PPP lender liability, loan forgiveness should be addressed
Changes to regulations and the creation of new lending programs have, and will continue to help consumers affected by the COVID-19 pandemic, CUNA wrote Friday to the House Small Business Committee for its hearing on oversight of pandemic recovery programs. CUNA thanked Congress for its efforts to establish the Paycheck Protection Program, as well as the Federal Reserve for creating a PPP Liquidity Facility, which made it easier for credit unions to make PPP loans without liquidity concerns.
CUNA also called on Congress and the Small Business Administration to address PPP lender liability concerns.
“Credit unions and other lenders essentially acted as agents of the government disbursing funds to small businesses during this time of need,” the letter reads. “Congress and the SBA ought to do the right thing by holding lenders harmless for errors that may have been made as a result of unclear, ambiguous or inadequate guidance, as well as misstatements and fraudulent activity on the part of borrowers. Congress should use upcoming recovery legislation to protect lenders from PPP related liability.”
The letter also notes that the key component to PPP loans is loan forgiveness, and asked Congress and the SBA to simplify the loan forgiveness application process for loans under $350,000.
This threshold would capture most loans and is the amount at which the CARES Act makes the lowest cutoff in determining lender processing fees. Additionally, the agencies should consider making forgiveness of these loans automatic or simply require a good faith certification that the funds were spent on forgivable expenses.
CUNA also highlighted remaining operational challenges, including:
- Lack of support from the SBA to provide timely feedback on issues;
- Lack of updating guidance and forms to reflect privately insured state-chartered credit unions are eligible to be PPP lenders;
- Lender prioritization guidance;
- Official guidance formalizing the use of SBA forms; and
- Lack of guidance on the purchasing process of loans.
Should an additional Economic Impact Payment be sent to consumers, CUNA suggests the IRS and Treasury provide real-time information to financial institutions to help mitigate fraud and manage expectations, and Congress should protect the payments from garnishment.