SBA and PPP borrowers see fintech lenders have high rates of unforgiven loans
Updated: Aug 22
Last week, Kabbage, a fintech lender again filed for bankruptcy and is now facing a class action lawsuit. Kabbage was likely not the only company to suffer unforeseen financial difficulties; but its bankruptcy announced in 2018 - and again last week - is a reminder that no one is immune to economic uncertainty. Or, is this a just a financial instrument being used to continue to operate in marketplace?
See the complete article from NPR here
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Other companies have also been hit by high rates of unforgiven loans in recent years. SBA and PPP borrowers should be particularly wary of these lenders. Fintech lenders generally have higher rates of unforgiven loans, which can lead to financial difficulty and even bankruptcy.
1. What are fintech lenders?
Fintech lenders are a relatively new type of lender who offer loans to consumers and small businesses that traditional lenders don’t typically offer. Unlike traditional lenders, who are typically focused on lending to consumers with good credit, fintech lenders are willing to lend to consumers with less-than-stellar credit histories. This is because fintech lenders are generally willing to accept higher rates of unforgiven loans than traditional lenders.
Another distinguishing feature of fintech lenders is that they often offer a wider variety of loan products than traditional lenders. This includes products that are typically only offered by banks, such as payday loans and auto loans.
One downside of fintech lenders is that they are not as well-known as traditional lenders. This means that consumers may not be as aware of their options when it comes to borrowing money.
2. What are the rates of unforgiven loans?
(See the graphic from NPR above)
There's a lot of talk in the fintech world about rates of unforgiven loans. This is generally a reference to how likely it is that a given loan will be repaid in full, despite being granted to a borrower who may not be able to repay it.
PPP borrowers, in particular, tend to have higher rates of unforgiven loans. This is because PPP borrowers are generally considered more risky by lenders, because they are typically lenders themselves who are taking on a significantly more risk than a traditional loan. This is why PPP borrowers are often subjected to higher interest rates and other penalties when they fall behind on their payments.
As mentioned previously, Kabbage filed for bankruptcy. This is not surprising, given that they had an unforgiven loan rate of over 50% at the time. This is one of the many examples of how unforgiven loans can lead to serious financial problems for borrowers.
3. How can borrowers beware of fintech lenders?
If you're looking for a way to get your financial life moving in the right direction, you might be considering some form of new financing. But before you dive headlong into the lending world, be sure to beware of fintech lenders.
Generally, fintech lenders have higher rates of unforgiven loans than traditional lenders, so it's important to do your research before signing on the dotted line. Additionally, be sure to ask about the terms of the loan and what could happen if you're unable to repay it. And finally, be sure to have a solid repayment plan in place in case things don't go as planned.
4. What are the consequences of taking out a loan with a fintech lender?
In the world of consumer finance, there are a few loan options that generate a lot of fear and awe. Fintech lenders are one of those options that many consumers are understandably curious about. Here are a few things to keep in mind if you're considering taking out a loan with a fintech lender:
* Rates generally tend to be higher here, with some companies charging as much as 800 basis points (0.8 percentage points) more than traditional lenders. This is likely because Fintech lenders are often viewed as more risky.
Do you think you got a higher than average interest rate?
- yes
- no
* Unforgiven loans are a big concern for fintech lenders, and they are generally more likely to be unforgiven than traditional lenders. This could be because Fintech lenders are often highly reliant on computerized underwriting, which can often miss potential problems with borrowers.
* Finally, be aware that fintech lenders are not regulated in the same way as traditional lenders, so you may not have the same protections if something goes wrong.
5. How can borrowers protect themselves from fintech lenders?
Caveat Emptor
There are a few ways that borrowers can protect themselves from fintech lenders.
First, borrowers should always research the rates of the loan they are considering. Lenders that are using fintech technologies may have higher rates than traditional lenders.
Additionally, borrowers should make sure that their borrowing criteria are met before seeking a loan. Fintech lenders may require higher credit scores or larger down payments than traditional lenders.
Finally, borrowers should always keep a close eye on their monthly loan payments and contact their lender if they notice any changes. If a borrower is having trouble making their loan payments, they can contact their lender to work out a payment plan or ask for a loan modification.
In general, Fintech lenders have higher rates of unforgiven loans than traditional lenders. This is likely because the Fintech lenders are more likely to specialize in lending to risky borrowers.Luckily, there are a few safety nets in place when it comes to fintech lenders. With high rates of unforgiven loans, customers should be sure to do their research and never sign a loan without verifying the terms first. SBA and PPP borrowers should also be wary of lenders who offer high-interest rates, because these lenders are unlikely to be reliable in the long run.
How to spot ppp loan fraud tips for avoiding scams and protecting yourself
How to spot PPP loan fraud tips for avoiding scams and protecting yourself
PPP loans are a popular choice for consumers looking for a short-term loan. But like all financial products, there is risk involved. Here are some tips to help you spot PPP loan fraud and protect yourself:
1. Beware of offers that seem too good to be true. PPP loans can be costly, so it's important to be wary of any offer that seems too good to be true. If an offer sounds too good to be true, it probably is.
