Additional SBA Crackdown on Pandemic-Era Fraud Leads to Program and Loan Suspensions, Possible FCA Enforcement

On September 14, 2026, the U.S. Small Business Administration (SBA) announced suspensions for 870,000 U.S. borrowers, tied to an estimated $39 billion in suspected fraud in COVID-era loan programs (“SBA Announcement”).

The same day, the U.S. Department of Justice’s (DOJ) National Fraud Enforcement Division (NFED) reported the results of a related criminal enforcement effort targeting SBA-related pandemic fraud (“DOJ Announcement”).

The government’s focus on fraud stemming from the COVID-19 pandemic—which officially lasted from March 11, 2020, to May 5, 2023—is not new. Yet this latest state-by-state crackdown, featuring the SBA’s largest suspension numbers to date, stems directly from an initiative under the White House Task Force to Eliminate Fraud (“Task Force”), created in March 2026.

The Task Force seeks to “coordinate and accelerate a comprehensive national strategy to stop fraud, waste, and abuse within federal benefits programs,” especially through enhanced collaboration across member agencies. The Task Force is operating in tandem with NFED, focusing on activity related to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL)—programs designed to help businesses through COVID.

The effects of this enforcement activity are significant: suspended borrowers cannot receive SBA small business or disaster loans, engage in federal contracting through the business development program, or participate in other SBA programs. And unless these debts are repaid, borrowers receiving demand letters face collection efforts by the U.S. Department of Treasury (“Treasury Department”) and possible liability under federal statutes such as the False Claims Act (FCA).

Expanded Focus

In an earlier news release issued July 8, 2026, SBA reported that its previous suspensions related to suspected fraudulent activity pursuant to its PPP and EIDL programs totaled more than 150,000 borrowers tied to approximately $10 billion in suspected PPP and EIDL fraud across the five states of California, Ohio, Minnesota, Maine, and Wisconsin.

The September 14, 2026, SBA Announcement, led by Administrator Kelly Loeffler, adds the remaining 45 states, the District of Columbia, and six territories. To emphasize the seriousness of the effort, Loeffler was joined at an in-person event in Kansas City by Vice President J.D. Vance, Attorney General Todd Blanche, FBI Director Kash Patel, and Assistant Attorney General Colin McDonald.

The top five states of suspended borrowers, by total loan approval amount (both PPP and EIDL loans) are reportedly Florida ($5.32 billion); New York ($4.97 billion); Texas ($4.25 billion); Illinois ($2.91 billion); and Georgia ($2.71 billion). The five states with the highest number of suspended borrowers are Florida (118,167); Illinois (96,128); Texas (88,831); Georgia (85,975) and New York (75,451).

In April, SBA announced that it had referred 562,000 suspected fraudulent loans to the Treasury Department for collection and transmitted the list of borrowers to DOJ.

Operation No Doze

Both the SBA Announcement and the DOJ Announcement reference “Operation No Doze,” a set of criminal enforcement actions led by NFED and SBA, targeting fraud in SBA’s small business COVID-era loan programs. According to SBA Inspector General William Kirk, SBA plans to send 30-day demand letters to suspected fraudulent PPP and EIDL borrowers, starting with 8,000 in Kansas and Missouri. Should borrowers fail to remit full payment during that month, they may face:

• Enforcement under the “administrative False Claims Act” (31 U.S.C. § 3801, distinct from the federal FCA, below);
• Referral to DOJ for further legal action, as appropriate (which could include the FCA, 31 U.S.C. §§ 3729 to 3733).
• Transfer of delinquent debts to the Treasury Department’s Bureau of the Fiscal Service Cross Servicing Program for collection (such transfers may result in added interest and collection fees of up to 28 percent); and
• Offset through the Treasury Offset Program against certain federal payments, including tax refunds, contractor and vendor payments, federal salaries, and Social Security and other benefit payments.

Operation Heartland Surge

Both the SBA Announcement and DOJ Announcement also reference the broader enforcement initiative, Operation Heartland Surge—an overarching anti-fraud enforcement initiative from June 12 through September 1, 2026, conducted by NFED, SBA, and SBA’s Inspector General that resulted in “numerous indictments” (of which Operation No Doze is a part). Operation Heartland Surge involved 44 U.S. attorney’s offices and 24 federal and state investigative partners, resulting in felony charges against 80 fraud defendants responsible for approximately $100 million dollars in intended losses.

Together with Operation No Doze, these initiatives resulted in enforcement actions spanning more than 160 criminal defendants and approximately $245 million in COVID loan fraud enforcement activity, according to the DOJ Announcement.

Takeaways

Borrowers impacted by the suspensions and demand letters as a result of these enforcement activities face several significant potential concerns:

Financial Consequences

If recipients of 30-day demand letters fail to pay, they face collection efforts by the Treasury Department; transfer of delinquent debts to the Treasury Department’s Bureau of the Fiscal Service Cross Servicing Program (which may result in added interest and collection fees of up to 28%); and offset through the Treasury Offset Program against federal payments, including tax refunds, contractor and vendor payments, federal salaries, and Social Security and other benefit payments.

Immediate Program Consequences

Suspended borrowers cannot receive future SBA small business or disaster loans, are rendered ineligible for federal contracting through the business development program, and cannot participate in other SBA programs.

Legal Consequences

Suspended borrowers are subject to enforcement under the administrative False Claims Act, officially known as the Program Fraud Civil Remedies Act of 1986, which can subject fraudulent borrowers to liability of up to double the government’s damages (as opposed to triple as in the federal FCA), plus administrative penalties; referral to DOJ for further legal action; and potential criminal prosecution.

In light of the government’s multi-agency, heightened focus on pandemic loan fraud, suspensions and demand letters should be taken seriously. Recipients should immediately consult an attorney experienced in defending against government inquiries related to fraud allegations, and specifically in pandemic-related matters. If you have questions, please reach out to the authors.

Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.

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If you have questions, please reach out to the author(s).

The Health Law Advisor blog is currently edited by Emily Chi Fogler.