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  • In 2020, the Federal Trade Commission (FTC) received nearly 100,000 business or personal loan fraud reports, many of them related to Small Business Administration (SBA) loan identity fraud.
  • That’s more than double the number of loan fraud reports from a year earlier. The Identity Theft Resource Center (ITRC) has also seen a spike in SBA loan identity crime reports since the COVID-19 pandemic.
  • Identity thieves apply for SBA loans (primarily Economic Injury Disaster (EIDL) and Paycheck Protection Program (PPP) loans) using stolen Social Security numbers and business Employer Identification numbers (EINs).
  • Scammers are also targeting consumers through phishing schemes in an attempt to steal their Social Security Numbers and other personal information needed to commit SBA loan identity fraud.
  • If anyone believes they are the victim of an SBA loan identity crime or would like to learn how to protect themselves from becoming a victim, they can contact the ITRC to speak with an advisor toll-free at 888.400.5530 or via live-chat. Just go to www.idtheftcenter.org to get started.

Small Business Administration (SBA) loan identity fraud spiked in 2020 due to COVID-19, and it continues to be a growing issue in 2021. The Federal Trade Commission (FTC) says in 2019, they received 43,920 reports of fraud involving business or personal loans; the number more than doubled in 2020 as the FTC had 99,650 reports. The FTC acknowledges that not all of the reports are related to SBA loan identity fraud, but also notes many of them are.

The Identity Theft Resource Center (ITRC) has seen a spike in calls and live-chats around SBA loan-related identity theft. The contacts continue today as contact center advisors work to help victims. Here is a testimonial from one victim who turned to the ITRC regarding their SBA loan identity crime case:

“I want to thank you for all your suggestions. You are the third (organization) I have contacted and by far the most helpful. I received a form from the Small Business Administration, and after returning it with the police report and the Identity Theft Report, I was informed that my debt with them would be canceled. It is such a huge weight off me. I did everything you suggested, and our credit is frozen with all the CRA’s. Thank you again.”

There are different forms of SBA loan-related identity theft of which  businesses and consumers should be aware:

Economic Injury Disaster Loans (EIDLs)

Economic Injury Disaster (EIDL) loans, loans for businesses that suffer substantial economic injury located within a disaster area, have always been available through the SBA. However, they have been expanded as part of the CARES Act to provide relief to businesses experiencing financial loss due to COVID-19. Identity fraud from an EIDL loan occurs when a threat actor applies for an EIDL loan using either a consumer’s Social Security Number (SSN) or a business’s Employer Identification Number (EIN).

Paycheck Protection Program Loans (PPPs)

Paycheck Protection Program (PPP) loans were designed to help businesses maintain their payroll and keep their workforce during COVID-19, and they are available through a lender. Identity fraud from a PPP loan occurs when an identity thief applies for a PPP loan using a stolen SSN, a business EIN or other stolen personal information needed to obtain a loan.

What to do if You Are a Victim of SBA Loan Identity Fraud

If a consumer or a business is the victim of an SBA loan identity crime (whether it’s from either an EIDL or PPP loan), they should take the following steps:

  1. Go back to the source of the loan to notify them of the identity fraud. If the identity fraud is from an EIDL loan, the victim should contact the SBA. If the fraud involves a PPP loan, the affected party should contact the lender that issued the loan. See below for more information on what the SBA requires people to submit, where to submit it, and details on their process.
  2. File an Identity Theft Report with the FTC at www.IdentityTheft.gov. An Identity Theft Report is one of the required documents by the SBA to cancel the loan debt as quickly as possible. Other documents needed include photo identification issued by a federal or state agency and a completed and signed Declaration of Identity Theft. For more information on the steps required by the SBA, click here.
  3. Place a credit freeze to lock credit files until they are needed.A credit freeze is the most effective way to ensure new loans or accounts are not opened.
  4. A less effective option is to place a fraud alert on credit files to alert potential creditors to take extra precautions before extending credit.
  5. Verify with the Secretary of State’s Office or another government agency where the business is registered to ensure the company’s ownership and registration status have not been changed.

Contact the ITRC

Anyone who believes they are a victim of SBA loan identity fraud should contact the ITRC for more information. People can speak to an advisor by phone (888.400.5530) or by live-chat to develop a resolution plan. Anyone who wants to document their steps can use the ITRC’s ID Theft Help app’s case log feature. Consumers who want to learn more can also check out our latest education resources at www.idtheftcenter.org.

