Congress is expanding its probe of financial fraud that occurred during COVIID-19, including looking closer at two top processors of pandemic-related financial aid.
According to USA Today, South Carolina Rep. Jim Clyburn, chairman of the Select Subcommittee on the Coronavirus Crisis, sent letters to Blueacorn and Womply on Nov. 23 asking for information about fraud prevention. Both companies surfaced as major players that integrated tech and financing to accelerate lending through the federal government’s Paycheck Protection Program.
Womply reportedly did not have lending experience before COVID-19, and Blueacorn did not exist. But the firms combined seized over $3 billion in fees, surpassing direct rivals.
Fintechs are not banks but work as middlemen –marketing to struggling businesses and quickly approving loans with partner banks, backed by the Small Business Administration. The firms make their money through a government-paid fee for facilitating the loans. The SBA helps run PPP.
“Unfortunately, many of these fees may have been earned by processing fraudulent or ineligible loan applications,” Clyburn wrote.
He asked for internal compliance documents, including “emails, chat room logs and transcripts, direct electronic messages and minutes” that discussed financial crimes.
Womply worked with 17 lenders and processed 1.4 million loans worth over $20 billion of the government’s $800 billion programs. Clyburn reported Blueacorn processed at least $14 billion in loans.
A Texas University study found online financial companies’ processes facilitated fraud in PPP loans. In August, USA TODAY focused on a University of Texas, Austin paper that identified more than 1.8 million loans with indications of potential fraud by borrowers. Some of the most egregious examples cited by the researchers involved Kabbage, Womply and Blueacorn.
Clyburn sent letters during his probe in February to Kabbage, BlueVine, Cross River Bank and Celtic Bank. He also gave Womply and Blueacorn until Nov. 26 to show if they would cooperate with the requests.
In a previous statement to USA TODAY, Blueacorn CEO Barry Calhoun said the company was “incredibly proud of the work we have undertaken to dramatically reduce fraud in the PPP program,” adding that it focused on serving a “traditionally overlooked population.” A spokeswoman said Tuesday the company would cooperate with the congressional inquiry.
Womply Founder and CEO Toby Scammell called PPP “an imperfect program” that nonetheless succeeded in saving millions of small businesses.
“Womply helped the program succeed, and I am particularly proud that our efforts leveled the playing field, so America’s very small and minority-owned businesses were able to participate,” Scammell stated.
Read More Black Enterprise