Womply, the San Francisco start-up, 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 oversaw the Paycheck Protection Program — determined that Womply was ineligible for the loans that Harvest had approved, and it required Womply to repay them, according to the report.
Womply’s fraud detection systems seem to have been “put together with duct tape and gum,” Chris Hurn, the chief executive of one of Womply’s lending partners, told House investigators.
When federal investigators asked Mr. Hurn’s company, Fountainhead Commercial Capital, for information held by Womply about Fountainhead’s loans, Mr. Hurn had to get 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 created company, Solo Global, run by Womply executives. Womply refused 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 its attention.”
The report includes 11 specific recommendations for various governmental bodies — including the Small Business Administration and Congress — to better safeguard future aid programs. It specifically urges the Small Business Administration to analyze the role of non-bank companies like fintechs — which face fewer regulatory constraints than banks — in its lending programs.
Those companies “were given extraordinary responsibility in administering the nation’s largest pandemic relief program — a responsibility that some of the fintechs that facilitated the highest volumes of loans were either unable or unwilling to fulfill,” the report said.
“A balance between speed and internal controls is achievable and necessary to ensure timely governmental assistance to disaster victims,” the Small Business Administration inspector general’s office wrote in a statement. “The report shines light on a significant aspect of the emerging fraud landscape in the P.P.P., which is an O.I.G. oversight priority.”
Stacy Cowley
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