Two Fintech companies have run extensive fraud with OPS loans, the house report shows

Womply, the San Francisco startup, received $5 million in loans from its largest lending partner, Harvest Small Business Finance, and sought to have those loans forgiven. But after reviewing Womply’s application, the Small Business Administration — which oversees the Paycheck Protection Program — determined that Womply was ineligible for the loans Harvest had approved and required Womply to repay them, according to the report.

Womply’s fraud detection systems appear to have been “put together with duct tape and chewing gum,” Chris Hurn, CEO of one of Womply’s lending partners, told House investigators.

When federal investigators asked Mr. Hurn’s company, Fountainhead Commercial Capital, about information Womply held about Fountainhead’s loans, Mr. Hurn had to obtain a restraining order to prevent Womply from destroying the loan records, according to the report.

In May, Womply notified its customers that it was giving itself the right to transfer millions of tax documents and bank account details from loan applicants to a newly formed company, Solo Global, run by Womply executives. Womply declined to tell the House subcommittee whether it had actually transferred that data and how it might use it, according to the report.

Mr. Clyburn said he had informed the Justice Department that “some of our findings may warrant their attention.”

The report contains 11 specific recommendations for various government agencies — including the Small Business Administration and Congress — to better secure future aid programs. It specifically calls on the Small Business Administration to analyze the role of non-bank companies such as fintechs — which have fewer regulatory constraints than banks — in its lending programs.

These companies “were given extraordinary responsibility for managing the nation’s largest pandemic relief program — a responsibility that some of the fintechs facilitating the highest volumes of loans were either unable or unwilling to fulfill,” the report said.

“A balance between speed and internal control is achievable and necessary to ensure timely government assistance to disaster victims,” ​​the Small Business Administration’s Office of the Inspector General wrote in a statement. “The report illuminates a significant aspect of the emerging PPP fraud landscape, which is an OIG oversight priority.”