  • One of the first changes in 2020 due to COVID-19 was the delay in the regular income tax filing date. Soon after that, millions of out-of-work Americans began to receive enhanced unemployment benefits and special small business loans.
  • Soon after that, cybercriminals began to steal those benefits. The Department of Labor estimates that unemployment fraud could total as much as $26 billion. California alone has seen nearly $2 billion in unemployment benefits fraud.
  • With the 2021 tax filing season quickly approaching, many people will receive a 1099 form alerting them that they must claim income they never received from the benefits they never sought.
  • To learn more, listen to this week’s episode of the Fraudian Slip.
  • People can learn about taking advantage of the Internal Revenue Service (IRS) identity protection programs or reporting identity-related issues to the IRS at IRS.gov and clicking on the Identity Theft Protection link at the bottom of the home page.
  • If anyone believes they are a victim of tax identity theft or unemployment benefits fraud, they should contact the Identity Theft Resource Center toll-free at 888.400.5530 or live-chat on the company website idtheftcenter.org.

The below is a transcript of our podcast episode with special guest, IRS

Welcome to the Fraudian Slip, the Identity Theft Resource Center’s (ITRC) podcast, where we talk about all-things identity compromise, crime and fraud, including the impact identity issues have on people and businesses.

In a typical episode, we would focus on something that has happened or is happening that impacts consumers and businesses. Not today. We are going to talk about what’s about to happen, specifically the 2021 tax filing season.

It’s been nearly a year since the COVID-19 pandemic disrupted virtually every aspect of everyday life. One of the first changes in 2020 was the delay in the traditional income tax filing date. Soon thereafter, millions of out-of-work Americans began to receive enhanced unemployment benefits and special small business loans. Shortly after that, cybercriminals began to steal those benefits. The Department of Labor estimates that unemployment fraud could total as much as $26 billion. California alone has seen nearly $2 billion in unemployment fraud.

Fast forward to today, and the spike in benefits fraud is subsiding. However, a second round of victims may soon emerge. Benefits like unemployment payments are considered income and are taxable. Thousands of the unemployment payments made in 2020 were made in the names of people whose identities were misused – and they didn’t know it. With the 2021 tax filing season quickly approaching, many people will receive a 1099 form alerting them that they must claim income they never received from the benefits they never sought. That is on top of the usual identity-related income tax fraud the IRS sees each year.

We talked with Jim Robnett, the Deputy Chief of the IRS – Criminal Investigation Division, about the following:

Overview

  • Before 2020, the number of false income tax returns linked to identity compromises was already falling. What had the IRS done that was working so well to reduce tax-related identity theft?

Pandemic-Related Tax Issues

  • The most obvious change in terms of taxes in 2020 was moving the filing date. From the IRS perspective, what was 2020 like for you?
  • Anytime there is a mass injection of money into the economy, there is fraud. The IRS played a crucial role in delivering the stimulus checks approved by Congress. What kind of response did you expect from criminals, and what did you see? 
  • We know there has been a massive amount of unemployment fraud, and that has had tax implications for victims. Explain why that is and what taxpayers should do if they suspect or know they are the victim of benefit fraud?
  • What should taxpayers do who get a 1099 form they were not expecting?
  • What about small businesses or entrepreneurs who may discover someone took out an SBA loan or other pandemic benefit in their name?

2021 Tax Issues

  • What should taxpayers do to prepare for 2021?
  • The IRS recently announced the expansion of Identity Protection PINs. That’s going to be a great tool for preventing fraud. Explain how that works and what taxpayers need to do to take advantage of the IP PIN program?

For answers to all of these questions, listen to this week’s episode of The Fraudian Slip Podcast.

Learn More From the IRS

You can learn more about taking advantage of the IRS identity protection programs or reporting identity-related issues to the IRS at IRS.gov and clicking on the Identity Theft Protection link at the bottom of the home page.

Contact the ITRC

You can learn how to protect yourself from identity fraud, crimes and compromises – including the tax-related issues we discussed today, by visiting idtheftcenter.org, where you can also read more about the latest data breach trends.

If you think you are the victim of an identity crime or your identity has been compromised, you can call us, chat live online, send an email or leave a voice mail for an expert advisor to get advice on how to respond. Just visit the website to get started.