The Small Business Administration’s (SBA) Office of the Inspector General (OIG) has recovered over $1.1 billion in funds paid through the COVID-19 Economic Injury Disaster Loan Program (EIDL) that were initially granted based on false application information, SBA OIG said in a report released May 6.
SBA OIG also canceled 15,345 loan disbursements as of early February after receiving identity theft complaints. Those canceled disbursements totaled $809.9 million, but still represent just a fraction of the loans SBA referred to its OIG.
“As of January 31, 2021, SBA has referred 846,611 COVID-19 EIDL applications to the OIG, which is the loan application related to an identity theft complaint … and any related applications,” SBA OIG said in the report. “SBA officials did not know the exact number of individuals who have filed an identity theft complaint because they did not track each complaint.”
Of the over 846,611 applications, the SBA had disbursed $6.2 billion in EIDL funds, and OIG found that the bank account numbers for over 29,000 disbursed loans were different than the original account number listed on the application, which could indicate fraud as well. Over $1.7 billion was disbursed in those instances.
The status of these identity theft claims is unknown, as SBA OIG found the agency lacks processes that would allow it to track identity theft complaints, provide updates to the victims, or release any liens on the victims’ assets. In addition, SBA lacks processes that would stop billing fraudulent loans to victims, prevent collection, or release victims of liability.
“At the time of our review, we found SBA did not provide status updates to those reporting COVID-19 EIDL identity theft,” the report says. “Some complainants have contacted SBA multiple times, which further distorts the total number of identity theft complaints. These individuals have been waiting a long time, some of them for months, for a resolution on potentially fraudulent loans in their names that could negatively affect their ability to obtain credit.”
The OIG notes that many victims were shocked to receive SBA loan statements, and recommends the agency update the processes it uses to validate identity theft.
