Womply refused to cooperate with the SBA inspector general’s office and lending partner Fountainhead, which requested information to investigate potential fraudulent PPP borrower activity, the subcommittee found.įountainhead was forced to get “a temporary restraining order against, so they can’t destroy these documents,” according to the report.įountainhead CEO Chris Hurn told American Banker he would cooperate fully with the new investigation, adding that his company has "always strived to conduct itself honorably and carry out objectives.”Ĭeltic, another bank now under SBA investigation, urged its fintech partner, Bluevine, to invest in fraud controls and comply with SBA standards, the subcommittee found.
Indeed, one of Womply’s lending partners criticized the fintech’s fraud prevention practices, describing the systems as “put together with duct tape and gum,” according to the report. "Cross River answered the call of Congress to help the smallest businesses survive the pandemic, and now we count on the SBA to do the right thing and differentiate between those who truly helped during the pandemic and those who didn't do enough to deter and identify fraud," Goldfeder told the outlet. Phil Goldfeder, Cross River’s senior vice president of global public affairs, told American Banker on Thursday he was surprised to find the SBA would investigate the bank, saying last week’s report "actually lauded the work of responsible banks like Cross River." In addition to probing the lenders named in the report, the SBA said Thursday it would investigate individuals and entities connected to them.
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Womply and Blueacorn, the subcommittee found, “failed to implement systems capable of consistently detecting and preventing fraudulent and otherwise ineligible PPP applications.” Womply collected $2 billion in PPP fees Blueacorn, $1 billion.īlueacorn chased higher fees by giving priority and less scrutiny to high-dollar loans, designating them as “VIPPP,” the report concluded, noting that the company’s “ownership directed reviewers to prioritize ‘monster loans will get everyone paid,’” while urging employees to dismiss applications for smaller loans.īlueacorn and Womply’s lending partners, Capital Plus and Harvest, “did little to oversee the activities of the companies to which they delegated their responsibilities,” the subcommittee found. James Clyburn, D-SC, the subcommittee’s chairman, said in a statement last week. “Even as these companies failed in their administration of the program, they nonetheless accrued massive profits from program administration fees, much of which was pocketed by the companies’ owners and executives,” Rep. Last week’s report, however, struck a blow to some fintechs’ reputations, concluding the firms’ lack of fraud controls made them the “paths of least resistance” for PPP borrowers seeking to exploit the government-backed COVID-19 relief. Thursday’s restrictions and investigations surface roughly two months after the SBA signaled it would expand the stable of nonbank lenders participating in its flagship 7(a) loan program to include fintechs for the first time.
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