Starling Bank Complaints – Sole Traders Mass Declines for Bounce Back Loan Scheme

Whilst there have been masses of complaints against Starling Bank‘s handling of its Bounce Back Loan applications amongst sole traders, this article aims to address the facts, misconducts and information based on evidence, whether it be via data acquired or direct quotes from Starling Bank CEO, Anne Boden. We’ve sought guidance from professionals in the fields of banking, finance, legal and technology.

Table of Contents

For easier reading, we’ve divided this article into multiple sections which you can link to directly below.

The calm before the storm

On May 11th 2020, after many weeks of planning, Starling Bank opened its Bounce Back Loans application to Limited Companies, followed by Sole Traders on May 12th 2020. This initial staggered process seemed a logical and well-devised approach, as applications tend to be at its highest on the first day of launch. This would allow time to process a large portion of applications first, before opening doors to further applicants.

Logistically, it also allowed Starling Bank that extra bit of time to finalise the process required for sole traders. Sole traders were required to submit extra documentation such as previous tax returns, tax calculations and VAT numbers where applicable. Those whom started trading after 6th April 2019 where made to complete their 2019/20 tax returns 8 months earlier than required if they wanted to apply.

The first day of BBLS launch seemed to be well handled, with many applicants stating they received payments within minutes or hours. Starling Bank’s Twitter feed remained informative throughout the day and night. However, problems started to arise the moment sole trader applications opened the following day.

Cracks begin to show

The benefit to banks of Limited company applications, is data is publicly available. Verification can therefore be automated. This is not the case for sole traders, so the need to have sole traders provide some sort of evidence of trading made complete sense. This would involve manual review, which of course would take some extra time. However, as the minutes, hours and days progressed, it became clear that time wasn’t the primary issues with Starling Bank’s handling of sole trader BBLS applications.

Errors, inconsistency and misconduct

Initial contradictions came as a result of ever-changing document requests by Starling Bank from sole traders. These changed so regularly before opening of applications, that Starling Bank’s social media team frequently gave incorrect advice to sole traders querying the documents required. Further teething problems arose when VAT registered sole traders were prevented from correctly submitting their VAT numbers (required for new sole traders with an estimated turnover above £85k) due to poor input field coding within Starling Bank’s application form. Whilst these issues did occur, one positive was the fact that Starling Bank’s website never underwent any major issues with server load. Unfortunately, the aforementioned issues are a pinch of salt compared to what occurred on Friday 15th May 2020, and the misconduct it shed light to.

Misconduct 1: Breakage of Terms

Starling Bank, and every other bank who signed up to become providers of the Bounce Back Loan Scheme were made fully aware of how it should operate and the fact that lenders should “not conduct any form of credit or affordability check”. This is a direct quote from Paragraph 13 of the BBLS Declaration as shown below via the screenshot taken from Starling Bank’s application form.

The Declaration clearly states “any form” of credit check. This includes “soft checks”. Whilst Starling Bank regularly stated they carry out soft checks and it “will not have any influence” on an application, they still clearly break the terms of the scheme. Additionally, they knowingly give false information by stating it is not used as a basis of approving or denying applications. This is discussed further, below.

Misconduct 2: Intentional False Information

Starling Bank has stated in hundreds of tweets, and via its website (now removed by the Starling Bank team but still viewable here) that their soft credit checks are simply for Identity Verification and will have no influence on whether an applicant receives the Bounce Back Loan or not. This was clearly intentional false information. There are two clear pieces of evidence for this:

Most significantly, Anne Boden confirms in her own words that declines were based on sole traders’ credit history. She also makes some further statements which will be looked at in detail, below:

Statement 1:
“…we decided to decline applications from sole traders in higher credit risk categories. We believe that it’s not responsible to offer a loan to self-employed individuals when we believe there is a high likelihood of them being unable to repay”. – Anne Boden, as published on FinTech Global.

Statement analysis:
The statement reads as though the decision was made in an attempt to, somewhat, favour these applicants. The problem here is, Anne Boden was made fully aware of how the scheme would operate prior to applying to become a BBLS provider. It was clear from the scheme being announced that credit risk would not, and should not, be a factor. If this was something Boden was not comfortable with, it made no sense to take part in the scheme. Her statement also confirms Starling Bank’s breach of terms.

