By Hannah Lang

Dec 1 (Reuters) - Several fintech companies that facilitated high volumes of pandemic-related loans to businesses in 2020 had inadequate processes to detect fraud, according to a new report from the U.S. House Select Subcommittee on the Coronavirus Crisis.

The committee concluded in its report published Thursday that some fintech companies failed to stop “obvious and preventable fraud” in administering loans in the COVID-19 Paycheck Protection Program $(PPP)$ “leading to the needless loss of taxpayer dollars.”

“Even as these companies failed in their administration of the program, they nonetheless accrued massive profits from program administration fees,” said Rep. Jim Clyburn, the chair of the committee, in a statement.

The program closed to borrowers in May 2021 after lending about $800 billion.

The committee opened an investigation into fintech companies Kabbage and Bluevine and their partner banks in May 2021 following reports they were linked to a disproportionately high number of fraudulent loans, and later expanded that investigation to include Blueacorn and Womply.

The report found internal systems to detect fraud were often lacking. Blueacorn employees who reviewed loans were told that each application should take less than 30 seconds to review, and that they did not need to apply as much scrutiny to high dollar loans, the committee said.

Womply’s lending partners accused the company of allowing “rampant fraud” to occur and described its fraud prevention practices as “put together with duct tape and gum.”

Kabbage, which was acquired by American Express in October 2020, likely approved loans with red flags because the loan program “imposed minimal risk on lenders who approved questionable applications,” the report said.

Meanwhile, the committee observed that Bluevine’s lending partner, Celtic Bank, conducted oversight of Bluevine’s anti-fraud controls and prompted the fintech to introduce manual review processes, after which it observed a steep decline in fraud.

(Reporting by Hannah Lang in Washington; Editing by Stephen Coates)

((Hannah.Lang@thomsonreuters.com;))