Jacob Ogles
The Small Business Administration last year suspended a fintech company in litigation with three Florida lenders. The company now asserts it was wrongly held responsible for lenders’ dishonesty and by federal government negligence.
Womply, a California-based marketing software company, entered litigation with multiple Florida lenders including the Sunshine State Economic Development Corporation, Fountainhead Commercial Capital and Benworth Capital Partners.
The dispute with Benworth, a Coral Gables-based company, has been drawn out, even as the federal Small Business Administration imposed a six-month suspension on Womply.
The fintech firm came under fire from Congress last year for failing to vet applications it handled for Paycheck Protection Program loans approved during the COVID-19 pandemic. That PPP program was approved to cover payroll for companies forced to close for extended periods, and aimed to prevent unnecessary layoffs.
Of note, Womply was among a small number of fintechs that during the pandemic put efforts into facilitating loans, and made billions as a result. But federal investigators say that was because it put collecting fees ahead of verifying loan applications’ legitimacy.
A House Select Committee on the Coronavirus Crisis investigation found about a third of all PPP loans in the country were processed by two fintech companies: Womply and Blueacorn.
A report alleges those firms “failed to implement systems capable of consistently detecting and preventing fraudulent and otherwise ineligible PPP applications” and that “lending partners, who were tasked with supervising the activities of these fintechs, often did little to oversee the activities of the companies to which they delegated their responsibilities.”
Fintechs specialize in employing technology to complete the delivery of financial services. But the report indicates the lack of screening regarding PPP loans failed to prevent “rampant fraud” while companies collected more than $2 billion in processing fees.
After the investigation, the Small Business Administration in December announced it would bar Womply from working with the federal agency in any capacity. Meanwhile, the agency announced investigations of Benworth and Fountainhead.
Attorneys for Womply told the SBA that Benworth bore a significant amount of responsibility regarding fraudulent loans, and had tried to maximize its own profits.
In a letter to SBA Administrator Isabel Guzman, Womply attorney Alexander Cheney accuses Benworth of an ongoing campaign to have “SBA officials attempt to influence the outcome of a private commercial arbitration with Womply.”
“The SBA should not be putting its thumb on the scale,” Cheney wrote.
In a letter to Womply in December, SBA Credit Risk Management Director Susan Streich said Womply’s suspension would last 180 days, which would allow the SBA time to further analyze the fintech firm’s compliance with loan program requirements.
Womply CEO Tony Scammel personally accepted three PPP loans for different businesses. He also pleaded guilty in 2014 to insider trading in an unrelated case and has been permanently banned from working in the securities industry.
Once Womply started offering services for PPP loans, the number of applications from small businesses skyrocketed, The New York Times noted at the time.
Benworth, a Coral Gables-based lender, used the Womply platform to deliver more than 305,000 PPP loans, with a principal amount exceeding $4 billion, according to Cheney’s letter. At one point, Cheney alleges the lender was doing enormous business and demanded a discount on fees to Womply, and withheld $95 million,
“At the time, Benworth did not contend that Womply’s fees violated any regulation, rule, or law,” Cheney wrote.
The letter notes Wolply has similar disputes that were fully resolved with Fountainhead, the Sunshine State EDC and Capital Plus Financial.
Cheney wrote that Benworth litigation continued because Benworth President Bernie Navarro “sought to leverage his relationship with Senator Marco Rubio of Florida to convince the SBA to issue new rules that would help Benworth in its private commercial dispute with Womply.”
Rubio was a chief architect of the PPP program in the Senate.
The SBA findings resulting in Womply’s suspension followed an 18-month investigation. Benworth has operated out of Coral Gables since 2008 and also has an office in Puerto Rico. The company specializes in hard money loans.
