Legal campaign launches to write off bounce back loan debt
A new legal campaign has launched, claiming that the government’s bounce back loans (BBLs) are unenforceable and invalid, so should not have to be repaid.
Back British Business is led by lawyers who are experts in financial services and disputes and are advised by a commercial and financial services Queen’s Counsel.
It has said that there is a valid claim under Common Law, as repeated lockdowns and confused guidance during the pandemic led many businesses to wrongly believe that they would be able to carry on trading quickly.
“At the time the loans were announced, the government said that the pandemic was under control and that lockdowns would be for a limited period to prevent the NHS being overwhelmed,” said Back British Business chief and financial services litigation expert Wasif Mahmood.
“The loans looked sensible to particular business owners, many of whom were excluded from any form of furlough or grant support, to say, yes, we can survive this – if we take a loan we can then trade through to pay it off. The problem is that the goalposts were moved – and many times – resulting in an unlevel playing field.
“The government implemented repeated UK lockdowns which meant a restriction on trade for some businesses, and a complete inability to trade for others. Losses mounted and the income that should have been available to start to repay these loans was simply not there. The loans that these particular businesses entered into have been, for that very reason, frustrated.”
Back British Business has argued that many businesses thought the BBL guarantee was to them directly, rather than the banks.
“Normally, when you do take out a loan from a bank, it is protected under the Consumer Credit Act which allows you to effectively have a voice against any injustice from big lenders that sometimes can occur,” said Mahmood. “The government removed the protection and armour of the Consumer Credit Act from the BBL scheme. There was also an attempt to remove the protections that are also afforded under the Financial Services Markets Act 2000.
“But there is still a means of challenging these particular loans on the basis of what is called Common Law. The courts can look at whether or not it is right that these loans have to be repaid in whole or in part using equitable principles.”
The Office for Budget Responsibility has forecasted that defaults from the BBL and another government measure, the coronavirus business interruption loan scheme (CBILS), could reach £22bn. This would be around 30 per cent of the £73.75bn delivered through the two schemes in total, £26.39bn of which was through CBILS and £47.36bn through BBLS.
The campaign is calling on the government to consider appeals to write off the loans, arguing that there will be a net benefit to the state by saving these companies as they will contribute in other ways.
It is appealing to banks and then, in turn, the Financial Ombudsman to challenge the repayments.
“Allowing these businesses to go to the wall is in nobody’s interest,” said Mahmood. “If you have some of these companies back up and running, The Treasury has the opportunity for more corporation tax, National Insurance payments, more income tax and VAT earnings.”
Over 30,000 business owners have already expressed interest in joining the campaign.
The campaign has created a website for claimants. Each application costs £550+VAT.