My identity theft nightmare started, and rightly so, when I picked up my mail on Halloween.

In my mail that day was a statement from U.S. Small Business Administration, saying I owed the agency $ 6,000 for a Economic disaster loan which had to be repaid, from August. My first reaction was “which loan?

Economic Disaster Loans are designed to help small businesses and nonprofits that have lost income due to the COVID-19 pandemic. The money can be used for a variety of business expenses including health care benefits, rent, utilities, and debt payments and loan payments are deferred for the first year.

I am not a candidate for this type of loan – I do not own a business, and although I am the treasurer of the Colorado Springs Press Association, it is a very small nonprofit organization that does not have need no help because of the pandemic. Needless to say, I never asked for or received any money from this loan; someone used my name to rip off American taxpayers.

Colorado small business loans increased in fiscal year ended Sept. 30

I’m assuming the person who applied for this loan got my information from the dark web, where stolen identities are bought and sold on a regular basis. My information is probably from Experian, Target, or some other data breach. They had my social security number, date of birth, and home address, which apparently was all you needed to get one of these loans.

It turns out that these loans were surprisingly easy to obtain. Bloomberg News reported last month that the gangs in Russia and Nigeria found the program easy. The program was part of a pandemic relief program and Congress asked the agency to withdraw money quickly and relax normal guarantees against fraud as long as borrowers said they were eligible, Bloomberg reported.

The agency made 3.6 million loans totaling $ 190 billion, but the SBA Inspector General’s office estimated in July at least 5,000 fraudulent loans have been made and deposited with US financial institutions, including those involving stolen identities. The same problem has been reported with the Pandemic Unemployment Assistance Program for the self-employed, independent contractors and “gig” workers. The SBA responded that it has “robust internal controls”, but that hasn’t stopped Russian and Nigerian gangs.

The agency received the loan application on my behalf in August, approved it nine days later, and deposited the money into an account at a California online bank. I learned all of this because I immediately called the SBA to report that I had not taken this loan or received any money from it. This is the only information I received from the agency. I filed a Freedom of Information Act request for the request and all supporting documents, but the SBA told me not to wait for a response until next month.

Colorado Springs businesses attribute their survival to the payroll protection program

I spent the next 24 hours filing a police report and identity theft report with the Federal Trade Commission, putting a security freeze on my credit reports, and filing fraud alerts with all three agencies. credit assessment. The SBA didn’t tell me if they had done anything about my report that this loan was fraudulent, and they didn’t tell me if I should repay the $ 6,000 loan that I didn’t. did not get.

This mess starts with the SBA trying to make these loans itself. The agency typically guarantees small business loans from banks and other lenders, including the paycheck protection program. The SBA also provides loans directly to individuals and businesses that experience losses in federally declared disasters, but this program is a fraction of the size of the Economic Disaster Lending Program.

My solution has two parts:

• Take the SBA out of the lending business directly. The agency should use banks and other private sector lenders to make all of its loans, but ensure that banks are incentivized to give good loans by requiring them to keep a percentage of the debt, as they do in the SBA loan guarantee program. . Private sector lenders have the expertise, training and experience to not make the mistakes that the SBA has made in the Economic Disaster Lending Program, or at least less, because the underwriting of loans is their main business and they will have an economic incentive to prevent fraud.

Over 8,700 Federal Paycheck Protection Program Loans Made in Colorado Springs Area

• Restructure the SBA to make it similar to the Federal Deposit Insurance Corp., which insures bank deposits. The agency has an independent board of directors and professional management with few political appointments. The leadership of the SBA at state, regional and national levels is made up of people appointed by politicians and the US taxpayer would be better off if replaced by professional leadership, preferably people with banking experience. There is no better time to make this change, as policy appointees will be out of work with a new administration arriving in January. I am not saying that political appointments are dishonest, but their motivation is political and not for economic or commercial reasons.

Epilogue

I received the results of my Freedom of Information Act application, and they explained to me why this happened – the SBA ignored many red flags that would have avoided fraud if they had. heeded the warnings.

The loan application stated that I owned a construction company called “Heilman Help” which was started in 2017, has three employees and generated almost $ 40,000 in income last year and made almost $ 22,000 in profit. . If the SBA had checked the company’s records in Colorado and Delaware – the two most likely places the business would be incorporated – it would have discovered that Heilman Help did not exist.

The request listed my old home phone number as the company phone line; this line has been disconnected since 2017.

The last red flag – the SBA could not verify the status of the bank account online or authenticate the ownership status of the account, but still closed the loan (using an electronic signature) and deposited $ 6,000 in the account anyway.

I still haven’t heard from the SBA Inspector General’s office, which is supposed to invest the fraudulent loans in the event of an economic disaster. I will add to this story if and when I hear from them.