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Fintechs Kabbage, BlueVine at Heart of Investigation Into Fraudulent PPP Loans  

Congress has opened an investigation into the activities of several fintech firms and their partner banks after learning of widespread fraud related to Paycheck Protection Program loans offered in the wake of the COVID-19 pandemic.

fraud 2695269 1280Rep. James E. Clyburn, the chairman of the Select Subcommittee on the Coronavirus Crisis, said letters were sent to Kabbage, Inc., BlueVine, Cross River Bank and Celtic Bank as the companies were linked to a “disproportionate number of fraudulent PPP loans.”

The loans were the result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed by Congress to, among other things, aid small businesses and organizations in withstanding the economic damage of coronavirus crisis. The loans were issued to cover payroll, utility payments and rent. According to the committee, the Small Business Administration (SBA) permitted both non-bank and “non-insured depository institution lenders, including fintechs” to begin providing some of the eligible loans as applications mounted.

“I am deeply troubled by recent reports alleging that financial technology (FinTech) lenders and their bank partners failed to adequately screen PPP loan applications for fraud,” Clyburn wrote in a statement. “This failure may have led to millions of dollars in FinTech-facilitated PPP loans being made to fraudulent, non-existent, or otherwise ineligible businesses.”

According to the committee, Kabbage processed more than $7 billion worth of PPE loans flowing to approximately 300,000 businesses; they allegedly accounted for 20% of the total of suspicious loans identified in one study. Additionally, they were identified as having sent close to $7 million in loans to farms that do not actually exist.

From Twitter:

Lydia DePillis @lydiadepillis May 28

"The House’s @COVIDOversight committee opens a probe into the role of fintech companies in facilitating PPP fraud, following reports by @MichelleF_Davis @benbwieder @MeghanBobrowsky @schwellenbach @ryantsummers and me and @derekwillis"

Additionally, BlueVine was said to have provided more than $4.5 billion in loans to some 155,000 businesses.

They are “among a group of FinTechs assessed to have facilitated 75[%] of the approved PPP loans implicated in Department of Justice (DOJ) fraud prosecutions, according to one analysis,” according to the announcement.

Cross River Bank and Celtic Bank were also sent letters after being identified as backing hundreds of thousands of fraudulent loans, it continues.

ProPublica, which began investigating some of these claims itself, said Kabbage was unable to explain the non-profit’s findings, but said it followed fraud prevention protocols and reported any suspicious activities to the SBA Office of the Inspector General, FinCEN and other federal agencies. A representative from the company said Kabbage is cooperating with investigators looking into the fraudulent loans.

Additionally, BlueVine said it also conducted fraud-prevention activities and worked toward supporting business owners safely, notes a report in Yahoo! News.

“The Select Subcommittee has consistently advocated for increasing access to loans and capital to those in underserved markets, including businesses owned by veterans, members of the military, socially and economically disadvantaged individuals, and women,” said Clyburn. “In achieving this goal, both now and in the future, FinTechs and their bank partners may have an important role to play through participation in small business loan programs. However, future partnerships must be contingent on FinTechs and their bank partners’ demonstrated ability to properly administer taxpayer funds and not jeopardize the integrity of the programs in which they participate.”

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