CUNA, the American Association of Credit Union Leagues and all 35 Leagues wrote to Treasury and the Small Business Administration leaders Thursday calling for changes to the Paycheck Protection Program (PPP) Interim Final Rule released Thursday. The CARES Act created the PPP funded at $349 billion for loans by SBA-approved lenders to help businesses keep workers on their payroll.

“Credit unions’ participation is critical to the success of this Program. Small business lending, including but not limited to SBA 7(a) lending, is very important to what we do, built on relationships, local knowledge, and underwriting skills honed over generations. Our chief concern is that, as written, the PPP may be problematic,” the letter reads. “Credit unions were encouraged that the PPP was included in the CARES Act. We were grateful for the opportunity to provide direct input into crafting the statutory parameters of PPP.

We want nothing more than the opportunity to deploy desperately needed credit to help local businesses bridge the current crisis, sustain their employee base and meet their other financial obligations,” it adds.

Chief among concerns is the compressed timeline in which credit unions received the interim final rule hours before the PPP loans go live.

“Furthermore, we have been told that there will be a lending platform to support the loan process but, to the best of our knowledge, our members have not had access to the platform,” the letter reads. “These issues will not keep credit unions from offering PPP loans, but will only add to the challenges of operating a business that is an integral part of the nation’s critical infrastructure during these trying times.”

Other CUNA, AACUL and League concerns, and suggested changes, include:

• Loan terms are unreasonably short, as the interim final rule provides for two-year loans. The organizations believe “unreasonably short term and will create hardship for cash-starved small businesses,” and the CARES Act provides for loans of up to 10 years.  The organizations believe Treasury and SBA should use authority given them by Congress to provide loan terms of 10 years or as close as possible to that term;
• Lender liability, since the rule provides little guidance on critical aspects of the PPP, including on documentation required to determine eligibility, the process for submission and approval of the loans by SBA, the collection of servicing fees and the determination of funds to be forgiven. This lack of guidance “shifts too much liability to the lender and, despite the guarantee, creates too much process risk relative to the very limited interest rate;” and
• Borrowing by credit unions, as under the general SBA 7(a) loan program, credit unions cannot be 7(a) borrowers because they “primarily engage in the business of lending.” CUNA, AACUL and the Leagues note that “this is an unprecedented time and likewise, unprecedented program, and thus SBA should temporarily modify the rule to allow credit unions to borrow under the Paycheck Protection Program.”