Two US fintechs to pay a total of $59m to settle FTC charges related to PPP
The Federal Trade Commission (FTC) says that two US fintechs, Biz2Credit and Womply, have agreed to pay a total of $59 million to settle charges made by the commission relating to PPP (Paycheck Protection Program) loan applications.
The FTC’s allegations related to “falsely promising fast processing of PPP loan applications”
The FTC alleges that the companies “made false promises to small businesses seeking to take part in the PPP, delaying and sometimes preventing them from obtaining funds they needed to keep their businesses afloat during the COVID-19 pandemic”.
The PPP is a loan program launched in the US in 2020 to help small businesses continue to pay their workforces through the pandemic.
Biz2Credit and its subsidiary, Itria Ventures, will pay $33 million and Womply will pay $26 million to settle the two separate cases.
The commission says that these are the “largest damages amounts ever secured by the agency under Section 19 of the FTC Act, and include money consumers lost because of the companies’ conduct, even if consumers made no payments directly to the companies”.
Biz2Credit
The FTC alleges that New York-headquartered Biz2Credit, an online SME funding platform, “deceptively advertised that consumers’ emergency PPP loan applications would be processed in an average of 10-14 business days when, in reality, the average processing took well over a month”.
Speaking to FinTech Futures, a Biz2Credit spokesperson says that “there was no admission of wrongdoing by Biz2Credit in the settlement” and that the company’s decision to enter into the FTC settlement “was a pragmatic business decision given the cost and uncertainty of litigation”.
Regarding processing times, the spokesperson says that Biz2Credit “demonstrated to the FTC that it’s 12-14 business day average processing time estimate for PPP loans was accurate for all bona fide PPP loan applications”.
“Fraudulent and ineligible applications, which took longer to process, were included by the FTC in its calculations. Biz2Credit carefully reviewed and ultimately declined applications that it determined were potentially fraudulent or ineligible under PPP program rules. It is important to note that PPP lenders like Biz2Credit made money only when they funded applications,” the spokesperson adds.
Womply
In a separate case, the FTC alleges that Womply, headquartered in California, “widely advertised that small businesses – particularly one-person businesses like gig workers – could successfully get PPP funding when they applied through Womply. The complaint charges, however, that more than 60% of Womply applications never resulted in funding.”
Furthermore, the FTC writes: “In addition, according to the complaint, Womply and Scammell advertised that their automated processes and good customer service would help small businesses secure PPP loans fast. In fact, applicants regularly faced significant issues that slowed down or fully hindered their applications and were often unable to receive customer service assistance they were promised, according to the complaint.”
The agency adds that “the settlement with Womply and Scammell prohibits them from making any deceptive, false or unsubstantiated claims about financial services or products”.
