![]() ![]() Kabbage, which was struggling at the beginning of the pandemic and had to furlough its employees, surpassed megabanks to become the second-largest PPP lender by application volume, ultimately approving more than $3 billion in PPP loans and taking in an estimated $145 million in fees. Similarly, a recent McClatchy investigation found that 20 percent of 75 suspect loans had been approved by fintech company Kabbage. While fintechs processed just 15 percent of PPP loans overall, they are associated with 75 percent of the PPP loans that the Department of Justice has connected with fraud. These include financial technology companies (fintechs) that provide myriad financial services powered by technology, such as BlueVine Capital and Kabbage, as well as banks and nonbank lenders that work with such companies, including Cross River Bank, Celtic Bank, and Ready Capital. In an effort to distribute the money faster, on April 14, SBA has allowed web-based companies into the program. ![]() At the same time, some lenders appear to be having more fraud cases than others. ![]() The House of Representatives’ Select Subcommittee on the Coronavirus also recently determined that “a lack of oversight and accountability from the Treasury Department and Small Business Administration (SBA) may have led to billions of dollars being diverted to fraud, waste, and abuse, rather than reaching small businesses truly in need.” Additionally, it found that 99.4 percent of PPP loans were left with little or no oversight given Treasury’s and SBA’s commitment to audit only PPP loans in excess of $2 million.īased on the small sample of cases brought by the Justice Department to date, which represent about $175 million in alleged fraud, up to 5 percent of PPP loans raise red flags. Source: the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) Overall, the number of fraud reports in 2020 is 530 percent higher than it was in 2019. In July, lending institutions reported nearly seven times the average monthly number of suspicious activities to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Between April 3 and May 6, 2020, the Paycheck Protection Program (PPP) released $525.8 billion in loans, “ an amount representing more than 20 times the largest year in SBA’s history in just 33 days.” But that speed comes at a cost. ![]()
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