Even at a time of crisis like we are in now, there are still those who seek to exploit the situation and do some harm. The massive $2.2 trillion CARES Act is no exception.
One unfortunate byproduct of the age of rapid information and digital transformation is this—even at a time of crisis like we are in now, when the public and private sector are truly coming together to support each other and do some good, there are still those who seek to exploit the situation and do some harm. The massive $2.2 trillion CARES Act is no exception—there are a number of scams right now looking to prey on vulnerable people and businesses, and they must be made aware and take caution.
According to published reports, the Better Business Bureau is already reporting that government imposters are calling people about COVID-19 relief. As part of the scam, callers suggest that you might qualify for COVID-19 government grants and that it’s necessary to first verify your identity and process your request. People are also being contacted through text messages and social media posts. According to Forbes, other scams exist with stimulus checks, urging people to take advantage of ways to get their money faster, simply by sharing a few personal details and paying a small “processing fee.”
This is 100% false and no one should fall for it. Stimulus checks will come from the government with no fees attached, and the IRS will deposit checks into bank accounts via direct deposit, the same way people receive tax refunds. (For those who receive paper checks for tax refunds, paper checks will be sent). The IRS does not call individuals, nor does it ask you to verify personal details—you should not give your bank account information, money transfer account information (such as PayPal or Venmo) or debit/credit card information.
Another area for business owners to be wary of scams is with the Paycheck Protection Program (PPP), the $349 billion forgivable loan program approved as part of the CARES Act. PPP begins April 3, and exists to help small businesses and contractors pay their employees during the COVID-19 crisis.It can be used for payroll, mortgage interest, rent and utility costs—and is forgivable if used for those purposes. It will provide a tremendous amount of support for small businesses as they try to remain open during this time, but again, there are still those who seek to do harm. And business owners need to be aware of this.
The PPP will not involve the U.S. Treasury Department or Small Business Administration calling or emailing any business seeking personal information—these will be loans applied for through the business lender. Published reports indicate such scams have already begun along these lines, so business owners should know to not give out any personal information to any of these fraudulent calls or emails.
Other scams may exist where business owners are contacted by people who say they can get a loan secured faster for a small fee—there are no fees related to the PPP, and people shouldn’t fall for this. Along those lines, PPP loans will be done by banks and lenders familiar to the individual businesses, and those lenders will need to apply for preferred status with the SBA in order to grant a PPP loan. This is why it is best to work with a bank or credit union that is a familiar entity, one that is federally backed and familiar. If institutions that are unknown to you and your business solicit you for a PPP loan, it is best to say no and stick with those you know.
The PPP lays out a very clear and deliberate process to help business owners who are struggling to remain open during this unprecedented time of disruption. Promises of quick access to cash or other ways to “cut corners” are false and, likely, exist to cause harm. Business owners are better off to follow the PPP protocols and work with a trusted lender, rather than get drawn into a scam.
Again, during an extraordinary time such as this when people are coming together to help, it is unfortunate that there are still those who seem determined to exploit people’s fears and cause harm. There is plenty of help available now through the CARES Act and PPP; people just need to be aware of these potential scams and avoid them at all costs.
Disclaimer: The contents of this resource are for general informational purposes only. While every effort has been made to ensure its accuracy, the information is provided “as is” and no representations are made that the content is error-free. We have no obligation to update any content, comments or other information for retroactive or prospective interpretations or guidance provided by regulators, financial institutions or others. The information is not intended to constitute legal advice or replace the advice of a qualified professional. There are areas of the CARES Act where additional clarification from the Treasury Department and the SBA is needed. Your judgment and interpretation of the act may be needed. Users should consult with their legal counsel and representatives of the lending institution regarding the proper completion of their application and supporting documentation.