WASHINGTON (Reuters) – The U.S. Department of Small Business (SBA) has wrongly disbursed $ 692 million in double loans for retail pandemic relief due to technical and other errors, the agency’s internal watchdog said Monday.
Lenders participating in the Paycheck Protection Program (PPP) distributed the cash to 4,260 lenders who had already received money due to multiple technical errors in the SBA’s loan processing systems, which struggled to process the volumes of loans, the SBA inspector- generally written in a report.
Reuters reported for the first time in June that technical snooping had led the SBA to approve thousands of duplicate loans that could be worth hundreds of millions of dollars.
Under the program, lenders distribute loans backed by the government on behalf of the SBA. If lenders use the funds for specific purposes, such as hiring staff, they keep the money and the government pays back the moneylender.
The watchdog did not say how much of the $ 692 million that the credit providers misappropriated was later reimbursed by the government. It initially said it would guarantee only one loan per borrower, meaning borrowers, rather than the taxpayer, might be on the hook for the mistake.
Reuters reported in June that lenders were trying to obtain double loans from borrowers.
In response to Monday’s report, SBA officials said the agency would consider all alleged duplicates for further review, and the case is expected to be resolved by September.
The watchdog added that there is no evidence that lenders are deliberately using SBA systems to obtain multiple loans.
Amid the insane launch of the first-come-first-served program last April, many lenders have applied to several lenders to increase the chances of a loan.
An SBA computer program intended to detect such duplicate applications has failed, the watchdog said. In addition, the SBA system did not detect an application as a duplicate if the borrower’s social security number and employee identification number were converted at the second application.
At one point, the number of approved duplicate PPP loans exceeded 40,000, but SBA officials were able to locate and resolve most of them before borrowers disbursed the cash, the SBA inspector general said.
Reporting by Pete Schroeder; Edited by Michelle Price and Peter Cooney