Financial technology companies oversaw a disproportionately high rate of fraudulent loans through the Paycheck Protection Program, a new congressional report says
Financial technology companies oversaw a disproportionately high rate of fraudulent loans through the Paycheck Protection Program authorized by Congress to provide small business loans during the Covid-19 pandemic, aThe report by the House Select Committee on the Coronavirus Crisis says “at least tens of billions of dollars” from the federal loan program overseen by financial technology firms were likely given to applicants who were fraudulent or ineligible.
Blueacorn received more than $1 billion in taxpayer-funded processing fees for its work on the Paycheck Protection Program, but spent less than 1% of that amount—$8.6 million—on its fraud prevention program, according to the report. Blueacorn’s founders arranged Paycheck Protection Program loans for themselves through Blueacorn, some of which show signs of potential fraud, the report says.
“The Select Subcommittee’s investigation found that many fintechs, largely existing outside of the regulatory structure governing traditional financial institutions and with little to no oversight from lenders, took billions in fees from taxpayers while becoming easy targets for those who sought to defraud the PPP,” according to the report.
Many of the financial technology companies were newly established or hadn’t before worked in small business lending, yet they were given a significant role over the federal loan program. The report recommends that the Small Business Administration and Congress should consider whether the companies should be allowed to play such a leading role in the future without stepped up oversight.
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