Statement 2:
“…This does not mean that the bank agrees not to perform credit or affordability checks. Rather, it means that the customer is allowing the bank to lend without completing these checks” – Anne Boden, as published on FinTech Global.

Statement analysis:
This is a clear attempt to work around the terms of the scheme. However, the terms are made abruptly clear: “The lender will not conduct any form of credit or affordability check…”. There are two very important parts to this statement; “will not” and “any form”. This statement categorically states checks will not be carried out. It does not say that it is at the lender’s discretion to carry out credit checks. Likewise, use of the words “any form” in regards to credit/affordability checks, means it includes any type of credit or affordability check including “soft checks”. Soft checks are still a form of credit checks.

Further to the above, there is no reason as to why additional Identity Verification should be carried out on sole traders. A thorough Identity Verification process already occurs when a sole trader opens an account with Starling Bank. It is also important to note that these soft checks carried out during the BBLS application process can in no way inform Starling Bank of whether a sole trader is in-fact a sole trader, meaning these checks were not used for that purpose either. The documents provided by sole traders give a substantial amount of data already, including Tax Returns, Tax Calculations, National Insurance Number, Unique Taxpayer Reference (UTR), name, address, profits and VAT number (where applicable). Coupled with the already-done ID checks when opening an account with Starling Bank (passport, drivers licence, KYC facial videos etc), and the ability to use the electoral register too, this should have provided enough information for ID verification purposes.

Another red herring exists – should applicants assume a BBLS decline was made for their own good as a result of poor credit, this raises even more questions around the sole trader applicants whom were rejected without being credit checked yet had fit the eligibility criteria. For what reasons could they have been declined?

Misconduct 3: Evidence Based on Rejection Timing

Thousands of sole traders were declined between 6pm and 7pm last Friday 15th May 2020. Many applicants formed groups via Whatsapp, Twitter and Facebook where they could update each other on progress. These groups allowed for real-time analysis of when decline emails were received from Starling Bank. Dubbed “mass declines”, over a thousand verifiable sole traders were denied during this one hour window. There is no doubt that many more mass-declined sole traders exist outside these groups.

This brings forward the possibility to assess whether any applications were declined without even being reviewed; the answer is yes. Many sole traders whom applied within the 6pm – 7pm window last Friday have evidenced that they were denied within seconds to minutes of applying. This, in reality, leaves no time for an application or documents to be properly reviewed. Soft checks were also not carried out, meaning many applications were in fact declined for no reason, and without consideration.

Partial Conclusion

This article touches on just some of the poor practices carried out by Starling Bank in regards to the Bounce Back Loan Scheme. Depending on how the situation develops, we will update this article over the coming days/weeks.

It is recommended that should you feel your Bounce Back Loan application was unjustly declined, you file a formal complaint with Starling Bank and then the Financial Ombudsman (in that order).

Should Starling Bank wish to rectify these issues, there are three recommendations; (1) Withdraw as a provider from the Bounce Back Loan Scheme and provide substantial compensation to the sole traders wrongfully declined (based on the terms of the scheme), (2) remain on the Bounce Back Loan Scheme, provide substantial compensation to sole traders wrongfully declined (based on the terms of the scheme) and rectify your process to match the terms for which you signed up to, or (3) review all declined applications by following the original terms of the scheme, for which you were aware of and agreed to before joining as a lender, and rectify your process to match the terms for which you signed up to.

20/05/2020 Update

Starling Bank has just announced via Twitter that it will be using the Tide.co approach by having a “Register Interest” form exclusively for its existing customers.

There are two main things to note here; (1) this is an approach which could have been implemented at launch, should effective planning have been put in place, and (2) this may well be a smoke-screen attempt to pause applications whilst they are being investigated. A tactic highly used in business.

21/05/2020 Update

The British Business Bank has finally made a public statement regarding lenders carrying out credit checks on Bounce Back Loan applications. The BBB confirms that lenders “cannot undertake credit checks or affordability checks under the Bounce Back Loan scheme”. View the full tweet here, and a screenshot below.