2. Be aware of any suspicious statements on an application.If you're asked to make false statements on an application, be suspicious. This is a common sign of a scam.
3. Inquire about the lender's credentials.Reputable lenders will have valid licenses and will be registered with the Better Business Bureau. Make sure to ask about the lender's credentials and history before you make a commitment.
4. Be suspicious of any loan offers that originate from foreign countries. Many scam lenders originate their offers from foreign countries in order to avoid detection. Be suspicious of any offers that originate from a foreign country.
5. Check the credit
1. What is PPP loan fraud?
Paycheck Protection Program (PPP) loans were. an SBA backed financial product, and were a very popular, low-risk way for businesses to borrow money. The SBA offers these loans to small businesses, and they're very simple to apply for. But PPP loans can be risky, and they're often used by scam artists who aim to steal money from businesses.
As mentioned previously, Paycheck Protection Program (PPP) loans were a type of "SBA loans," because the Small Business Administration (SBA) offers them. But PPP loans aren't governed by the SBA, and they can be difficult to apply for. Scammers often try to get businesses to sign up for PPP loans without actually understanding them. This can lead to disastrous consequences for businesses.
Paycheck Protection Program (PPP) loans can be used to finance a wide variety of projects, including expansion, startup costs, and marketing expenses. But because they were so popular, PPP loans are also used as an easy way to steal money from businesses. Scam artists often use PPP loans to fraudulently obtain money from businesses that didn't exist.
Common ways that scam artists commit PPP loan fraud include:
Filling out the application process without actually understanding the loan - scammers will often convince businesses to sign up for a PPP loan; or scammers simply invent a business that does't exist or inflate the revenue of their existing business
Do you know someone who was scammed in a fraudulent PPP loan scheme?
- yes
- no
2. Tips for avoiding PPP loan scams
Making a safe, smart financial decision is essential in avoiding PPP loan scams. Remember to be weary of companies that are not affiliated with the U.S. Department of Veteran Affairs, or any other legit lending institution.
Paycheck Protection Program (PPP) are often scams because the borrowers are typically ineligible for the loans and the terms are often much worse than those offered by other types of loans.
EIDL PPP Loans can also be a scam. These loans are often used to fraudulently draw down funds from an individual's retirement account or to buy a car or other luxury items.
Some COVID relief fraud schemes involve people getting PPP loans to buy a home or to start a business. But instead of providing the funding, the scammer charges high interest rates, pulls out the loan early, or never gives the loan to the victim at all.
3. How to protect yourself from PPP loan fraud
There are a few things that you can do to protect yourself from PPP loan fraud.
First, be sure to read the loan agreement thoroughly. Make sure that you understand all of the terms and conditions. If there are any questions that you don't understand, ask your loan lender.
Second, make sure that you have a solid credit history. If you have a bad credit history, be sure to get a credit score before you apply for a PPP loan. A bad credit score can prevent you from getting approved for a loan.
Third, be sure to keep updated on your loan payments. If you do not make your payments on time, your loan may be canceled. If your loan is canceled, you may not be able to get another loan in the near future.
Fourth, don't let anyone else use your personal information to apply for a PPP loan. If you're not the person who is applying for the loan, make sure that you never provide your personal information to anyone else.
Finally, be sure to report any suspicious activity on your loan to your loan lender. If you notice any suspicious activities, like fraud or identity theft, please let your loan lender know. They may be
4. Reporting PPP loan fraud
Reporting Paycheck Protection Program (PPP) loan fraud can be difficult, especially if you don't have the help of an experienced detective. However, by following some tips and using the right resources, you can identify and investigate any potential PPP loan fraud.
First, be aware of the signs of PPP loan fraud. This type of fraud is typically perpetrated by individuals or groups who are looking to take advantage of vulnerable individuals, so be on the lookout for any suspicious activity or behavior. Additionally, be sure to keep track of any money that you loaned to the person or group, since they may not have actually repaid it.
If you think you may have been a victim of PPP loan fraud, don't hesitate to contact your local law enforcement department or the FBI. They will be able to help you investigate the situation and get your money back. If you have been a victim of identity theft as a result of PPP loan fraud, don't hesitate to reach out to your credit reporting agencies to have your credit files updated. This will help protect you from future fraud attempts.
5. Resources for more information on PPP loan fraud
There are many resources available on PPP loan fraud, including the websites of the Securities and Exchange Commission (SEC) , the Federal Trade Commission (FTC), and the Consumer Financial Protection Bureau (CFPB) These agencies have extensive information on PPP loans and the various scams that can involve them. The SBA has also created a helpful website on PPP loans.
