Fast Loans, Fraud, And Fintech

Scammers who tapped PPP funds liked using online lenders

- By Michelle F. Davis

In April the Paycheck Protection Program was under fire for moving too slowly and leaving too many people out. Part of the $2 trillion Cares Act, it was set up to offer forgivable loans to small businesses such as restaurants and hair salons that would help keep them afloat through the Covid-19 lockdowns in the U.S. Banks were initially in charge of administering the government-backed payments. In an effort to distribute the desperately needed money faster, web-based companies were later allowed into the program. Grateful businesses praised their speed.

It turns out scammers found them useful, too. Financial technology companies handled 75% of the approved PPP loans that have been connected to fraud by the U.S. Department of Justice, a Bloomberg analysis of more than 100 loans at the center of the cases shows. The fintech companies arranged just 15% of PPP loans overall. They include Kabbage and BlueVine Capital, as well as banks and nonbank lenders that work with such companies, including Cross River Bank, Celtic Bank, and Ready Capital.

In many cases, a simple Google or state records search would have suggested an applicant’s business didn’t exist or was dormant. One borrower facing charges allegedly got approval for $3 million from Ready Capital Corp. for a business in Beaumont, Texas, even though the company had no website or presence on social media and the business address provided, according to Google Maps, was for a single-family residence. (Investigators intervened before the loan was funded.) Another borrower in Little Rock, Ark., received almost $2 million from Kabbage Inc. and BlueVine Capital Inc. for businesses that weren’t in good standing with the secretary of state.