![]() ![]() Of course, some fintechs bucked the trend. The Justice Department has launched more than 70 criminal cases into alleged PPP fraud. ![]() To identify potential fraud, the academics looked for red flags in PPP loan applications, including businesses that weren’t registered, the existence of multiple businesses at a residential address, unusually high implied compensation per employee and large inconsistencies in the number of workers reported in applications for other government programs. “There is a tradeoff between quick and easy access to government funds and potential for abuse,” Sam Kruger, one of the study’s authors and an assistant finance professor at the University of Texas at Austin, said in an interview. Fintechs also tend to face less oversight from regulators. This newer model leans heavily on algorithms to screen loan applications and sometimes lacks the robust compliance procedures that traditional banks rely on. “While small businesses suffered, many large, legacy financial institutions refused to provide loans to businesses without existing relationships,” she said in the statement.Ĭapital Plus and Harvest did not respond to requests for comment.įintechs use digital technology to issue loans, hold deposits and provide other banking services, typically without physical bank branches. Lee also pointed the finger at traditional lenders. “Despite evolving government guidance and inadequate processing systems, financial technology companies executed the goal of the PPP program with the regulatory compliance standards in mind throughout the lending process, helping to save hundreds of thousands of small businesses,” Penny Lee, the trade group’s CEO, said in a statement. ![]() The Financial Technology Association, an industry trade group, defended the role of fintechs during the pandemic. Angus Mordant/Bloomberg/Getty Imagessīiden administration grants $2 million to Nikola, whose founder faces criminal chargesįort Lee, NJ-based Cross River said it’s “disappointing that some would use misdirected criticism, gross assumptions and unsubstantiated claims to undermine the sacrifice and countless hours that were dedicated to getting the American economy back up and running.” Milton is charged with misleading investors from November 2019 until around September 2020 about the development of Nikolas products and technology, according to an indictment unsealed Thursday by federal prosecutors in N.Y. Trevor Milton, founder of Nikola Corp., center, exits federal court in New York, U.S., on Thursday, July 29, 2021. “Cross River stepped up to answer the mandate from Congress and in the process, deployed fraud detection standards that far exceeded the continuously evolving SBA program requirements,” a spokesperson for Cross River said in a statement, adding that it reached nearly half a million of the “smallest and most vulnerable businesses in need.” The fintech industry pushed back against those arguments. The sheer scope of the suspicious lending by the fintechs, the authors wrote, suggests that “many lenders either encouraged such loans, turned a blind eye to them or had lax oversight procedures.” In particular, the report found that the largest three fintech issuers of PPP loans - Cross River, Capital Plus and Harvest - all had “high and increasing rates” of misreporting and received more than $900 million each in processing fees. “These findings highlight the large costs of low oversight and lack of sufficient negative ramifications to borrowers and lenders for poor lending practices in the PPP,” the academics concluded. ![]() The report points to regulatory gaps and due diligence failures that allowed for suspicious lending of taxpayer money intended to help mom-and-pop shops hurt by the pandemic. Santiago/Getty ImagesĬolonial Pipeline says ransomware attack also led to personal information being stolenĪltogether, the researchers found that 1.8 million PPP loans with a total value of $76.3 billion had suspicious characteristics. On Monday, the FBI confirmed that the cyberattack was carried out by DarkSide, a cybercrime gang believed to operate out of Russia. On Sunday, the federal government announced an emergency declaration that extends through June 8th and can be renewed. Alpharetta, Georgia-based Colonial Pipeline, which has the largest fuel pipeline, was forced to shut down its oil and gas pipeline system on Friday after a ransomware attack that has slowed down the transportation of oil in the eastern U.S. WOODBRIDGE, NEW JERSEY - MAY 10: Fuel holding tanks are seen at Colonial Pipeline's Linden Junction Tank Farm on in Woodbridge, New Jersey. ![]()
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