Select Subcommittee Expands Investigation into Role of FinTech Industry in PPP Fraud
Washington, D.C. (November 23, 2021) — Yesterday, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, expanded the Select Subcommittee’s ongoing investigation into financial technology (FinTech) companies’ facilitation of fraud in the Paycheck Protection Program (PPP) by sending letters requesting documents and information from Blue Acorn PPP, LLC (Blueacorn) and Womply, Inc. (Womply), two online FinTech startups that processed one-third of all PPP loans in 2021. The inquiries follow reports that these companies may be linked to a disproportionate number of PPP loans made to fraudulent or ineligible applicants.
Chairman Clyburn wrote to each company:
“I am deeply troubled by reports alleging that financial technology (FinTech) lenders and their bank partners failed to adequately screen PPP loan applications for fraud. This failure may have led to millions of dollars worth of FinTech-facilitated PPP loans being made to fraudulent, non-existent, or otherwise ineligible businesses. I am writing today to request documents and information necessary for the Select Subcommittee to understand whether your company appropriately implemented all necessary fraud and financial crime prevention controls while facilitating PPP loans.”
After facing unprecedented numbers of PPP applications from small businesses impacted by the coronavirus pandemic, the Small Business Administration began allowing non-bank and non-insured depository institution lenders, including FinTechs, to provide loans to eligible recipients. Some FinTechs and their bank and non-bank partners may have insufficiently screened applicants for indicators of financial crime and fraud. These potential failures came even as these same FinTechs, including Blueacorn and Womply, were each paid over a billion dollars in taxpayer funds to process these potentially fraudulent loans.
On May 28, 2021, the Select Subcommittee sent letters to four Fintech companies and banking partners that had been linked to high numbers of fraudulent loan prosecutions and whose due diligence and fraud detection practices had been publicly called into question. Today’s letters expand the Select Subcommittee’s inquiry following additional information from the University of Texas at Austin’s McCombs School of Business indicating that:
The Select Subcommittee’s investigation continues to build on its March 2021 findings that, under the Trump Administration, the Department of the Treasury and SBA failed to institute adequate safeguards to prevent waste, fraud, and abuse in pandemic relief programs, leading to nearly $84 billion in potentially fraudulent loans.
As Chairman Clyburn stated in May 2021 letters to Kabbage, Inc., BlueVine, Cross River Bank, and Celtic Bank: “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. 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.”
To this end, the Select Subcommittee is seeking to better understand the fraud controls and compliance frameworks that FinTechs, including Blueacorn and Womply, have applied to their PPP loan programs. Womply and Blueacorn are asked to provide the requested documents and information by December 6, 2021.