Business and Planning Bill — House of Lords, 2020-07-20
Topic: Domestic Commerce
Michael German (Liberal Democrats, Centre to centre-left): My Lords, I support this amendment, tabled by my noble friend, because, put simply, it would do two things. First, it would put beyond doubt the protection which borrowers of bounce-back loans have against their lenders pursuing punitive action if they default. Secondly, given the relatively low take-up of these important loans, it would give reassurance to companies seeking to use the facility provided by the Government as essential finance to keep them in business and retain employment Companies may have been, or are, hesitant to take out these loans for a variety of reasons. For example, they might be worried about repayment, the ongoing viability of their business or whether they wish to continue trading. But to respond to these fears, the Government must assist by providing the maximum level of certainty on what happens if the borrower cannot repay the loan. The guarantee to the lenders is that the Government will bear the cost of defaulting. This is very welcome, but that guarantee is given to the lender and not to the borrower. There is some protection in place to prevent the lender taking further actions against the borrower, but the legislation before us takes away most of the ultimate protections for a borrower—to have recourse to the courts My noble friend has outlined these issues in great detail. I am grateful to her for the forensic manner in which she laid out the borrower protection arguments for this amendment. I will not repeat the detail on the missing protections that she has given Taking the two reasons I have outlined for supporting this amendment separately, on the first it is clear that many lenders, mostly large high-street banks, will already have banking arrangements with those who are seeking or have taken out these bounce-back loans. In Committee, I quoted examples of this relationship possibly being used to influence the behaviours of lenders. Put simply, they have financial power over their borrowers through that continuing relationship with them. Other lenders, many of them now trying to lend money under these schemes, have difficulty in getting their hands on the 0.5% interest cash that the Government have made available to lend, largely because the big banks will not funnel these funds through to them, on the "Why should we help our competitors?" principle. This means that the big banks will have a bounce-back loans advantage, most frequently with their existing customers On the second reason, the Government estimate that many more of these loans will be needed—perhaps four times as many—to protect small companies from going under, given the consequent unemployment that would cause. These loans need to provide protection for the borrower in a way which will not deter them from proceeding. The fallback of court protection from the poor behaviour of the lender provides a higher level of reassurance to borrowers, in line with the current legislation I share the Government’s hope that these loans can provide a lifeline to many companies. They are a very good response to the pandemic. This amendment would support the Government’s ambition and strengthen the case for businesses considering taking out these loans by removing the concern that default could lead to unfair sanctions being imposed on them.