Policy background Bounce Back Loan Scheme (BBLS)
The BBLS was designed in response to the ongoing need for small businesses to rapidly access loans as a result of the economic disruption that has been caused by the outbreak of Covid-19.
	Usually, lenders providing small business loans require those businesses to provide extensive evidence of past financial data and examine their business plans and financial forecasts. Some of these small business loans are also subject to extensive and complex information disclosure requirements under the Consumer Credit Act 1974 (CCA), its subordinate legislation and Financial Conduct Authority (FCA) rules because they fall within the definition of regulated credit agreements. However, this is not appropriate in the current circumstances, first because of the significant uncertainty caused by the Covid-19 pandemic, which makes such forecasts challenging, and because these processes are time and resource intensive for the lender and so would inhibit lending at the scale and pace required to respond to this crisis.
	Instead, reflecting the current circumstances, the scheme allows lenders to rely on self-certification by the business that they meet the eligibility criteria for the scheme and that they can afford to pay back the loan. It also provides for simpler information disclosure requirements to the borrower. However, lenders will continue to carry out fraud and know-your-customer checks.
	For lenders to be able to change their lending practices in this way, it has been necessary for the Government to make legislative changes. The first set of legislative changes was effected through the Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020 (S.I 2020/480), which amended the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ("the Regulated Activities Order"). This amending Order came into force on 4 May 2020, the day the BBLS was launched. The effect of this amending order is that, with the exception of debt collection activities, loans made under the BBLS of £25,000 or less to individuals (such as sole traders), unincorporated bodies of persons or partnerships of fewer than four partners will not be regulated credit agreements and therefore not subject to the majority of provisions in the CCA, its subordinate legislation and the FCA’s rules on consumer credit. This removes a range of regulatory obligations on the lender, including around detailed information disclosure provisions and affordability tests, that would otherwise have inhibited the operation of the scheme.
	This Act makes further legislative amendments necessary for the BBLS to operate effectively. The Act removes the application of sections 140A to 140C of the CCA, referred to as the "unfair relationship provisions", to BBLS loans. These provisions could not be disapplied through the Financial Services and Markets Act 2000 (Regulated Activities) (Coronavirus) (Amendment) Order 2020. The unfair relationship provisions give the court broad powers to make an order where it determines that the relationship between the lender and the borrower is unfair to the borrower. The unfair relationship provisions currently apply to all loans to individuals (such as sole traders), unincorporated bodies of persons and partnerships of fewer than four partners under the BBLS, including loans of more than £25,000 to this group of borrowers.
	Lenders have indicated that if the unfair relationship provisions were to continue to apply to BBLS loans, they would need to continue with many of the processes, in particular the affordability tests, which lengthen the loan application process, or face an unreasonable level of legal risk that the courts will subsequently conclude that the loan agreement gave rise to an unfair relationship – particularly if there was little prospect of the loan being repaid. The disapplication of the unfair relationships provisions to loans made under the BBLS allows lenders to shorten the application process in line with the intention of the Scheme. Accordingly, and in order to facilitate lenders offering BBLS loans at the scale and pace required, it is necessary to introduce this measure to amend section 140A of the CCA with the practical effect of disapplying the unfair relationship provisions for all loans made under the BBLS to individuals (such as sole traders), unincorporated bodies of persons and partnerships of fewer than four partners.