Federal Government Not Attempting to Collect on PPP Loans Below $100k
The federal government is refusing to seek to recover loans related to coronavirus that were not eligible for forgiveness. This could be considered theft under an $800B program.
The pandemic assistance was administered by the Small Business Administration, or SBA. Paycheck Protection Program (PPP) said that it won’t seek to collect loans that should have paid back but weren’t, so long as the amount is less than $100,000. The majority of the 12,000,000 loans issued in 2020 and 2021 were less than $100,000.
The agency’s inspector general, which is tasked with policing waste, fraud, and abuse, sounded the alarm at SBA’s decision, saying its logic does not add up and it should suspend the decision.
“SBA ending collections on PPP loans valued at $100,000 or less is not in compliance with applicable criteria,” The IG wrote. “SBA is potentially increasing the taxpayer burden by missing the opportunity to collect on these delinquent PPP loans,” It Write.
The federal government encourages future fraud by allowing Americans to keep large sums of money that they don’t have right to.
“Ending collections could set a precedence for future stimulus programs and incentivize ineligible borrowers to obtain loans valued at $100,000 or less. However, continuing to pursue collections will help ensure accountability from delinquent borrowers and promote program integrity,” It was.
The majority of the loans were “forgivable,” They were effectively converted into grants. However, if the recipients didn’t meet certain conditions, they were due to return the money. But the agency lets them keep the money. One million borrowers who owe $17 billion in loans have not asked for forgiveness of loans below $100,000.
“SBA made a decision to formally end collections on purchased PPP loans with an outstanding balance of $100,000 or less. SBA’s rationale for the decision was to provide equitable treatment between smaller sole proprietor borrowers not protected by an incorporation shield and larger incorporated borrowers,” The IG wrote an “alert” Questioning the decision. “Therefore, borrowers that have a purchased PPP loan with an outstanding balance of $100,000 or less would not be referred to the U.S. Department of the Treasury for collections or other collection measures.”
Agency cannot collect money that is owed them if it would cost more to recover the money. SBA claimed that was the case, but the IG said that was doubtful, and that the SBA didn’t even run the numbers.
“SBA purchased these PPP loans because the lender identified that the borrowers were 60 days or more past due on scheduled loan payments. However, SBA did not pursue collections on these loans. Instead, SBA charged off these loans and made no referral to Treasury, without conducting a sufficient cost benefit analysis to support ending collections,” It was.
It said that by referring loans to the Treasury according to normal procedures, the government can easily recover money at minimal cost. This includes withholding future tax refunds. It also adds their name to a list that prevents them from accessing other government programs.
And SBA did not give up on trying to claw back money that Americans weren’t entitled to because it proved fruitless. It never tried. “We also did not find any evidence that SBA made any attempts to collect on the purchased PPP loans. At the onset of SBA purchasing the PPP loans in July 2021, it decided not to pursue debt collection for the purchased PPP loans,” The IG wrote.
PPP loans were provided by banks. The government was required to take over the loans if the problems arose. The government investigated and found that several financial institutions had committed fraud. Cavalier attitude Therefore, it’s best to take a hands-off approach. fraud because the more loans they processed, the more money they made–and when loans were approved despite being ineligible, it was taxpayers, and not the bank, who would eat the cost.
The law requires banks to first try to collect money before they sell the loan to the government. However, SBA didn’t require banks to prove that they tried, the IG stated.
Agency can suspend collections under the Debt Collection Improvement Act if the person is unable or unwilling to pay. This was not investigated by the SBA, so some money may have gone to extremely wealthy people.
SBA “stated in its analysis that the decision to end collections was to ensure equitable treatment between smaller sole proprietor borrowers and larger incorporated borrowers. SBA stated that if they pursued collections, the individuals associated with the generally larger incorporated borrowers would suffer nothing, whereas the individual sole proprietors, not protected by the incorporation shield, would incur collection efforts that the larger, incorporated borrowers would avoid. However, SBA’s analysis did not support equitable treatment as it did not provide any specific data on the breakdown of individual and corporate borrowers nor any quantitative assessment of effect to each type of borrower,” The IG wrote.
In a response to the IG, the SBA said it did not intend to reverse its decision, and defended itself by saying that it wasn’t worth recovering money because it has a very poor record of doing so–in one similar program, recording only 0.28% of the amount it was owed. The SBA also stated that it was not subject to the Office of Management and Budget recommendations.
The Earlier in the month, Government Accountability Office said in a searing, comprehensive report that large portions of the $4 trillion coronavirus stimulus program were marred by federal agencies’ seeming indifference to fraud, including a minimum of $60 billion in fraudulent unemployment insurance claims.
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