Fintechs are under scrutiny over fraudulent PPP loans and small businesses could suffer. Here are the biggest takeaways from the federal investigation.

Rep. Jim Clyburn of South Carolina is the chair of the House Select Subcommittee on the Coronavirus Crisis.Michael Brochstein/SOPA Images/LightRocket via Getty Images

• A federal investigation blames fintechs for rampant Paycheck Protection Program loan fraud.
• The resulting report named fintechs and lenders it said failed to screen for fraudulent claims.

America's fintech darlings became the MVPs of the Paycheck Protection Program by easing the process for troubled small-business owners, but now they're in hot water over suspicions that they facilitated fraud.

The US House Select Subcommittee on the Coronavirus Crisis released a report this month that named Blueacorn, Womply, Bluevine, and Kabbage among fintechs and small-business lenders that failed to prevent fraudulent loans.

Small businesses benefited most from fintechs' participation in the program because easier online applications meant increased access to government funding, especially for underrepresented founders who were largely left out of initial PPP rounds. Now, the report's findings put fintechs under scrutiny and may jeopardize their participation in future government programs.

The Paycheck Protection Program was a federal rescue program intended to help the 7.5 million US small businesses at risk of closing permanently in the first year of the COVID-19 pandemic. The Small Business Administration awarded nearly $800 billion in PPP loans to 11.47 million businesses.

Since then, the Justice Department has charged several business owners over accusations that they fraudulently obtained forgivable PPP loans, alleging they never used the funds for eligible purposes, such as employee payrolls or certain business expenses. In two notable examples, one man pleaded guilty to purchasing a Lamborghini with one of the government-funded loans, and the Justice Department charged another man over accusations that he bought an alpaca farm with PPP money.

In a two-year investigation into PPP use, the House subcommittee interviewed witnesses, executives, and former employees and obtained internal company communications. The resulting report places much of the blame on the fintech companies and lending partners, saying they failed to screen for fraudulent claims and "abdicated that responsibility, in many cases recklessly."

Kabbage, Blueacorn, and Womply did not immediately respond to Insider's request for comment.

Here are the biggest takeaways from the federal investigation.