U.S. lawmakers have opened an investigation into FinTechs Kabbage and BlueVine, along with their partner banks, for their role in the distribution of billions of dollars in COVID relief money to small businesses.
The House Select Subcommittee on the Coronavirus Crisis wants Kabbage and BlueVine — as well as Cross River and Celtic Bank, the companies’ respective banks — to document their fraud control and compliance systems, along with the revenues they earned. Reuters noted on Friday (May 28) that these requests do not automatically indicate wrongdoing.
According to the report, Kabbage and BlueVine were among the largest lenders in the Paycheck Protection Program (P2P), issuing $7 billion and $4.5 billion in loans last year. Lenders have said they were under pressure to make millions of loans quickly while staying on top of a constantly changing set of PPP regulations.
Reuters reported that the probe “highlights how an unprecedented $780 billion loan program launched by the U.S. government to help companies weather the COVID-19 economic shutdown has led to legal and regulatory woes for lenders.”
The PPP has been criticized by regulators and the media for its failure to conduct proper checks, leading to rampant fraud. Kabbage and BlueVine did not reply to requests for comment.
The PPP involved lenders giving loans to small businesses hurt by the COVID crisis. If a recipient business used the money for business expenses, the government repaid the lender. In some cases, Reuters says, FinTechs and banks worked together, the former processing the applications and the latter handling the loans.
Meanwhile, the U.S. Department of Justice is also investigating Kabbage and other FinTechs to determine whether they miscalculated how much money borrowers could ask for due to confusion over payroll taxes.
And as PYMNTS noted last week, Kabbage is also facing allegations that it helped facilitate loans to businesses that turned out to be fake.