Fraud Friday – Senate Small Business Committee Demands SBA to Prioritize Fraud

March 24, 2023

Delaney Sexton
Contributing Editor

Fraud Friday – Senate Small Business Committee Demands SBA to Prioritize Fraud

“A primary focus of the SBA should be to aid in the recovery of the more than $100 billion in fraudulent and improper loans made through COVID relief programs. Report after report has been released from the investigative community indicating tremendous levels of fraud, yet the vast majority of stolen funds remain unrecovered,” says Senator Joni Ernst. “I’m concerned the SBA is not pursuing Administrative recoveries.”

Senator Ernst cites a suspected $5.4 billion in fraudulent loans that used stolen Social Security Numbers and $1.3 billion in EIDLs to applicants with foreign IP addresses during her comments. Current fraud recoveries from the SBA Inspector General are estimated at $9 billion which Senator Ernst states is a “drop in the bucket”. Despite the fraud within relief programs, the Administration has made the decision not to pursue debt collections on PPP loans under $100,000.

Earlier this month, Chairman Cardin and Ranking Member Ernst sent a letter urging the SBA to work with congressional committees on the two proposed rules that do not reflect congressional input or authorization: The Affiliation and Lending Criteria for the SBA Business Loan Programs and Small Business Lending Company Moratorium Recission and Removal of the Requirement for a Loan Authorization.

This was once again mentioned during the Senate Small Business Committee’s hearing on Thursday. Concerns were expressed that “changes to the current underwriting standards have the potential to make the program vulnerable to predatory lending practices.” They also discussed that “prudent guardrails” must be shown to be successful before making changes. Otherwise, these changes could impact the fiscal integrity of SBA’s lending programs.

Senator Ernst closes her opening statement by saying, “I urge the agency to reverse course on the proposed rules and shift resources to reviewing all loans suspected of fraud by investigators and pursue Administrative recoveries.”

Senate Committee Hearing
Senator Ernst Release
Chairman Cardin & Ranking Member Ernst Letter to SBA