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Loan Fraud Schemes: Don't be a Victim

May 08, 2020
Posted by: Stearns Bank

To support small businesses during the Covid outbreak, the federal government has pumped billions of dollars into the U.S. economy. Programs such as the CARES Act were passed into law at breakneck speed, often with vague or incomplete rules.

Included in the CARES Act, the Paycheck Protection Program has made about $500 billion in loans available to small businesses with favorable terms. The purpose of the program is to enable small businesses to keep running and avoid layoffs.

But a surge of money combined with anxious borrowers also attracts scam artists. Small businesses seeking loan relief can be targeted for criminal fraud. These schemes include phishing emails, false representation on phone calls, phony programs promising quick access to funds, and upfront fees for “special” services.

None of these "special services" are authorized by the SBA, and business owners drawn in by these deals are wasting valuable time and resources following a dead end.

The U.S. Small Business Administration issued this statement about ways the new loan program could be targeted for fraud:

"The Office of Inspector General recognizes that we are facing unprecedented times and is alerting the public about potential fraud schemes related to economic stimulus programs offered by the U.S. Small Business Administration response to the novel Coronavirus pandemic (COVID-19)," the statement says. "Fraudsters have already begun targeting small business owners during these economically difficult times."

The SBA advises that small business owners should not have to pay fees upfront for expediting or approving a loan under PPP. And, "if someone offers a high interest bridge loan in the interim, suspect fraud." The CARES Act is set up so business owners won’t have to pay a fee, including application fees, package fees and closing fees.

Government agencies are your best source of information. If training or services include a fee, it will be reasonable and well explained in advance.

Additional fraud schemes and warnings from SBA include:

Grants

  • SBA does not initiate contact on either 7a or Disaster loans or grants. If you are proactively contacted by someone claiming to be from the SBA, suspect fraud.

Loans

  • If you are contacted by someone promising to get approval of an SBA loan, but requires any payment up front or offers a high interest bridge loan in the interim, suspect fraud.
  • SBA limits the fees a broker can charge a borrower to 3% for loans $50,000 or less and 2% for loans $50,000 to $1 million with an additional ¼% on amounts over $1 million. Any attempt to charge more than these fees is inappropriate.
  • If you have a question about getting a SBA disaster loan, call 800-659-2955 or send an email to disastercustomerservice@sba.gov.
  • If you have questions about other SBA lending products, call SBA’s Answer Desk at 800-827-5722 or send an email to answerdesk@sba.gov.

Phishing

  • If you are in the process of applying for an SBA loan and receive email correspondence asking for personally identifiable information (PII), ensure that the referenced application number is consistent with the actual application number.
  • Look out for phishing attacks/scams utilizing the SBA logo. These may be attempts to obtain your PII, to obtain personal banking access, or to install ransomware/malware on your computer.
  • Any email communication from SBA will come from accounts ending with sba.gov.
  • The presence of an SBA logo on a web page does not guarantee the information is accurate or endorsed by SBA. Cross-reference any information you receive with information available at sba.gov.

Other Advice From SBA

  • Don't release any private information (especially Social Security numbers, credit card information, or banking information) in response to an unsolicited call, letter, or email.
  • Contact the Better Business Bureau (BBB) for more information on a company before you commit to anything.
  • Contact your state's Attorney General's office if you suspect fraud.
  • Do a reverse search of the phone number on the internet – you'll often find that several people have listed the number as belonging to scammers. Ask for the number if you don't have caller ID.
  • Legitimate government entities will have websites and emails that end with .gov such as http://www.sba.gov.
  • Search "scam" or "scams" on http://www.sba.gov. You'll find many of the scams that we already know exist.
  • Report scams. Report to the BBB and to the Attorney General. If someone purports to be affiliated with the SBA, contact your SBA office.
  • Contact your SBA office if you're not sure how to apply for small business certification programs or have other questions pertaining to your small business.

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