An online lender has given hundreds of PPP loans to bogus farms. Now Congress is investigating. – ProPublica
A House committee has launched a formal investigation into how several online lenders may have facilitated fraudulent Paycheck Protection Program loans, following reports from ProPublica and other media.
The House Screening Subcommittee on the Coronavirus Crisis Inquiry is seeking answers from Kabbage and BlueVine, online lending platforms that have processed hundreds of thousands of government-guaranteed loans to de small businesses, as well as Celtic Bank and Cross River Bank, which have frequently associated with the Web. based lenders.
While these highly automated lenders helped the Small Business Administration’s $ 800 billion relief program reach small businesses that weren’t served by traditional banks, they also became targets for cheaters.
“I am deeply troubled by recent reports alleging that FinTech lenders and their banking partners have failed to adequately screen PPP loan applications for fraud,” said the chairman of the subcommittee. James E. Clyburn, a Democrat from South Carolina. “This failure may have led to millions of dollars in FinTech-facilitated PPP loans being granted to fraudulent, non-existent, or ineligible companies.”
The subcommittee’s letters to the targets of its investigation cited articles published by Bloomberg, the Miami Herald, Project on Government Oversight and ProPublica that revealed that fintech firms were responsible for an inordinate amount of fraud that hit the PPP since its inception.
Last week, ProPublica revealed that Kabbage had processed 378 loans with a collective value of $ 7 million to one-person businesses that do not appear in their respective state company records. The overwhelming majority identified themselves as farms, usually registered at residential addresses with no discernible agricultural activity.
“The illegitimacy of these so-called farms – including the potato fields in Florida and the orange groves of Minnesota – would have been evident if even the bare minimum of due diligence had been carried out on loan applications,” the sub wrote. -committed in its letter to Kabbage, which was acquired by American Express last fall.
The letter demands a long list of documents, including records of potential fraudulent activity on the platform, documents outlining the resources devoted to fraud detection, and descriptions of how the company recruited candidates. PPP and how it got loan reviewers to process more applications.
These matters primarily involve Kabbage’s conduct before it became part of American Express, which did not acquire Kabbage’s loan portfolio or its service arm, which are now incorporated as a separate company. The new company, called K Servicing, continued to process new PPP requests and close those in the first round.
Kabbage is also said to be the subject of an investigation by the Justice Ministry into how he calculated PPP loan amounts.
A spokesperson for American Express, who previously said Kabbage followed all required fraud protocols and reported suspicious loans to the SBA, addressed questions to K Servicing. Spokesmen for K Servicing, BlueVine, Cross River and Celtic Bank did not respond to requests for comment.