An online lender has given hundreds of PPP loans to bogus farms. Now Congress is investigating.
A House committee has launched a formal investigation into how several online lenders may have facilitated fraudulent Paycheck Protection Program loans, following a report by ProPublica and other media.
The House Selection 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 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 properly review PPP loan applications for fraud,” said subcommittee chairman James E. Clyburn. , a Democrat from South Carolina. “This failure may have led to millions of dollars in FinTech-facilitated PPP loans to fraudulent, non-existent, or otherwise 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 which revealed that financial technology companies represented an inordinate amount of the fraud that plagued PPP. since its creation.
Last week, ProPublica revealed that Kabbage had processed 378 loans worth a total of $ 7 million to individual businesses that do not appear on 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 performed 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 all records of potential fraudulent activity on the platform, documents outlining the resources devoted to fraud detection, and descriptions of how the company recruited employees. PPP applicants and how it prompted loan reviewers to process more applications.
These issues primarily involve Kabbage’s behavior before he became part of American Express, which did not acquire Kabbage’s loan portfolio and its service arm, which are now incorporated as a separate company. The new company, called K Servicing, continued to process new PPP requests as well as 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 complied with all required fraud protocols and reported suspicious loans to the SBA, referred questions to K Servicing. Spokesmen for K Servicing, BlueVine, Cross River and Celtic Bank did not respond to requests for comment.
This story was first published by ProPublica on May 28, 2021.