Main Street Monday – Customers Bank will Pay $58 Million to Kabbage for PPP Dispute

November 7, 2022

Delaney Sexton
Contributing Editor

Main Street Monday – Customers Bank will Pay $58 Million to Kabbage for PPP Dispute

In the first round of PPP in 2020, Kservicing, formerly known as Kabbage, processed Customers Bank’s PPP loans and earned $47 million in servicing fees. The bank paid the fees for the first round in a timely manner, but this was not the case in round two of PPP.

In 2021, Kabbage and Customers Bank continued working together. Customers Bank owed Kabbage $65.5 million in fees for round two PPP, but the bank refused to pay Kabbage because of processing failures. In response, Kabbage withheld $34.8 million in origination fees and other payments from Customers Bank. In May of this year, Kabbage decided to file suit against the bank.

Recently, Customers Bank and Kabbage reached a settlement agreement in Delaware which will help Kabbage continue through its bankruptcy proceedings. The terms state that Customers Bank will pay $23 million and forfeit $35 million in servicing and referral fees.

While this litigation has been settled, Kabbage is still undergoing investigations by the House Select Committee on the Coronavirus Crisis, the Federal Trade Commission, the SBA, a Justice Department office in Massachusetts, and a Justice Department office in the Eastern District of Texas for the lack of fraud controls in its PPP loan servicing. Kabbage has given a substantial amount of time and resources trying to defend itself during these investigations.

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