First FTC coronavirus lawsuit alleges company lured consumers with false SBA connection

The COVID-19 crisis has many small businesses on the ropes, so it’s unfortunate we have to warn them about another threat. According to a lawsuit just filed by the FTC, a Rhode Island company that goes by the name “SBA Loan Program” has been soliciting applications from small businesses, but has no affiliation with the U.S. Small Business Administration and the loan programs that agency is currently running.

Under the CARES Act, eligible small businesses can apply for loans under a temporary SBA program called PPP – the Paycheck Protection Program. The loans can be made only by lenders authorized by the SBA.

Let’s repeat the most important fact: Defendants Ponte Investments, LLC, and John C. Ponte are not authorized by the SBA to make loans under the CARES Act. And yet despite that, the FTC says the defendants have contacted people, claiming to be calling from SBA or saying things like “We are the SBALoanProgram.com and as mandated by the SBA, getting approved is easier than ever!”

The complaint alleges the defendants also are luring consumers in through the URL SBALoanProgram.com. Visitors to that site immediately get a pop-up that says “CARES Act Paycheck Protection Program.” This pop-up has also told some visitors “WE ARE A DIRECT LENDER FOR THE PPP LOAN PROGRAM!” The site continues, “Can’t get your bank to answer the phone? Get the personal attention you need. Our staff are here to help.”

Clicking on “Apply Here” takes consumers to an online application that says in big letters “CARES Act Paycheck Protection Program” and has also told some consumers “We are a Direct Lender for the Payment Protection Program.”

At the very bottom of the page, after the “Submit” button in faint grey print on a white background, it says this: “We are not the US Government. If you wish to apply for a Disaster Relief Loan follow this link to the SBA website www[dot]sba.gov/disaster. The Paycheck Protection Program is not provided by the SBA.” But even if a consumer sees that language – a big if, given how the defendants have designed the page – the FTC alleges it’s too little, too late. What’s more, the text still doesn’t disclose that SBA Loan Program isn’t authorized to make PPP loans, meaning that the fine print doesn’t correct the deceptive net impression the FTC says the defendants conveyed to consumers.

According to the complaint, the SBA – the real SBA – has sent a cease and desist letter to SBA Loan Program. But SBA Loan Program has continued to claim it will make PPP loans and has encouraged consumers to submit applications.

The complaint charges the defendants with falsely claiming they’re affiliated with the Small Business Administration. But the injury to consumers extends far beyond that challenged claim. To date, more than 1.6 million small businesses that have applied through authorized lenders have received $349 billion in relief, meaning that the CARES Act funds available for PPP loans are now spoken for. The upshot: The hundreds, or perhaps thousands, of people who were led to apply on the defendants’ site could be out of luck, putting their businesses and employees in an even more precarious position. The case is pending in federal court in Rhode Island.

What’s the word for small businesses?

• As you hang tough in the current economy, keep your guard up against outfits trying to make a bad situation even worse. Your go-to first source for SBA information now and for future developments should be the SBA’s Coronavirus Relief Options page.
• If someone calls or emails you out of the blue claiming to be from the SBA, suspect fraud.
• We want to hear about questionable coronavirus promotions targeting small businesses and consumers. Have you spotted something iffy? Report it to the FTC.

We also have a message for anyone thinking about making a quick buck at the expense of struggling small businesses. The FTC will aggressively pursue those who use deceptive and unfair practices to exploit the coronavirus crisis.