House report into PPP loan fraud points the blame at fintechs
FinTechs have long been a hot topic in the banking world, as they aim to solidify their place in the financial industry. However, credit union and bank groups alike maintain that FinTechs should not be allowed to gain a foothold until they are held to the same standards and regulations as banks and credit unions. Specifically, these groups claim that unregulated FinTechs are responsible for widespread PPP (Paycheck Protection Program) loan fraud.
In December, the bipartisan House Select Committee on the Coronavirus Crisis released the report titled “How Fintechs Facilitated Fraud in the Paycheck Protection Program” which supported the idea that lack of oversight regarding FinTechs allowed large amounts of fake PPP loans to be dispersed.
“While the PPP delivered vital relief to millions of eligible small businesses, at least tens of billions of dollars in PPP funds were likely disbursed to ineligible or fraudulent applicants, often with the involvement of fintechs, causing tremendous harm to taxpayers,” the staff of the House Select Subcommittee on the Coronavirus Crisis wrote in the December report.
The investigation also found that FinTechs managed to make billions off of fraudulent loans thanks to processing fees and when reviewing loans, it was noted that FinTechs actually give less scrutiny–but higher priority–to larger loans and essentially ignored loans to smaller businesses as they offered less profit. Additionally, the majority of lenders working with said FinTechs left fraud prevention and eligibility verification in the hands of their FinTech partners, who were often unregulated and poorly vetted.
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