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Will the pandemic cause potential litigation to banking and finance?


Financial institutions have become accustomed to cyclical turbulence, which has helped to mould their resilience to challenging events during the new coronavirus outbreak. The sudden shutdowns in the United Kingdom and the United States drove a historic downturn that has seen the UK economy shrink by 20% and interest rates slashed to near zero (DLA Piper, n.d.). It has led to many health, human, social and economic issues, with the real future impact lingering within the shadows. This economic distress has been postponed by initial government relief but corporate sentiment is now characterised by uncertainty and caution about the future. Litigation expresses the process of taking legal action and is the consequence of uncertainty. This uncertainty becomes very prevalent during a global pandemic and leads institutions to face a broad range of COVID-19 related lawsuits because of this primed landscape.

Although within the bigger picture, the financial services sector is in a more senior position to survive the shockwaves of the pandemic, it is still susceptible to risk. The greatest risk posed to the international financial services sector are surprisingly more indirect and are arising from banks’ “front line involvement in governmental relief efforts, exposure to customers in the hardest hit industries, and the challenge of maintaining operations in a shifting political, regulatory and technological environment”. One of the most emerging legal trends is the government loan programmes potentially causing litigation risk. In response to the issues that came with the pandemic, the UK and US Federal governments introduced a series of loan programs designed to protect small to medium-sized businesses, shore up employment, and prevent an eviction crisis in the face of a sudden and sustained loss of revenue (DLA Piper, n.d.). Some of these many, varied financial assistance schemes for business include the ‘Coronavirus Business Interruption Loan Scheme’ (CBILS) by the UK and was established to support businesses that needed finance to survive the challenges brought by the epidemic so that they can recover afterwards as they have the ability to access financial support of up to £5 million if they had been adversely affected by COVID-19 (British Business Bank, n.d.). Whilst vast amounts of CBILS loans have been issued, there is a potential for generating and/or contributing to disputes between applicant and lender. Dispute can be built by discretionary roles required of the banks and the high existential stakes at play for the applicants. Intertwined with this are multiple other social pressures such as the unrealistic expectation of applications being assessed and reported back quickly. Moreover, there is compulsion in the loan diligence process by remote working.

Fortunately, not many claims have surfaced in the UK because of this. Contrasingly, the PPP loans in America clearly pose a legal challenge. Lawsuits often allege improper PPP loan prioritisations based on factors like loan amount, origination fee amount, size of applicant, and pre-existing relationships. Furthermore, more conflict may have risen because of scenarios such as borrowers’ using PPP funds and loan forgiveness and state enforcement actions arising from lenders’ failures to comply with a developing regime of new state and local relief measures. (DLA Piper, n.d.). An example of the possible misconduct of PPP funding was recently highlighted in a lawsuit, filed by a Maryland business, against the Bank of America allegedly arguing that ‘it prioritized existing clients when awarding coronavirus loans’ (Reply, 2020). The Bank of America was suspected of putting “privileged discriminatory policies of corporate greed over the needs of America’s small businesses” when utilising Coronavirus Aid, Relief, and Economic Security Act measures that were intended to strengthen small businesses during the outbreak. An accusation was made that they unfairly favoured clients and other small businesses applying for aid. The plaintiff, Profiles, that made this accusation did this because they were shocked to find out they were unable to make a loan application for the program with Bank of America; regardless of them meeting the eligibility requirements under the program. This led them to suggest the only reason the Bank of America will not offer Paycheck Protection Program loans to non-loan holders is because of utter corporate greed. The owner continued on to saying “the purpose and motivation behind BOA’s discriminatory practice is transparent'' due to the prioritisation of their balance sheet at the expense of the small businesses, thus there not being a true lending relationship with the bank. This lawsuit acts as a key example for possible future legislation as the economic side of businesses worsens during the pandemic.

Moreover, due to the pandemic converting everyday interactions into online digital-based services, there is a race between all businesses to follow up this needed transformation. This perfectly acts as a common ground for cybercrime and fraud to occur however. Executed scams range from fake investment opportunities, insurance policies and pension transfers advertised over social media. It can involve phishing schemes; using fake emails from government departments offering access to grants, pandemic relief funds and even trax reducts. Other forms of this scamming include malware, spyware and Trojan viruses (nidirect, 2016) embedded in websites where the criminal can pose as a known counterparty and redirect funds from the victims to themselves (DLA Piper, n.d.). Targeted victims for perpetrators do not just include bank customers themselves, but also the bank too because bank employees are vulnerable to these threats. Therefore, new challenges are introduced as it stresses the need to observe data protection, compliance and other industry specific requirements, avoid unfair competition and prevent fraudulent transactions, especially wire transfers (, n.d.). The areas of the bank that deal with customer records are also targets for more sophisticated cyber-attacks such as attempts to obtain confidential customer information by hacking video conferencing, meetings and communications software. Therefore, there is an increasing focus on this matter as it will only become more prevalent as more things become digital.

Overall, it leads you to question whether any good will emerge from this. Good may arise from the blatant necessity of further protection being put in place due to digitisation. It becomes rather perspicuous that the litigation fears are mainly a threat from customers and so consequently, this will need to be combatted as banks and the finance sector endure the effects of the latter’s disruption and difficulties. There should be an automatic assumption made by banks that there will undoubtedly be issues regarding lender liability and disputes due to insolvency proceedings claims. It is vital to exaggerate the fact that there is no sense of ‘normal’ anymore and that as a bank, they hold a key role to move with the future and develop a stronger economic headwind as a response to the pressure. Practical steps that could be possibly taken in the future is the insurance that all lending criteria against which specific loans are assessed is consistently adhered to and documenting refusal of loans making these guidelines for loan availability clear to customers to prevent customer litigation. Ultimately, to avoid litigation risk, companies should implement monitoring programmes that have the ability to track trends in customer complaints and claims. This would in turn reduce the severity and increase effective responses, proving to be very beneficial in such a distressing time.


British Business Bank. (n.d.). Coronavirus Business Interruption Loan Scheme (CBILS). [online] Available at:

DLA Piper. (n.d.). The gathering storm: COVID-19-related disputes in the financial services sector – A transatlantic perspective | Insights | DLA Piper Global Law Firm. [online] Available at: [Accessed 28 Jun. 2021].

KPMG (2020). COVID-19: Impact on the banking sector - KPMG Global. [online] KPMG. Available at:

nidirect. (2016). Online scams. [online] Available at: [Accessed 28 Jun. 2021].

Reply (2020). Bank of America Class Action Claims Unfair COVID-19 Loan Practices. [online] Top Class Actions. Available at: [Accessed 29 Jun. 2021]. (n.d.). Banking and financial litigation amid and after the pandemic – fivehundred. [online] Available at: [Accessed 28 Jun. 2021].


[A] - (n.d.). Cashing in on the pandemic: how lawyers are preparing to sue states over COVID-19 response measures | Corporate Europe Observatory. [online] Available at:


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