State-chartered, privately insured CUs blocked from accessing PPP

May 26, 2021

Congress should hold the Small Business Administration (SBA) accountable for blocking privately insured credit unions from accessing Paycheck Protection Program (PPP) funding, CUNA wrote to the House Small Business Committee Wednesday. Despite the passage of the PPP and Health Care Enhancement Act, which included all state and federally chartered credit unions in the definition of “credit union,” certain credit union PPP applications were not addressed in a timely manner.

“As state-charted, privately insured credit unions began to submit applications to participate in the PPP, their applications were left idle for months, with little or no response from the SBA on their status, except that the application was ‘under review,’” the letter reads. “Many of these credit unions never received a response from the SBA and were unable to participate in PPP and offer critical support to their members in time of need. Ultimately, the SBA response was that the United States Treasury (UST) and SBA review teams did not approve these applications because they did not meet the requirements of the Non-Federally Regulated Lender (NFRL)…We believe this was a considerable misinterpretation of qualified lenders under the PPP.”

CUNA also continued its call for the SBA to provide certainty for backlogged PPP loan forgiveness applications. SBA is required by its own Interim Final Rule to issue a decision within 90 days after receiving the application.

“While we understand there is a high volume of loan forgiveness applications, small businesses and financial institutions need certainty on the status of their applications,” the letter reads. “We urge SBA to address these delays with loans forgiveness applications and to ensure that SBA has adequate staff in place to provide customer service in the coming months.”

CUNA also noted that one of the most important things Congress could do to promote financial inclusion and help small businesses would be to ensure federal law permits all federal credit unions to serve underserved areas and to provide member business lending cap relief.

“That said, CUNA strongly supports the Expanding Financial Access for Underserved Communities Act, which would allow all federal credit unions to add underserved areas to their field of membership and exempt business loans made by credit unions in low-income areas from the credit union member business lending cap,” the letter reads. “Furthermore, the legislation expands the definition of a low-income credit union to include any area that is more than 10 miles from the nearest branch of a financial institution.”