U.S. lawmakers have opened an investigation into financial technology companies Col. Inc. i BlueVine and its associated banks for their role in distributing billions of dollars in pandemic aid to small businesses, according to Reuters letters.
The investigation, to be announced on Friday, reveals how an unprecedented $ 780 billion loan program launched by the U.S. government to help companies overcome the economic shutdown of COVID-19 has caused problems. legal and regulatory requirements for lenders.
The loan plan, known as Payment check protection program (PPP), has received criticism from regulators and the media for not implementing proper controls, which has led to widespread fraud.
Representatives of Kabbage Inc, which is also branded K Servicing, and BlueVine did not respond to requests for comment Thursday evening.
According to the PPP, lenders granted loans to small businesses affected by the pandemic. If the borrower spent it on payroll and other business expenses, the government paid the lender on behalf of the borrower. Some fintechif the banks merged, with fintech technology processing loan applications and the bank managing the loan.
The United States Subcommittee on Selection in the coronavirus Crisis has asked Kabbage, BlueVine and its partners Cross River Bank and Celtic Bank, respectively, to provide documents and information to detail the fraud controls and compliance systems they implemented for the PPP, as well as the revenue they earned in facilitate the program, the letters showed.
He Congress requests for information do not necessarily indicate wrongdoing or mean that companies will incur penalties.
Representatives of American Express Co., which last year bought most of Kabbage’s assets that were not its loan portfolio, Cross River Bank and Celtic Bank did not respond to requests for comment on Thursday evening. The letters, dated May 27, were addressed to top company executives and requested a response before June 11.
“I am deeply concerned by recent reports that financial technology lenders and their banking partners were unable to properly examine PPP loan applications for fraud,” the letters, signed by U.S. Democratic Rep. James Clyburn, said. chairman of the subcommittee.
He US Department of JusticeThe civilian division is also investigating smart technologies, including Kabbage, to see if they miscalculated how much PPP aid borrowers were entitled to due to confusion over how to account for payroll taxes, according to reported Reuters earlier this month. Sources familiar with the matter said at the time that smart technologies have attracted regulatory control in part because of the high incidence of fraud associated with their loans. Government data show that fintechs issued about $ 26.5 billion in PPP loans.
According to the letters, Kabbage issued $ 7 billion worth of PPP loans between April and August last year, making it the second largest PPP lender by volume of applications. BlueVine is estimated to have issued more than $ 4.5 billion in PPP loans, ranking it among the top ten PPP providers by volume of applications. Lenders have said they were under enormous pressure to get millions of loans quickly, while keeping pace with the ever-changing PPP rules.