Lawsuit targets Fintech’s handling of PPP loan forgiveness requests

A recent lawsuit seeks to hold a fintech company liable for failing to properly repay loans made under the Paycheck Protection Program (PPP), marking what could be the first putative class action lawsuit challenging how PPP lenders process loan forgiveness requests.

The lawsuit, filed in late March 2022, alleges that Kabbage failed to properly handle borrowers’ PPP loan forgiveness requests. To see Carr v. Kabbage, Inc., Case No. 1: 22-cv-01249 (ND Ga.). The PPP allowed borrowers to have their loan forgiven if they were able to meet certain criteria. The complaint alleges that Kabbage issued billions of dollars in PPP loans but made it difficult or impossible for borrowers to submit loan forgiveness applications. He alleges that Kabbage failed to process applications within the timelines required by federal regulations, asked clients to sign altered forms, and demanded that clients provide unnecessary documents.

The suit blames Kabbage for other behaviors that it says made it harder for borrowers to cancel their loans. He says Kabbage handles PPP loans through a separate, understaffed entity. He argues that Kabbage should have participated in the Small Business Administration’s loan forgiveness portal. And he alleges that Kabbage wrongly attempted to collect loans that should have been cancelled.

The suit seeks to certify a national class of Kabbage borrowers, as well as five state subclasses. In particular, it is seeking to return all of its origination fees on PPP loans to Kabbage.

Dorothy H. Lewis