ATLANTA – A new analysis has found more than $76 billion in Paycheck Protection Program loans may have been obtained fraudulently, with many of the loans handed out by online lenders.
So far, few of these “dubious” loans appeared to have been detected by authorities or repaid, according to the study by researchers at the McCombs School of Business at the University of Texas at Austin.
Online lenders, known as fintechs, have streamlined processes that were used to issue pandemic relief loans to applicants quickly, satisfying one of the program’s top objectives by rapidly putting federal dollars into circulation. But that may have been a boon for bad players looking to avoid the more rigorous underwriting standards used by traditional banks, which are in place to help detect fraud, the study says.
“I see very broadly that there’s a trade-off between quick and easy access to this government money and susceptibility to abuse'” Sam Kruger, an assistant professor of finance and one of the study’s authors, told The Atlanta Journal-Constitution. “And I think one of the things that our research sheds light on is a potential cost of that ready access.”
The federal Paycheck Protection Program was enacted to help small businesses stay afloat during the pandemic. The forgivable loans were expected to cover payroll, rent and utility expenses while state and local governments ordered the businesses to close or when they had to reduce operations to fend off the spread of the virus.