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Nicola-mod, Moderator
Category: Law
Satisfied Customers: 21
Experience:  Moderator
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I took a bank loan out to buy a business. I didnt proceed with

Customer Question

I took a bank loan out to buy a business. I didnt proceed with the sale as the lease was not as they said it should be. The bank are now saying that this is fraud and want their money paid back that they paid into my account. Is this fraud? I cant see how, as it was in my own name and just because i never actually bought the business and changed my mind i cant see why they are accusing me of fraud.
Submitted: 4 years ago.
Category: Law
Expert:  Alice H replied 4 years ago.
Hello and welcome to Just Answer.

My name is Alex and I'm happy to help with your question today.

Are you going to repay the loan if its not being used for its intended purpose?
Customer: replied 4 years ago.

Yes, I have already made 2 loan repayments towards the loan. the 3rd is due next week.

Expert:  Alice H replied 4 years ago.
I understand. But what have you used the money for?
Customer: replied 4 years ago.

Nothing. It is sitting in my savings account while i look for another business to buy. Is that not legal?

Expert:  Alice H replied 4 years ago.

In simple terms, to prove fraud, the bank would have to establish that, when you applied for the loan, you were (i) dishonest or (ii) made a false statement or (iii) deceived them.

The fact that a business deal fell through does not mean necessarily you were dishonest. However, if there was no business deal and you dishonestly obtained the loan or made a false statement to get it, then you could be liable to repay the full sum even though you are repaying the debt.

So the issue is whether the information you gave the bank to obtain the loan was true. If the information was untrue then they can demand repayment of the full sum. Failure to do so could give them grounds to sue for breach of contract and/or civil fraud or (although this is rare) investigate whether you have committed a criminal offence of fraud.


Customer: replied 4 years ago.

I was not dishonest. I told them that i needed the business loan to proceed with a sale of a business in my own name. They knew i didnt have the keys, and spoke to my lawyer on the day the money was transferred so they knew the business had not been purchased. Nothing untrue was said. So, it cant be fraud can it?

Expert:  Alice H replied 4 years ago.
I agree.

But the money is not being used for the purpose for which it was borrowed so strictly speaking you could still be in breach of loan agreement.

Customer: replied 4 years ago.

In realistic terms though if i continue to make the loan repayments would they really consider trying to pursue a fraud charge against me?

Expert:  Alice H replied 4 years ago.
Yes they could try.

I suppose it really depends on the amount of money involved.

I'm assuming it must be a large sum otherwise they probably wouldn't be interested.

But strictly speaking even if you continue making the repayments you would still be in breach of the agreement if the money has not been used for its intended purpose.

Its difficult to see how this could be fraud but you have to consider whether you options:

1. Repay the entire loan and avoid any further aggravation.

2. Refuse to repay the loan with the possibility of collection activity and/or possible investigations into civil/criminal fraud.

Customer: replied 4 years ago.

It was £32,000.

Do you think i have reason to worry?

I am just going to continue to pay the monthly repayments.

Expert:  Alice H replied 4 years ago.
Unfortunately I can't answer that question because I don't know exactly what the bank's stance is going to be. But if they're already talking about action to recover the money then its probably safe to assume that this is what they'll do.
Expert:  Nicola-mod replied 4 years ago.

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