OIG Report Shows SBA Forgot to Report Many Charged Off PPP Loans

For many underwriters the era of PPP loans is now a distant memory. The loans were either forgiven long ago or are for some reason now tied up in collections. It’s the latter that should be cause for concern. According to the Office of the Inspector General, the SBA was required to report charged-off PPP loans to three major commercial credit reporting agencies but for the sample the OIG reviewed, the SBA failed to report 37% of charge-offs to any credit agency. Further, it failed to keep the credit agencies updated on its charge-offs on a regular basis, missing its required reporting deadlines 97% of the time.

“SBA did not report these charged-off PPP loans to commercial credit reporting agencies because it relied on its automated process used to report loans to credit reporting agencies and did not periodically monitor or conduct reviews to ensure loans were reported, as required,” the OIG report said. “When we asked SBA officials why they did not report all loans to credit reporting agencies, they stated that all charged-off PPP loans should be reported, and that SBA’s Office of Capital Access was in the process of reviewing and updating its system to correctly identify PPP loans eligible for reporting.”

The OIG added that as a result there was an increased risk that delinquent borrowers could inappropriately obtain other loans.

“We compared our list of charged-off PPP loans to the loans identified in our COVID19 Pandemic EIDL and PPP Loan Fraud Landscape report and found that 169,589 loans [out of 203,101] totaling $5.8 billion were also reported in the fraud landscape report as potentially fraudulent,” the report said. That’s 83% of all charge-offs in the sample.

The takeaway is that most of the early PPP charge-offs were actually a result of fraud and if the SBA was forgetting to report most of these to the credit agencies, then this useful information may not be known by any subsequent lender or funder down the road.

The OIG report can be downloaded here.