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Thousands of Businesses Double-Paid Through PPP

  • Office of Inspector General identifies duplicate Paycheck Protection Program loans to more than 4,000 borrowers totaling approximately $692 million
  • Computer errors, borrowers applying through different lenders, and other issues led to the problem
  • U.S. Small Business Administration has agreed to OIG recommendations to safeguard against loan duplication for future PPP-like programs

Summary by Dirk Langeveld

As part of an examination of vulnerabilities in the U.S. Small Business Administration’s loan processing system for the Paycheck Protection Program, a government watchdog identified several thousand instances where borrowers received a duplicate loan in the first rounds of PPP funding.

The Office of the Inspector General determined that lenders disbursed more than one loan to 4,260 borrowers between April 3 and Aug. 19, 2020. In 2,689 instances, loans went to borrowers with the same tax identification number; in 1,571, they went to a borrower with the same name and address. In all, 8,731 loans totaling approximately $692 million were involved in the duplicate disbursements.

The SBA acknowledged issues with duplicate loans last summer, saying they were a result of businesses submitting multiple applications because they had not heard back from their lender or because they were concerned that PPP funds would be depleted. In some instances, borrowers submitted their Social Security number to one lender and Employer Identification Number to another when applying.

The SBA told the OIG that it identified 40,2019 duplicate loan numbers and resolved 95 percent of them. It also said it prevented another 685,629 duplications from occurring. However, the OIG report says the SBA did not always provide sufficient support to substantiate these figures.

The SBA worked with lenders when the issue first appeared, advising them to cancel duplicate loans independently or to advise borrowers that they would need to choose which loan they would keep. Borrowers who received a duplicate loan are only eligible for forgiveness of one loan, and must return or repay the other.

The OIG said duplications also resulted from a computer script that stopped working and the agency turning off controls for its electronic loan application system to rely on loan reviews. The watchdog agreed with the SBA that it is unlikely that borrowers exploited the vulnerability for fraudulent purposes, since only lenders have access to the application portal, but it did note that there are several fraud cases involving duplicate loans to the same business.

The report is critical of the duplications, saying they risked the loss of taxpayer funds and delayed disbursement of crucial relief funds to eligible businesses. The OIG made four recommendations to the SBA to resolve the current issue and proactively establish safeguards against duplications in the future; the SBA has agreed with these recommendations and promised to complete them by Sept. 1.

The duplications accounted for only 0.16 of loans approved and 0.12 percent of the overall funds disbursed through PPP last year. In its first rounds, the program approved 5.2 million forgivable business loans worth $525 billion. A third round of PPP is underway after the program was revived with $284.5 billion in funding under the Economic Aid Act and an additional $7.25 billion through the American Rescue Plan.

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