Fraud Friday – Kabbage is Bankrupt

October 7, 2022

Delaney Sexton
Contributing Editor

Fraud Friday – Kabbage is Bankrupt

“The actions we take today are in line with KServicing’s mission to support PPP borrowers through their loan forgiveness process, provide loan processing services to partner banks, and wind down the Company’s existing loan portfolio,” Laquisha Milner, Chief Executive Officer, states. “During the COVID-19 pandemic, the Company was instrumental in originating and servicing PPP loans in partnership with the federal government and bringing the benefits of the PPP to small businesses in underserved communities. We remain committed to providing high-quality service to borrowers and continuing to service PPP loans without interruption to the best of our abilities during this process.”

This week, a filing revealed that Kabbage Inc. filed for Chapter 11 bankruptcy in the District of Delaware amid investigations and litigation. The Federal Reserve Bank of San Francisco declared that Kabbage was in default last week and owe the Federal Reserve about $540 million.

During this time, Kabbage is focusing on “minimizing any disruption” and “[ensuring] a seamless experience” for its borrowers while addressing the bankruptcy, and they are going to continue paying all their active employees.

They are currently still facing investigations by the House Select Subcommittee on the Coronavirus Crisis, the Federal Trade Commission, the SBA, and two U.S. attorneys according to the bankruptcy documents. These investigations are surrounding claims that they improperly approved PPP loans that did not comply with SBA requirements or were blatantly fraudulent.

Kabbage is making claims that American Express contributed to its issues by not honoring a transition service agreement that was part of the sale of Kabbage.

The investigations and litigation that Kabbage is undergoing caused the forgiveness of almost 60,000 loans to be stalled further. Even taking this into consideration, Kabbage has a lower forgiveness rate than other major lenders.

Kabbage Press Release
Washington Post Article
Miami Herald Article
Wall Street Journal Article