Lloyds Bank PLC · DRN-6181450

The complaint Ms T is unhappy that Lloyds Bank PLC consider her liable for an outstanding Bounce Back Loan (“BBL”). What happened Ms T, a sole trader, successfully applied to Lloyds for a £9,000 BBL in March 2021 and received the loan funds into her business account that same month. In July 2024, Ms T complained to Lloyds because her financial circumstances had deteriorated and she was unable to repay the BBL in line with the contractual terms. Ms T also felt that because the BBL was ‘government backed’ via the BBL guarantee which meant that the UK Government should repay the loan to Lloyds on her behalf. Lloyds responded to Ms T and explained that the BBL guarantee was provided to lenders, such as themselves, and not to borrowers. Lloyds also didn’t feel that they were doing anything wrong by continuing to consider Ms T liable to repay the loan and didn’t uphold her complaint. Ms T wasn’t satisfied with Lloyds’ response, so she referred her complaint to this service. One of our investigators looked at this complaint but didn’t feel that Lloyds were treated Ms T unfairly as she felt was the case. Ms T didn’t agree, so the matter was escalated to an ombudsman for a final decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Under normal circumstances, when a business applies for a loan, the lender will undertake a creditworthiness assessment of that business. This is so that the lender can assess whether it is willing to lend to the applicant business and on what terms. Conversely, the lender can decide to decline the loan application if it considers that the applicant business presents too high a risk that it won’t be able to repay the loan it’s applying for. As the Covid-19 pandemic developed in 2020, the UK Government was faced with a problem. The social restrictions necessitated by the pandemic were having a catastrophic effect on small businesses, but loan providers such as Lloyds had little appetite to provide loans to the affected businesses because there was a clear risk that businesses might not survive the pandemic and be able to repay the borrowing back to them. As a response to this problem the UK Government developed the BBL scheme. Under this scheme, lenders such as Lloyds would benefit from the BBL guarantee, which meant that if a BBL account holder couldn’t repay the loan, the UK Government would repay the loan (so long as certain conditions were met) so that the lender didn’t lose money by providing a loan to an applicant that, under normal circumstances, they wouldn’t have lent money to. Ms T has said that she believed that the BBL guarantee would apply to her, the borrower, so

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that if she took the loan and couldn’t repay it the UK Government would pay it on her behalf. Unfortunately, Ms T’s belief in this regard was mistaken, and as explained above the guarantee was provided to the lender, so that the lender would provide loans during the unprecedented circumstances surrounding the pandemic that they would have had no appetite to have provided without such a guarantee. Furthermore, because the UK Government correctly anticipated that lenders would receive a large number of applications for BBLs, the requirement for a creditworthiness assessment was removed from the scheme. Instead, the scheme was self-attested, meaning that borrowers declared their eligibility for the scheme and that declaration wasn’t checked. In short, if you applied for a BBL and declared you were eligible, you got the loan. Ms T has said that she applied for a BBL tentatively, with a view to learning what she was eligible to receive. But a tentative application is still an application and included a declaration of eligibility. And because the onus was on lenders to provide loan funds to applicants quickly, Ms T received the loan funds that she applied for in short order. If Ms T hadn’t wanted the loan she could have returned the funds at any time within the first twelve months without penalty and only paid the interest that was accruing on the loan balance during that time. But Ms T didn’t do this. Indeed, Lloyds have shown that Ms T moved a significant portion of the loan funds from her business account to her personal account. This was not allowed by the terms and conditions of the loan, which included that the loan funds must be used for business purposes. Ms T may question why, if the UK Government will repay Lloyds via the BBL guarantee, Lloyds are still pursuing her for the loan. But as I alluded to above, the BBL guarantee is dependent on certain conditions being met, and one of those conditions is that a lender does everything that they can to recover the money from the borrower, both before and after the lender is reimbursed via the BBL guarantee. And if the lender can recover money from the borrower after the BBL guarantee has been enacted, the lender must repay that money to the UK Government, to reduce the loss incurred by the UK Government on the lending. Upon consideration of all the above, I don’t feel that Lloyds have acted unfairly here and it follows from this that I won’t be upholding this complaint. I appreciate that Ms T may not have understood the terms of the BBL, but that isn’t Lloyds’ fault, and by her own admission Ms T didn’t read the terms of the loan before she applied for it. I note the difficult personal and financial circumstances that Ms T has described in her submissions to this service. But in providing the BBL to Ms T upon her self-attested application for the loan, Lloyds acted as they were expected to. And, ultimately, Ms T has had the benefit of the money she applied for, and it therefore feels fair to me that she should be considered liable to repay it. I hope that Ms T will understand, given what I’ve explained, why I’ve made the final decision that I have. My final decision My final decision is that I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Ms T to accept or reject my decision before 25 March 2026. Paul Cooper Ombudsman

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