PPP implementation continues to create issues for CUs

May 15, 2020

CUNA wrote to the Small Business Administration (SBA) Friday with comments on operational and legal issues stemming from the implementation of the Paycheck Protection Program (PPP). Implementation of the PPP has necessitated five related interim final rules, and CUNA’s letter provided feedback on all five.

“Credit unions have seen incremental fixes to initial issues that challenged the lending process and vexed borrowers. But now, with funds still available, it appears that businesses are reluctant to borrow. Some reasons for this might be confusion over aspects of the program, such as loan forgiveness, which still are not sufficiently developed,” the letter reads. “We remind the SBA that credit unions are a vital component to the delivery of financial services to many Americans and that credit union members should have equal access to PPP just as those that choose to borrow from large banks.

In the letter, CUNA calls on the SBA to:

  • Clarify that all credit unions, including privately insured state-chartered credit unions, are eligible to be PPP lenders;
  • Address lender prioritization of borrowers and discretion in choosing borrowers throughout the process;
  • Issue a final rule or guidance formalizing the policy that non-SBA forms will not impact lender or borrower rights under PPP;
  • Develop guidance on the process that it will use to purchase PPP loans from lenders. Questions SBA should address include the proper forms that should be used and the limitation on timing and methods for handling sold loans that become problematic or develop other issues;
  • Issue a template or form clearly explaining the level of detail required in reports to the SBA requesting advance purchase of a PPP loan. Specific issues this template or guidance should address are how a lender must determine alternatives along with the number of alternatives;
  • Address lender liability stemming from PPP loans; and
  • Provide details on lender due diligence or validation lenders will be required to conduct on borrower submissions so lenders can start the process of planning for forgiveness requests. This guidance should include methods on how financial institutions should calculate partial forgiveness requests when a borrower does not meet the 75% threshold for forgivable payroll costs.