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Fraud Friday — SBA 7(a) Loan Agent Fraud Totals $335 Million in 10 Years

November 13, 2015

By Bob Coleman
Editor, Fraud Friday

Part II of my coverage of SBA Inspector General’s top-ten challenges for the agency.

Writes the OIG:

“Since 2005, SBA OIG has investigated at least 22 cases with confirmed loan agent fraud totaling at least $335 million.

“Further, OIG has determined that loan agents were involved in approximately 15 percent of all 7(a) loans and resulted in increased risk of default.

“Yet SBA’s oversight of loan agents has been limited, putting taxpayer dollars at risk.

“First, to track loan agent activity, SBA eventually decided to have lenders fax a loan agent disclosure form (Form 159) to SBA’s fiscal and transfer agent (FTA) and require the FTA to enter the data into a database accessible to SBA. SBA also began linking Form 159 information with its loan data.

“However, as a recent OIG report identified significant issues in the data quality on the Form 159 information, SBA will likely need to make further modifications to this process. For example, the FTA is testing an automated Form 159.

“Lenders need to ensure that agents involved with their loans have not been subject to enforcement action by SBA. SBA now lists the names of loan agents and others named in SBA enforcement actions on its website, and updated an SOP in FY 2014 to instruct lenders to consult this list to avoid problematic loan agents.

“However, SBA also needs to develop a system to assign a unique identifier to loan agents that participate in the 7(a) Program.

“Otherwise, suspended agents could circumvent SBA by simply changing their name and continuing participating in the program.”

Go here for a list of suspended and debarred SBA loan agents.

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