In 2020, then-President Donald Trump established the Paycheck Protection Program (PPP) to help small businesses continue to pay their workers during the COVID-19 pandemic. Since then, a total of $800 billion has been awarded via more than 11 million PPP loans, but evidence suggests that fraud was widespread due to lax screening throughout the process.

A study from the University of Austin estimates that as much as $64 billion in fraudulent PPP loans may have been awarded during the pandemic.

On December 1, the House Select Subcommittee on the Coronavirus Crisis released the findings from its investigation into the PPP. According to the report, two financial tech startups responsible for processing one-third of all PPP applications "failed to stop obvious and preventable fraud", and many other companies admitted to sub-par screening and risk assessment.

The two firms, Blueacorn PPP and Womply Inc., "took billions in fees from taxpayers while becoming easy targets for those who sought to defraud the PPP," lawmakers wrote. Womply itself was the recipient of more than $5 million in PPP loans for which the Small Business Administrations (SBA) later found it was eligible.

According to the report, Womply was so mismanaged that lenders described it "put together with duct tape and gum." In total, the firm reviewed, approved, and charged processing fees for 2.7 million PPP applications. However, in January, Womply sent a statement to the House subcommittee claiming that it was never responsible for screening the applicants.

"Womply did not approve PPP loan applications, issue PPP loans, or otherwise serve as a lender in the PPP," Womply's attorneys wrote. "Womply helped connect borrowers with PPP lenders, which were responsible for reviewing, approving, submitting, funding, and servicing the PPP applications and loans."

The report also describes banks and lenders' failure to check applications for fraud. SBA also failed to monitor the program for fraud, despite proof of widespread misuse.

"The risk here is not ours - it is SBA's risk," a manager at another PPP processing fintech, Kabbage, told company fraud specialists.

Blueacorn, meanwhile, reportedly spent just a few million on risk assessment and fraud prevention for PPP processing, despite bringing in more than $1 billion in processing fees. Workers claimed they were never trained to do even the most basic level of fraud prevention, including spotting fake driver's licenses and tax documents. Managers recommended reviewing each application for just 30 seconds.

"The more you submit, the more we get paid," Blueacorn management allegedly told workers. "Closing these monster loans will get everyone paid."

Along with approving loans with virtually no screening, Blueacorn also allegedly declined or ignored applications for smaller loan amounts.

"Who f***ing cares?" Blueacorn co-founder Stephanie Hockridge allegedly wrote in internal messages. "We're not the first bank to decline borrowers who deserve to be funded."

The subcommittee first began its investigation into the two firms in May, 2021, after it was publicly reported that Womply and Blueacorn were associated with high levels of PPP fraud. Lawmakers say that the findings have been sent on to the Justice Department and SBA.

"We must learn from this inexcusable misconduct to erect guardrails that will help ensure that federal programs - including emergency assistance programs in future crises - are administered more effectively, efficiently, and equitably while keeping waste, fraud, and abuse to an absolute minimum," said the chair of the subcommittee, Democratic Representative for South Carolina Jim Clyburn.

These PPP applications make up just one part of the billions of dollars worth of fraudulent claims made during the pandemic. In August, the Secret Service said that it had returned $286 million in fraudulently claimed pandemic assistance to the SBA.

Fintech startups like Womply and Blueacorn were brought on during the pandemic because they could be used to process applications more quickly. However, as the Government Accountability Office wrote in March, "the tradeoff was that they did not have systems in place to prevent and identify payment errors and fraud."