US pandemic relief program mistakenly paid $ 692 million in duplicate loans: watchdog

WASHINGTON (Reuters) – The US Small Business Administration (SBA) mistakenly paid $ 692 million in duplicate loans to help the small business pandemic because of technical errors and other errors, the agency’s internal body said on Monday.

Creditors participating in the Payment Check Protection Program (PPP) distributed the money to 4,260 borrowers who had already received funds due to various technical flaws in SBA’s loan processing systems, which were struggling to process loan volumes, wrote the SBA Inspector General in a report.

Reuters reported for the first time in June that technical confusion prompted the SBA to approve thousands of duplicate loans, potentially worth hundreds of millions of dollars.

Under the program, lenders grant government-backed loans to small businesses on behalf of the SBA. If borrowers use the funds for their intended purposes, such as keeping employees employed, they keep the money and the government pays the creditor.

The watchdog did not say how much if any of the $ 692 million wrongly distributed by creditors was later repaid by the government. Initially, he said he would guarantee only one loan per borrower, which means that creditors, not the taxpayer, may be subject to error.

Reuters reported in June that lenders had been trying to recover borrowers’ duplicate loans.

In response to Monday’s report, SBA officials said the agency would flag any suspicious duplicates for further analysis and expects the matter to be resolved by September.

The watchdog added that it saw no evidence that borrowers intentionally exploited SBA’s systems to obtain multiple loans.

Amid the frantic launch of the first-come, first-served program last April, many borrowers signed up with several borrowers to increase the chances of getting a loan.

A SBA computer program to detect such duplicate applications has failed, said the watchdog. In addition, the SBA system would not detect an application as a duplicate if the borrower’s social security number and employee ID number were changed in the second application.

At one point, the number of duplicate PPP loans approved exceeded 40,000, but SBA officials were able to identify and resolve most of them before lenders disbursed the money, said the SBA Inspector General.