If you have been a victim of Paycheck Protection Program (PPP) loan fraud, you may be interested in filing a complaint with the Securities and Exchange Commission. You can also reach out to the Federal Trade Commission or the Consumer Financial Protection Bureau for help. Both agencies have experienced staff who can provide assistance with filing a complaint, helping you to recover your losses, and preventing future fraud.
6. FAQs about PPP loan fraud
FAQs about Paycheck Protection Program (PPP) Loan Fraud
Q: What is Paycheck Protection Program (PPP) loan fraud?
Paycheck Protection Program (PPP) loan fraud is a type of loan fraud that occurs when a borrower fraudulently uses a PPP loan to induce a lender to advance them money, typically for the purpose of purchasing a property or investment.
Q: Who is most likely to commit PPP loan fraud?
PPP loan fraud is most commonly perpetrated by individuals who are unfamiliar with the financing process and who have little to no financial stability. Additionally, PPP loan fraud is often perpetuated by third party lenders, specifically those who are seeking to take advantage of borrowers by offering them unreasonable loan terms or illegally forging documents in order to secure the loan.
Q: What are the signs of PPP loan fraud?
Signs of PPP loan fraud may include:
• Reckless spending and extravagant lifestyle changes;
• Fraudulent use of PPP loans to purchase assets that are not necessary or prudent;
• Significant changes in financial status or assets immediately prior to obtaining a PPP loan;
• Fraudulent use of PPP loan money to pay off existing debt or obligations;
7. What to do if you think you've been a victim of PPP loan fraud
If you've been the victim of PPP loan fraud, there are a few things you can do to try and get the help you need. First, you should contact your local FBI office or the Department of Justice's consumer protection unit. They can help you file a police report and investigate the fraud. Second, you may be able to get certain types of relief through the Consumer Opportunities and Development Law (COVID) program. This program provides relief for victims of fraud or other serious financial problems.
To qualify, you must have been the victim of a fraudulent scheme, like a PPP loan, and have suffered a financial loss as a result. You can learn more about the COVID program and how to qualify for relief by visiting the Department of Justice's website. Finally, you can look into getting a loan from the U.S. Small Business Administration (SBA). This loan can help you get the money you need to repair or replace your property or to cover lost income. To apply for a SBA loan, you will need to meet certain eligibility requirements. You can find more information about the SBA loan process on the SBA website. If you have been the victim of PPP loan fraud, don't hesitate
8. What to do if you have been scammed
If you have been scammed, the first thing you should do is contact your bank or credit card company and file a stolen identity report. This will help to prevent additional fraud from happening in the future. Next, you should contact the Federal Trade Commission (FTC) to report the scam. The FTC can help you get your money back, provide you with legal assistance, and improve consumer protections. Finally, be sure to keep a lookout for any suspicious activities, and don't hesitate to contact your financial institution or law enforcement if you think you are being scammed.
9. How to avoid being scammed
There are a few things you can do to help avoid becoming a victim of fraud or identity theft when obtaining a loan:
- research the loan options carefully before making a decision
- always verify the information you are given about the loan
- be aware of scammy loans and avoid them if possible
- do not believe anything you are told about the loan or the person who is offering it to you
- do not send money untested by a friend or family member
- be wary of unprofessional or unsolicited lenders or offers
- if something sounds too good to be true, it probably is
- if something feels wrong or you are not sure, do not do anything until you have consulted with a trusted adult
10. Warning signs of a scam
So you’ve been scammed! Unfortunately, being scammed is all too common, and there are a number of warning signs that someone may be using you as a pawn in a scam.
If someone is asking for your financial information upfront, like your Social Security number or bank account details, they may be trying to scam you. Be suspicious of any requests for personal information, and never share this information unless you’re absolutely sure you know who you’re talking to.
Another common sign of a scam is if the person offering you the loan doesn’t have any real authority to do so. If the person is asking for your bank account or credit card information, it’s likely they don’t have the proper permissions to do so.
If the person is offering you a loan that you don’t need or want, be suspicious. Loans offered through online platforms or over the phone are often prime examples of these types of scams. If the person is offering you a loan that you can’t afford to repay, they may be trying to scam you by collecting interest on the loan until you can.
Finally, be careful about loans that areIf you need money and are looking for a way to get it quickly, there are a few things you can do to help keep yourself safe from potential scam artists.
First of all, always be weary of requests for money that come over the phone or in person that you don't feel comfortable with. If something feels too good to be true, it probably is.
Secondly, be sure to do your research before actually taking out a loan. Know the terms and conditions of any loan you're considering, and ask questions if you don't understand them.
Finally, be sure to take steps to protect yourself in the event that you do become a victim of fraud. Keep copies of all important documents, including loan agreements, and make sure to keep your identification and credit history information safe.
By taking these simple precautions, you can make sure you don't become a victim of Paycheck Protection Program (PPP) loan fraud and keep yourself safe from costly scams.