Lloyds bank says fraud rate for COVID loans is five times normal levels

FILE PHOTO: Customers use ATMs at a branch of Lloyds Bank in London, Britain, February 21, 2017. REUTERS/Toby Melville

LONDON (Reuters) - The rate of fraud for state-backed loans to small companies in the COVID-19 pandemic is about five times normal levels, a senior Lloyds bank executive said on Monday.

Banks in Britain came under huge pressure to process billions of pounds of so-called ‘bounce back’ loans to companies struggling to stay afloat in lockdowns since March to fight the pandemic.

“We have gone to great lengths to stop fraud on bounce-back loans,” David Oldfield, chief executive of Lloyds’ commercial banking arm told parliament’s Treasury Select Committee.

There was evidence of fraud on 3% of loan applications, whittled down to less than 1% following further checks, still five times higher than on normal loans, Oldfield said.

There was a trade off between checking for fraud and getting money into customers’ account quickly, typically the following day, Oldfield said.

Reporting by Huw Jones, Editing by Iain Withers