KServicing has hit back against allegations that it had facilitated high rates of fraudulent PPP loans.
KServicing and other fintech companies were accused in a report by the House Select Committee on the Coronavirus Crisis, of defrauding the federal government out of large sums of money.
“Unfortunately, the report does the American people a disservice by parsing bits of information out of context to reach a predetermined conclusion. Looking back on the tumultuous time of the height of the COVID-19 pandemic, the fintech community played a vital role in helping bolster the US small business community and we are proud to have been part of that endeavor”, KServicing says in a statement.
KServicing Claps Back at House Subcommittee on PPP Loan Inquiry
The report accuses fintech companies of failing to stop obvious and preventable PPP fraud, leading to the needless loss of taxpayer dollars.
It accused fintech companies of largely existing outside of the regulatory structure governing traditional financial institutions and with little to no oversight from lenders. It was also alleged that they took billions in fees from taxpayers while becoming easy targets for those who sought to defraud the PPP loan program.
KServicing formerly Kabbage, is alleged to have facilitated PPP loans while ignoring employee concerns and several red flags about potentially fraudulent loans. It was alleged that it had approved loans with clear indicators of likely fraud.
This was partly because the program imposed minimal risk on lenders who approved questionable applications. As fraud surged in the program, Kabbage reduced its full-time fraud prevention staff, alleged the sub-committee’s report.
This is the latest challenge facing the small-business loan servicer. In October 2022, it filed for Chapter 11 bankruptcy and is being investigated by the U.S. Department of Justice (DOJ) over its Paycheck Protection Program (PPP) loan approval practices.
Here’s the full statement from KServicing issued this week:
“Kabbage dba KServicing (“Kabbage or KServicing”) is proud of the role it played in supporting American businesses during the COVID-19 pandemic, which resulted in almost 300,000 small businesses receiving critical financing to keep their doors open and employees paid. Kabbage’s existing online lending platform was able to process the sudden flood of loan applications, in a timely manner, in the midst of a national crisis and in light of ever-changing federal lending rules. Kabbage adhered to the applicable rules and regulations in good faith. Two and half years later, Kabbage remains committed to the borrowers who used our services during that difficult time to access Paycheck Protection Program (PPP) loans.
The Select Subcommittee has played an important role in reviewing COVID-19 government programs and protecting the interests of the American people as it relates to one of the worst pandemics this nation has experienced. Kabbage worked diligently with the Subcommittee to provide timely and transparent information as they engaged in this investigation. Unfortunately, the report does the American people a disservice by parsing bits of information out of context to reach a predetermined conclusion. Looking back on the tumultuous time of the height of the COVID-19 pandemic, the fintech community played a vital role in helping bolster the US small business community and we are proud to have been part of that endeavor.”
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There were probably lots of fintech companies that did a crappy job. Unfortunately, the system wasn’t well designed and didn’t have good safeguards to prevent this type of crap. And yet again, the responsible parties will probably escape accountability.