Fraud Alert: Scammers Target COVID-19 Relief Loan Applicants

Fraudsters are targeting small businesses applying for coronavirus disaster relief loans, including the federal Paycheck Protection Program.

Authorities are investigating companies for falsely marketing themselves as approved U.S. Small Business Administration lenders.

The warning comes as Congress is expected to approve a second round of small business PPP loans for companies hurt by the coronavirus pandemic.

Scams have been reported in Rhode Island, New York, and Maine.

The Federal Trade Commission says hundreds, if not thousands of small businesses were duped when they applied for loans with Ponte Investments of West Warwick, R.I., which did business as SBA Loan Program and ran the website SBALoanProgram.com.

The FTC went to court to get a temporary injunction prohibiting SBA Loan Program, owner John C. Ponte, and Ponte Investments from representing themselves as either associated with a federal agency or an authorized SBA lender.

SBA Loan Program, according to a complaint filed by the FTC, represented itself to small businesses as being the SBA or being endorsed, sponsored, or approved by the SBA.

Impersonating SBA Officials

The commission is seeking a permanent injunction that would force Ponte to rescind or reform contracts with small businesses, and refund any money collected.

The company’s action violates the FTC Act, the commission alleged.

In one instance, a small business in Maine got a call from an SBA Loan Program representative who claimed to be from the SBA.

The company’s website falsely claimed it is “a direct lender for the PPP loan program.”

The representative told the business owner that SBA Loan Program was working with the owner’s bank and urged the owner to apply immediately because PPP funds were running out.

A second representative followed up with an email that suggested the company was “mandated by the SBA” to process the loans.

The company’s website falsely claimed it is “a direct lender for the PPP loan program,” the complaint said.

‘Deceptive Marketing’

In New York, Attorney General Letitia James announced her office issued a cease-and-desist order against a company, SBA.com, for “deceptive marketing and business practices related to the issuance of PPP loans.

The website is intentionally similar to the agency’s website, she said.

“The SBA.com home page creates a misleading impression by offering links to ‘COVID-19 Relief,’ and another link that states: ‘Your Paycheck Protection Program Loan starts here,’ even though SBA.com is not a certified PPP lender,” James said.

“It is disturbing to see these defendants preying on desperate businesses looking for ways to keep their employees financially secure.”

FTC chair Joe Simons

Earlier this month, U.S. Senator Susan Collins (R-Maine) warned constituents of scammers who were calling small businesses and falsely telling them they needed to pay a fee to apply for a PPP loan.

“In this time of incredible challenge for all Americans, it is disturbing to see these defendants preying on desperate businesses looking for ways to keep their employees financially secure,” FTC chair Joe Simons said.

He encouraged any business owner who encounters scams like this to report it to the FTC.

Fraud Tips

James offered these tips to small businesses applying for the loans:

• Only deal with known, trusted vendors who are eligible to issue PPP loans. Visit the SBA website for a list.
• Make sure the information on your loan application is correct. Unscrupulous agents or lenders may encourage borrowers to list false information to get the biggest loan possible, which maximizes lender fees. But the borrower who lists false information could face criminal charges.
• Borrowers should not pay fees to get a PPP loan. Lenders are paid fees only by the SBA. If a borrower is working with an agent, the lender pays the agent’s fees.
• Borrowers should not pay more than 1% interest on a PPP loan.

In addition, small businesses should never respond to calls, emails, or other communication claiming to be from the Treasury Department or the SBA, and avoid any lender who claims to be able to get an expedited loan or who offers a loan advance.