As part of the efforts to help individuals and companies affected by Covid-19 pandemic, the government instituted a Paycheck Protection Program (PPP), administered by the Small Business Administration (SBA). This class action brings suit against Kabbage, Inc. and K Servicing, for not keeping up with processing PPP loan forgiveness applications.
The Nationwide Class for this action is all borrowers of PPP loans for $150,000 or less, serviced by K Servicing for which the borrower has applied for but not received forgiveness of the entire amount of the PPP Loan. Florida and Michigan Subclasses have also been defined for borrowers within the above class located in Florida and Michigan, respectively.
The complaint claims Kabbage was in difficulty in March 2020, at the beginning of the Covid-19 pandemic, anticipating a fall-off in its business, and therefore laying off US employees, closing its India-based office, lowering executive pay, and pausing its lending functions.
However, in April 2020, it was able to get permission to act as a PPP lender, originating loans to small businesses that could be forgiven under certain circumstances. To do this, the complaint claims, Kabbage had to restructure its technology quickly. The complaint alleges, “By the end of the first two funding rounds in early August 2020, Kabbage had issued the second-largest number of PPP loans in the country.”
The complaint alleges that Kabbage earned between $330 million and $340 million on the $7 billion it made in PPP loans. American Express bought most of the company in 2021, although not the servicing part of the business, which has been renamed K Servicing.
Unfortunately, the complaint contends that K Servicing “was left completely bereft of competent employees and necessary resources to properly service the hundreds of thousands of loans” which Kabbage made.
Among other things, the complaint alleges, the company chose not of take part in the SBA’s Direct Borrower Forgiveness Portal, which the complaint alleges was a “streamlined” way of processing loan forgiveness applications for PPP loans of $150,000 or less. When a borrower applies for forgiveness in this way, a lender (such as Kabbage) can review the forgiveness application and issue a forgiveness decision.
The complaint alleges that K Servicing has not been able to service the loans itself in a timely manner. It claims that borrowers have been asked to provide more documentation than SBA rules require and to resubmit documents previously submitted; and that they have received documents that appear to have been fraudulently altered and to make payments on loans that should already have been forgiven.
The SBA’s rules for the loans require that servicers make a determination on a forgiveness application within sixty days, but the complaint alleges that K Servicing is not meeting that deadline. This, the complaint alleges, is creating a burden on small businesses that cannot afford it.
Article Type: LawsuitTopic: Government Programs or Benefits, Loans
Most Recent Case Event
Kabbage Slow Forgiveness on PPP Loans Complaint
March 30, 2022
As part of the efforts to help individuals and companies affected by Covid-19 pandemic, the government instituted a Paycheck Protection Program (PPP), administered by the Small Business Administration (SBA). This class action brings suit against Kabbage, Inc. and K Servicing, for not keeping up with processing PPP loan forgiveness applications.
Kabbage Slow Forgiveness on PPP Loans ComplaintCase Event History
Kabbage Slow Forgiveness on PPP Loans Complaint
March 30, 2022
As part of the efforts to help individuals and companies affected by Covid-19 pandemic, the government instituted a Paycheck Protection Program (PPP), administered by the Small Business Administration (SBA). This class action brings suit against Kabbage, Inc. and K Servicing, for not keeping up with processing PPP loan forgiveness applications.
Kabbage Slow Forgiveness on PPP Loans Complaint