NEW YORK–The online lender Kabbage, often hailed as among the fintechs credit unions need to be watching, has filed for bankruptcy.
Kabbage, a unit of American Express, had been among the biggest lenders in the first year of the Paycheck Protection Program, processing more than $7 billion in loans, but it has since been dogged by questions of whether it was too lax in approving loans that it should have known were fraudulent.
The has led to numerous federal investigations into its PPP lending practices.
As noted by the Miami Herald, the Kabbage that declared bankruptcy was a shell of its former self. After American Express acquired the company in 2020 it took the online lender’s technology and many of its employees, but left behind the PPP loan portfolio, which would be handled by a holding company that now does business under the name KServicing.
Numerous Investigations
“That holding company disclosed in the filings that it is currently facing investigations into its PPP lending practices from the House Select Subcommittee on the Coronavirus Crisis, the Federal Trade Commission, the U.S. Small Business Administration and two U.S. Attorneys, working in conjunction with the U.S. Department of Justice,” the report stated.
In terms of PPP loan forgiveness, Kabbage has fared poorly, the Herald said, noting it had the lowest rate of borrower forgiveness of any major lender in the program, with borrowers describing an “agonizing process of trying to have their loans erased.”
A ‘Skeleton Staff’
The Herald reported the bankruptcy filings
show that the holding company has a skeleton staff of only 19 full-time employees and currently has only $11 million in available cash on hand.
“Those employees, along with an army of contractors, are responsible for overseeing a loan portfolio that currently includes 48,000 PPP loans with an outstanding balance of $1.3 billion and dealing with a mounting array of legal woes,” the report added.
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