The U.S. Department of Justice is currently investigating whether financial technology (fintech) companies may have miscalculated how much aid customers received from PPP loans. According to sources with knowledge of the probe, the investigation includes Kabbage, an Atlanta based company.
The investigation appears to be focused on confusion around how to account for payroll taxes. It is important to note that a Justice Department probe does not necessarily indicate wrongdoing. Also, it is not clear if the probe will result in penalties against the companies.
PPP loans, which have been a lifeline for many small businesses, have been undergoing a great deal of scrutiny. The most recent round in particular was affected by a perfect storm of issues, with borrowers finding the process to be extremely slow, partially because of a prevalence of fraudulent applications.
One of the sources who discussed the Justice Department probe said that fintech companies have been examined due to their reliance on software that in some cases had glitches causing errors in applications. Other sources said that some automated lending platforms had few manual checks which caused these types of errors to be replicated over thousands of loans.