I have asked the British Busines Bank a series of questions recently, and they have finally got back to my official Freedom of Information requests that I am working my way through.
As I know plenty of people have had their Bounce Back Loans snatched back by many banks. I asked them for information and a response on the following:
“How many defaults on Bounce Back Loans have so far been recorded/reported by Bounce Back Loan lenders?”
“What infrastructure if any has been agreed and put in place to handle defaults on Bounce Back Loans, please send all information on that aspect of the scheme.”
BBB has processes in place to handle claims made by lenders for default loans. At present, lenders are expected to pursue unpaid loans using their own business processes, but we continue to work with government departments and lenders to develop further the debt recovery protocols and processes to enable consistency.
The number of defaults is to be reported by the Department for Business, Energy, and Industrial Strategy (BEIS) in its Annual Report and Accounts, so as the information is intended for future publication, the information currently held about loan defaults is exempt under Section 22 of the FOIA.
The operational information related to the debt recovery processes is commercial information, which if disclosed to the general public presents a risk to the scheme and the potential for an individual or business to find ways to avoid loan repayment. Non-payment of a loan invariably has an impact on the lender, the business, the taxpayer, the government as well as BBB, so we consider the information on the debt recovery process to be exempt from disclosure under Section 43(2) of the FOIA.
When we apply an exemption, we are required to explain what the exemption is and why it applies.
Section 22 (future publication)
Section 22 of the FOIA applies to information that is intended for future publication. It is a qualified exemption and subject to a public interest test.
The public interest factors in favour of disclosing the information:
There is always a general public interest in transparency and how Government and public authorities operate, make decisions, and spend money, and the purpose of the Freedom of Information Act is to enable the public to ask questions, be informed and engage with decisions and affairs that affect the public and society as a whole.
There is public interest in the BBLS because of the number of loans awarded and the sums involved and, although it is the lenders’ money being loaned, the government cover the initial 12 months interest payment (2.5%) and 100% of the outstanding loan if the borrower cannot repay.
There is a public interest in protecting public money and ensuring loans are repaid as well as preventing financial crime including fraud. The speed of the introduction of the BBLS, the number and value of the loans and the ongoing economic uncertainty has given rise to concerns about the estimated losses and potential for fraud.
The public interest factors in maintaining the exemption:
The BBLS provides a twelve-month payment holiday period, at which point initial payments will become due, and lenders will be able to determine if a loan is likely to default. There is a public interest in ensuring the data released about the rates of default is accurate and the publication in the annual report and accounts provides the appropriate time to enable lenders to carry out their debt recovery processes and confirm the loans that have defaulted once the twelve-month holiday period has expired.
Section 43(2) – Prejudice to commercial interests
Section 43(2) provides that information is exempt if its disclosure would, or would be likely to, prejudice the commercial interests of a person; a person can be an individual or any legal entity.
The disclosure of the debt recovery processes would be likely to prejudice the commercial interests of:
Lenders: At the point, a loan is made, the money belongs to the lender and as per the Loan Agreement, signed between the lender and BEIS as the Loan Guarantor, the lender is responsible for recovering the loans. Any opportunity that allows an individual to intentionally avoid repaying a loan affects the commercial interests of the lender.
Although the lender is covered by the government guarantee, they must still commit resources to the loan recovery process, which if the disclosure undermined this process, it may influence their decision whether to participate in future government – backed loan schemes.
Businesses: The loan scheme has provided much needed money to businesses, many of which will repay the loan. Any opportunity that allows an individual to avoid repaying a loan invariably affects the commercial interests of all businesses if lenders subsequently become more selective about who they loan money to or the schemes they become involved in.
If lenders are reluctant to participate in such schemes, it is likely that fewer businesses would have access to the finance needed to continue to trade or diversify.
Taxpayers: Loan repayment and debt recovery are key elements to any loan process. Any opportunity that allows an individual to avoid repaying a loan affects the commercial interests of the taxpayer as it will be government money that will repay the lender under the government-backed scheme.
Department for Business, Energy, and Industrial Strategy: BEIS is the Loan Guarantor for BBLS and therefore any opportunity that allows an individual to avoid repaying a loan affects the commercial interests of the government as they will have to cover the default loan.
Were the disclosure of the information to impact on the loan recovery, it is also likely to damage the trust that the government has with the lenders, which may affect the terms or willingness of lenders to participate in future schemes.
BBB: Work with lenders to deliver the BBLS and help define the operational activities that lenders adhere to. Hence, there is a reasonable expectation, not uncommon between business partners, that information related to key processes and operations are afforded a degree of confidentiality, which if disclosed to the general public is likely to damage the relationships between BBB and the lender and also increase the opportunity for someone to potentially avoid repayment.
Likelihood of prejudice
Relying on Section 43(2) requires us to consider the likelihood of the prejudice and whether it ‘would’ or ‘would be likely to’ occur. We believe the prejudice ‘would be likely to occur’ given the level of interest in the loans and the likelihood the information will be published further.
Public Interest Test
The purpose of the public interest test is to consider the circumstances of the request and weigh the public interest in maintaining the exemption against the public interest in disclosure. The public interest means the public good, not what is of interest to the public, and not the private interests of the requester.
The public interest factors in favour of disclosing the information are listed above under the Section 22 exemption.
The public interest factors in maintaining the exemption:
The loans are initially made by lenders who are required to pursue the debt, although work continues to look at a standard debt recovery protocol, the disclosure of the information would provide insight into the operations of lenders who are entitled to expect a rea sonable amount of confidentiality concerning their ways of working.
It is in the public interest that all parties involved in BBLS can ensure businesses repay the loans that have been made wherever possible. Loan protocols are important to that process, but it is also important that information is not disclosed that could be used to avoid repaying a loan.
It is in the public interest for the government loan schemes to be effective to ensure the relevant stakeholders, the lenders, businesses, government departments and BBB, have confidence in the schemes that have enabled around 1 .5m businesses access to money during unprecedented and uncertain economic times.
Finally, the financial services industry is an important part of the UK economy and there is a strong public interest in ensuring the financial sector can operate effectively. Lenders have established processes in place, which can be supported with standard protocols, without the need for the specific details to be disclosed to the public.
On balance, there is a general public interest in the disclosure of information, as greater transparency makes public authorities more accountable.
Against this, there is a public interest in ensuring that information is not released that may allow someone the potential opportunity to misuse information to avoid repayment of a loan resulting in the use of taxpayers’ money.
In consequence, we do not consider the release of the information to be in the public interest.