DOJ Probes Fintech PPP Lenders

The DOJ has launched a probe into fintech firms like Kabbage for their handling of PPP loan distribution, expressing concern that firms may have miscalculated eligible loan amounts or misrepresented payroll taxes, Reuters reported.

The probe is the beginning of an investigation and does not indicate any wrongdoing. The DOJ is reacting to the concerns from multiple sources since PPP launched that the $780 billion program ran the risk of fraud and misuse of funds.

The PPP lending portion of Kabbage, since spun off and rebranded to K Servicing, made less than 300,000 PPP loans worth $7 billion from April to August alone, according to the website. Based on the original PPP lender guidelines, that could net the firm as much as $350 million in commission for sourcing the loans.

As recently as December, the SBA’s own oversight officer Hannibal Ware found that possibly “over 2 million approved PPP loan guarantees” or about $189 billion in loans were “potentially” not in compliance with the law. Those applications are a piece of the puzzle and may turn out to be not fraudulent at all, but the DOJ is taking steps to make sure.

The SBA compliance rules changed constantly, creating a challenge for many PPP lenders to adapt their automated loan processing while updates came out.

In related news, the SBA began accepting applications for the Restaurant Revitalization Fund on Monday, May 3rd. In the first two days, the organization recorded 186,200 applications from restaurants and eligible businesses from across the country.

“61,700 of the applications came from businesses with under $500,000 in annual pre-pandemic revenue,” the SBA reported. “Representing some of the smallest restaurants and bars in America.

Kevin Travers was a Reporter at deBanked.