guidance in relation to applications for Bounce Back Loans said as follows (you can still find the link online today):

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months’.

That was a clear and unambiguous statement to people that the government was guaranteeing their loans, not the banks’ position. The statement was directed precisely at those applying for loans.

Many people took out their loans on the express understanding that the government would stand behind them if they could not afford to repay their loans.

In fact the guarantee is not to customers it is a guarantee to the lending banks, who are making 2.5% or more interest on these loans with no risk whatsoever.

The banks did not do enough to highlight the risk to borrowers. The banks have a clear conflict of interest between their customers and their guarantor, the British Business Bank.

This is most aptly exemplified in a Parliamentary debate in the House of Lords when discussing Section 12 of the Business and Planning Act 2020. Baroness Bowles commented that:

… I am not disputing good intentions, but the high-profile government publicity surrounding the loans can be misleading. There is constant reiteration of the good things about bounce-back loans: 100% guaranteed by government; try again if the first lender declines you; you cannot be asked for personal guarantees. This is encouragement to apply and gives the impression that the government guarantee is coming into play for the benefit of the borrower. That is not the story, though. The Government back the lender; they are not a guarantor for the borrower. That is not stated on the GOV.UK website’

The terms of these loans were clearly misrepresented by government and the banks did not do enough to correct that. It is time the government stood behind their proffered guarantee.

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