False Claims Act Risk for Financial Institutions: Lessons from Government Relief Program Enforcement Trends

The government has relied on financial services institutions to administer relief programs in times of economic crisis. During the Great Recession, the government asked mortgage servicers to participate in the voluntary Home Affordable Mortgage Program (or HAMP) which ultimately resulted in the modification of over a million residential home mortgage loans. The program made monthly payments more affordable for borrowers and meaningfully contributed to reversing the nation’s foreclosure crisis. More recently, to protect jobs during COVID shutdowns, the government established the Paycheck Protection Program (PPP) through which the Small Business Administration, in partnership with private banks, made low interest loans available to businesses to cover payroll and other expenses. The loans could potentially be forgiven if the business maintained or quickly re-hired employees. 

While consumer financial services providers have consistently answered the government’s call, deploying much needed assistance to millions of consumers, administering government economic relief programs also carries risk. Relators have successfully leveraged the False Claims Act (FCA) to extract settlements from financial institutions based on alleged imperfections in administering complicated programs that the government demanded be implemented immediately during various crises. 

Key Takeaways: 

• Government relief programs like HAMP and PPP rely heavily on financial institutions, but participation can trigger FCA scrutiny tied to compliance certifications.
• FCA liability does not require actual knowledge of violations of program requirements—reckless disregard or deliberate ignorance is enough.
• Whistleblowers (relators) have played a major role in driving HAMP- and PPP-related FCA cases and have shared in significant recoveries.
• Pandemic-related financial recovery programs have been a recent major enforcement focus, with hundreds of millions of dollars recovered in recent years.
• Robust compliance controls, documentation, and transparency related to application of and compliance with government requirements for programs like HAMP and PPP are critical to mitigating risk—especially given delayed enforcement timelines.

The False Claims Act and HAMP

The FCA is the government’s “primary civil tool to redress false claims for federal funds and property involving government programs and operations.” Financial institutions who participate in federal programs can be held liable for submitting or causing the submission of a false or fraudulent claim for payment or for knowingly and improperly avoiding an obligation to pay the government. Companies can be liable if they acted with reckless disregard or deliberate ignorance, even if they do not have direct knowledge of a false or fraudulent claim. 

The FCA provides for steep penalties, including civil penalties of US$14,308 to US$28,619 for each false claim and treble damages. In Fiscal Year 2025 alone, the government recovered US$6.8 billion in FCA settlements and judgments. Often FCA cases are initiated by private individuals, or “relators,” who act as “whistleblowers” under the Act’s qui tam provision and share in any recovery.

In the years following the Great Recession, financial institutions agreed to partner with the government through the HAMP program. Participating in HAMP required banks and other financial institutions to make significant investments. After mortgage servicers overhauled their default servicing operations to comply with HAMP’s detailed requirements, including subjecting themselves to rigorous audit procedures, numerous FCA lawsuits were filed by relators alleging that the servicers had falsely certified their compliance with “all laws, rules and regulations,” even those that did not impact their performance under the program. For example, in 2012 and 2013, a single private relator brought a series of lawsuits against every major bank and non-bank mortgage servicer challenging the servicers’ compliance with HAMP. These cases relied on servicers’ annual certifications, which stated, “Servicer is in compliance with, and certifies that all Services have been performed in compliance with, all applicable Federal, state and local laws, regulations, regulatory guidance, statutes, ordinances, codes and requirements . . . .”

With only isolated exceptions, the United States has declined to intervene for the purpose of advocating dismissal of any of these suits, notwithstanding the benefits the government received from the servicers’ participation in HAMP. While some of these cases have been settled after years of costly litigation, generating millions of dollars in settlements, others remain pending 17 years after the program began.

The Government Gets Involved

While DOJ left HAMP suits in the hands of private relators, pandemic-related programs have been an FCA enforcement priority. Through the end of fiscal year 2025, the DOJ has collected over US$820 million in FCA cases relating to fraud or improper payments in connection with pandemic-relief programs.¹ In some of these cases the lender’s compliance certification provides the hook for an argument that less than perfect program administration amounts to fraudulent conduct. For example, in May 2024, DOJ announced two settlements with Kabbage, Inc., a now-bankrupt lender, to resolve allegations that it knowingly submitted thousands of false claims for loan forgiveness, loan guarantees, and processing fees to the Small Business Administration as part of the PPP. Both cases relied on Kabbage’s compliance certification, which stated, “To the best of its knowledge, Lender certifies that it is in compliance and will maintain compliance with all applicable requirements of the Paycheck Protection Program and PPP Loan Program Requirements.” 

In the current environment of increasing FCA enforcement activity, financial services institutions should be mindful of potential exposure to FCA liability when participating in any government program. In this period of economic uncertainty where household debt continues to grow² and delinquency rates on consumer loans increase,³ the government may again ask the private sector to provide assistance to struggling Americans at its behest. When making compliance certifications to the government, financial services providers should employ robust controls to substantiate their processes. Building and maintaining evidence of transparency and program compliance is critically important, particularly when the FCA’s sealing and investigation provisions mean that defendants may not be aware that a potential lawsuit exists until many years after the challenged conduct has occurred.

¹ Department of Justice, Fact Sheet, False Claims Act Settlements and Judgments, FY 2025, available at https://www.justice.gov/opa/media/1424126/dl.
² Fed. Rsrv. Bank of N.Y. Center for Microeconomic Data, Quarterly Report on Household Debt and Credit (Nov. 2025), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2025Q3.
³ Fed. Rsrv. Bank of St. Louis, Delinquency Rate on Consumer Loans, All Commercial Banks (Nov. 21, 2025), https://fred.stlouisfed.org/series/DRCLACBS.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Amanda M. Santella, an O’Melveny partner licensed to practice law in the District of Columbia and Maryland; Elizabeth L. McKeen, an O’Melveny partner licensed to practice law in California; Elizabeth Arias, an O’Melveny counsel licensed to practice law in California; Hannah E. Dunham, an O'Melveny counsel licensed to practice law in California and the District of Columbia; Ashley Pavel, an O'Melveny counsel licensed to practice law in California; and Jessica H. Block, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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