The boss of digital bank Starling has threatened to take legal action against the former anti-fraud minister over his comments about its Covid loans fraud record.
In a letter to Lord Agnew of Oulton, chief executive Anne Boden called the former minister's claims the bank's allegedly failed to stop fraudulent activity of state-backed Covid loans "wild accusations".
She wrote: "Your statements are defamatory and I must ask you to withdraw them. You say that you have no information to support your accusations, but you continue to repeat them despite Starling making it clear that you are wrong."
Swansea-born Ms Boden, who set up the mobile-only bank in 2014, repeated her request for Lord Agnew to withdraw his comments, threatening legal action if he did not, writing: “Starling reserves all its rights in relation to your defamatory statements.”
She further accused the former minister of criticising the bank to "exculpate yourself from the responsibilities that you accepted when you took the job as a minister.”
"We have only met once, on a video call during the pandemic when I explained to you how the scheme worked. I understand that you did not like the fact that I explained the scheme to you. I am not sure whether you were upset because you didn’t understand the scheme or because I had the audacity to speak up," she wrote.
The letter from the Starling boss follows the government's former counter-fraud minister publicly criticising the bank for its allegedly poor performance at preventing pandemic fraud.
Lord Agnew resigned as anti-fraud minister in January over the government’s failure to prevent and monitor fraud in the £47bn bounce back loans scheme.
In a speech at Westminster Abbey last month, The Times revealed that Lord Agnew singled out Starling saying it had “acted against the government and taxpayers’ interests” and was one of the worst banks for preventing fraud and flagging up suspicious activity.
He claimed that Starling had not taken its anti-fraud responsibilities seriously enough, adding that Starling was "one of the worst when it came to validating the turnover of businesses or submitting suspicious activity reports”.
“Of course, being new on the block most of their applicants were not already customers and so any reasonable institution would have been doubly careful before pouring the money out of the door. But the opposite happened," said Lord Agnew.
He further claimed that the bank had used the loan scheme to swell its “balance sheet by a factor of 50 times in barely less than a year, with no risk to themselves and 100 percent risk to the taxpayer”.
Ms Boden said she was shocked by Lord Agnew’s comments and demanded he withdraw his claims.
She said: "I am shocked by Lord Agnew’s comments. We have always been very open and transparent about our approach to BBLS lending and in fact I have described the process - chapter and verse - in my book. We have been one of the most active and effective banks fighting fraud and in fact in the Treasury Select Committee of 14th December 2020, I was asked why we were rejecting so many more applications compared to other banks.
"The comments raised by Lord Agnew about not checking the turnover of businesses or submitting suspicious activity reports are absolutely and utterly wrong and I must ask him to withdraw the statement."
Ms Boden added: "At no point did Lord Agnew ask us for any information about any of the issues he has raised. We attended one meeting at which he was present. Otherwise, his engagement with us was nil."
The former minister has refused to withdraw his claims unless the digital lender could prove it was not "one of the worst" performers on distributing state-backed emergency loans.
He told The Times: “I have no plans to withdraw my comments until I can see some data that puts my mind to rest.”
He has submitted a series of questions about the lender’s performance on the scheme.
The Bounce Bank Loan scheme was set up in April 2020 by the UK Government to keep trading companies afloat during the coronavirus pandemic.
It allowed businesses to borrow up to 25 per cent of their annual turnover up to £50,000, and meant borrowers had to self-attest their 2019 turnover to secure the loans.
A total of 1.6 million loans, underwritten by the taxpayer, worth £47bn were issued through the initiative.
Lord Agnew has previously said that the scheme was a "vital intervention at an extraordinary time" but that it was "dreadfully implemented".
The government estimated more than a third of loans will never be repaid due to fraudulent activity and legitimate borrowers defaulting.
State-guaranteed loans were handed out with only light checks on borrowers.
During the coronavirus pandemic, Starling Bank gave out £1.4bn in Covid bounce back loans to its business account customers, with 66% of recipients based outside of London.
Earlier this year, Ms Boden told BusinessLive Wales that all banks were mandated to carry out very rigorous fraud checks.
“The bounce bank loan scheme was intended to get loans of up to £50,000 to small businesses as quickly as possible. Starling did all those checks,” she said.
“With a scheme of that size there was always going to be fraud. But there’s no expectation at the moment that, in the scheme as a whole, that fraud will be more than anticipated.”
Ms Boden added: “If a bank has not carried out the processes as they were defined, then the bank has to take responsibility. I can only speak for Starling but we did all the fraud checks necessary. I think the majority of banks did that as well.”
“The overall percentage of fraud is probably within the expected levels set at the start of the scheme.”
As of March 31 last year, £2.07 billion of Starling’s £2.23 billion loan book was underwritten by the state thanks to its use of emergency schemes. The bank has since diversified its loan book.
The fast-growing fintech venture has three million customers in the UK and is likely to float on the London Stock Exchange over the next two years. Last month saw its Cardiff operation grow to nearly 900 staff, far exceeding initial job creation forecasts.
The firm originally committed to creating 400 jobs when unveiling its office investment at Brunel House in the Capital back in 2020. However, that swelled to 868 - an increase of 117% on the initial business plan.
