Testimony of Nick Schwellenbach, Senior Investigator, Project On Government Oversight before the United States Senate Committee on Small Business and Entrepreneurship on “Improving Access to Capital in Underserved Communities: The Community

By the end of 2021, the vast majority of the largest PPP lenders, by both value and volume (nine out of ten), were fintechs or fintech-partnered lenders.” Staff of House Committee on Oversight and Reform, Select Subcommittee on the Coronavirus Crisis, 117th Cong., “We Are Not the Fraud Police”: How Fintechs Facilitated Fraud in the Paycheck . [...] “It is the sense of the Senate that the Administrator should issue guidance to lenders and agents to ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially and economically disadvantaged individua. [...] The report stated that “Congress and the SBA should consider carefully whether unregulated businesses such as fintechs, many of which are not subject to the same regulations as financial institutions, should be permitted to play a leading role in future federal lending programs.”21 I urge this Committee and the SBA to review that report, as it contains troubling details about the practices of some. [...] In the spring of 2020, fintech industry groups successfully lobbied the government to allow their participation in the Paycheck Protection Program.22 The SBA issued interim rules governing the PPP on April 2, 2020 — the day before the program began accepting loan applications. [...] The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) gave the federal government, specifically the Treasury secretary in consultation with SBA, the authority to open participation in the PPP to “Additional Lenders,” and gave them the authority to issue “regulations and guidance.”23 20 Government Accountability Office, COVID-19: Opportunities to Improve Federal Response and Recovery E.