Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

U.S. lawmakers say some fintechs failed to prevent 'obvious' pandemic fraud

Published Dec 01, 2022 11:02AM ET Updated Dec 01, 2022 12:18PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: U.S. Representative Jim Clyburn (D-SC) delivers remarks on the dedication of a statue honoring Pierre L'Enfant, the French-born engineer who designed the original city plan for Washington, D.C., at the U.S. Capitol in Washington, D.C., U.S. Fe
 
AXP
+0.28%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Hannah Lang

(Reuters) -Several fintech companies that facilitated high volumes of pandemic-related loans to businesses in 2020 had inadequate processes to detect fraud, according to a new report from the U.S. House Select Subcommittee on the Coronavirus Crisis.

The committee concluded in its report published on Thursday that some fintech companies failed to stop “obvious and preventable fraud” in administering loans in the COVID-19 Paycheck Protection Program (PPP) “leading to the needless loss of taxpayer dollars.”

“Even as these companies failed in their administration of the program, they nonetheless accrued massive profits from program administration fees,” Rep. Jim Clyburn, the chair of the committee, said in a statement.

The program closed to borrowers in May 2021 after lending about $800 billion.

The committee opened an investigation into fintech companies Kabbage and Bluevine and their partner banks in May 2021 following reports they were linked to a disproportionately high number of fraudulent loans, and later expanded that investigation to include Blueacorn and Womply.

The report found that internal systems to detect fraud were often lacking. Blueacorn employees who reviewed loans were told that each application should take less than 30 seconds to review, and that they did not need to apply as much scrutiny to high dollar loans, the committee said.

Womply’s lending partners accused the company of allowing “rampant fraud” to occur and described its fraud prevention practices as “put together with duct tape and gum.”

Kabbage, which was acquired by American Express (NYSE:AXP) in October 2020, likely approved loans with red flags because the loan program “imposed minimal risk on lenders who approved questionable applications,” the report said.

Kabbage in a statement said it "adhered to the applicable rules and regulations" of the program "in good faith."

"Unfortunately, the report does the American people a disservice by parsing bits of information out of context to reach a predetermined conclusion," Kabbage said.

“American Express has honored its obligations under the transition services agreement and will continue to do so in accordance with its terms," a company spokesperson said.

Meanwhile, the committee observed that Bluevine’s lending partner, Celtic Bank, conducted oversight of Bluevine’s anti-fraud controls and prompted the fintech to introduce manual review processes, after which it observed a steep decline in fraud.

"Since its founding in 2013, Bluevine has remained committed to establishing and maintaining robust internal controls and governance processes," a spokesperson for Bluevine said.

"As recognized in the report, Celtic made extensive and effective efforts to combat fraud," a Celtic Bank spokesperson said in a statement.

U.S. lawmakers say some fintechs failed to prevent 'obvious' pandemic fraud
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email