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Biden announces measures to ensure PPP loan access to "mom and pop" businesses
On February 22, the Biden administration announced measures to ensure the smallest businesses have access to Paycheck Protection Program (PPP) loans. (See also SBA press release here.) Specifically, the Biden administration has directed the Small Business Administration (SBA) to (i) provide an exclusive 14-day application window, starting Wednesday, February 24, during which only businesses with fewer than 20 employees are eligible to apply; (ii) set aside $1 billion for PPP loans for sole proprietors, independent contractors, and self-employed individuals in low- and moderate-income areas, and revise the loan calculation formula for these applicants to offer more relief; (iii) eliminate an exclusion that prevented small businesses owned at least 20 percent by an individual who was arrested for or convicted of a felony unrelated to financial assistance fraud within the previous year from applying for a PPP loan; (vi) eliminate the student loan delinquency restriction, which currently prevents small businesses owned at least 20 percent by an individual who is delinquent or has defaulted on student debt from receiving PPP loans; and (v) ensure non-citizen small business owners who are lawful U.S. residents may apply for PPP loans using individual taxpayer identification numbers.
Additionally, the Biden administration stated that SBA “is launching a new initiative to deepen its relationships with lenders” in order to facilitate communication regarding the PPP. The current round of PPP funding expires March 31 (covered by InfoBytes here).
OCC says storm-affected banks may close
On February 16, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by Winter Storm Uri “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the 2012 Bulletin, only bank offices directly affected by potentially unsafe conditions should close and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs.
Find continuing InfoBytes coverage on disaster relief here.
Yellen addresses “digital divide”
On February 9 and 10, the U.S. Treasury Department hosted its U.S. Financial Sector Innovation Policy Roundtable, which convened public and private sector experts “to exchange views for collaborating on policy issues and innovative technologies that support global financial integrity, while fostering economic recovery, competitiveness, and financial inclusion.” Treasury Secretary Yellen delivered the opening remarks touching on the enactment of the Anti-Money Laundering Act, which was included in the National Defense Authorization Act (NDAA) for Fiscal Year 2021 (covered by InfoBytes here), noting that the law is timely as “we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy.” Moreover, due to the Covid-19 pandemic, the world has seen “more sophisticated” cyberattacks. Yellen asserts that the pandemic has highlighted the “digital divide” in the country and that “millions of people remain disconnected from the financial system.” Similar to broadband deserts, there are “financial services deserts,” as shown the Paycheck Protection Program’s issues with reaching small businesses in communities of color. Yellen concluded that “just as much as we need responsible innovation, we also need equitable innovation; tools that can help bring the benefits of the financial system and modern IT to more people.”
FTC settles with payday lender
On February 11, the FTC announced a settlement with the owners and operators of a payday lending enterprise (collectively, “defendants”) for allegedly deceptively overcharging consumers and withdrawing money from consumers’ accounts without permission. The FTC filed a complaint against the defendants last year claiming, among other things, that the defendants violated the FTC Act, the Telemarketing Sales Rule, TILA/Regulation Z, and EFTA/Regulation E, by advertising loans with fixed payback terms and promising consumers that their loans would be repaid after a pre-determined number of payments. However, the FTC claimed that in many cases the payback terms defaulted to debiting the financial fee only, and the U.S. District Court for the District of Nevada granted a temporary restraining order against the defendants (covered by InfoBytes here). Under the terms of the stipulated final order, the FTC ordered that any consumer debt for loans issued and assigned to the defendants are “deemed paid in full to the extent that such [e]xisting [d]ebt exceeds the amount financed plus one finance charge. . . .” The defendants are also (i) permanently banned from the payday lending industry, including making loans or extending credit of any kind; (ii) prohibited from making any misrepresentations related to the collection of any debt; (iii) prohibited from making unauthorized electronic fund transfers from consumers’ bank accounts; and (iv) permanently banned from creating, or causing to be created, any remotely created payment orders. A $114 million monetary judgment will be partially suspended upon completion of asset transfers from all financial institutions holding accounts in the defendants’ names.
Biden extends foreclosure protections
On February 16, the Biden administration announced an extension of the Covid-19 forbearance and foreclosure protections for homeowners through June 30. According to the White House statement, the administration has directed HUD, Department of Veterans Affairs, and Department of Agriculture to (i) extend the foreclosure moratorium for homeowners through June 30; (ii) extend the mortgage payment forbearance enrollment window until June 30; and (iii) provide up to six months of additional mortgage payment forbearance, in three-month increments. The announcement notes that the extension will “directly benefit the 2.7 million homeowners currently in COVID forbearance and extend the availability of forbearance options for nearly 11 million government-backed mortgages nationwide.” The FHA extensions are reflected in Mortgagee Letter 2021-05 and the VA extensions are reflected in Circulars 26-21-04 and 26-21-05.
As previously covered by InfoBytes, FHFA announced an extension of Fannie Mae and Freddie Mac’s foreclosure moratorium until March 31 and the option for borrowers to receive an additional three-month Covid-19 forbearance extension.
FTC settles with credit card laundering defendants
On February 10, the FTC announced settlements with several defendants that allegedly violated the FTC Act and the Telemarketing sales Rule by assisting an operation responsible for laundering millions of dollars in credit card charges through fraudulent merchant accounts. As previously covered by InfoBytes, the defendants engaged in a credit card laundering scheme with the operation to process credit card charges through merchant accounts set up by the operation under fictitious company names instead of processing charges through a single merchant account under the operation’s name. According to the FTC’s complaint, the defendants purportedly (i) underwrote and approved the operation’s fictitious companies; (ii) set up merchant accounts with its acquirer for the fictitious companies; (iii) used sales agents to market processing services to merchants; (iv) processed nearly $6 million through credit card networks; and (v) transferred sales revenue from the transactions to companies controlled by the defendants.
The settlements (see here, here, and here) permanently ban three of the defendants from payment processing and telemarketing or acting as independent sales organizations or sales agents in the payment processing industry. A previously issued settlement against a fourth defendant banned him from payment processing or acting as an independent sales organization or sales agent in the payment processing industry. Monetary judgments totaling more than $10.7 million collectively have been suspended due to the defendants’ inability to pay.
HUD to “fully enforce” prohibition against sex- and gender-based discrimination
On February 11, HUD announced that it will administer and enforce the Fair Housing Act (FHA) to prohibit discrimination on the basis of sexual orientation and gender identity, in response to President Biden’s Executive Order (E.O.) 13988. According to a memorandum issued by HUD’s Acting Assistant Secretary for Fair Housing & Equal Opportunity (FHEO), the E.O. directs federal agencies to assess actions taken under federal statutes that “prohibit sex discrimination and to fully enforce those statutes to combat discrimination based on sexual orientation and gender identity,” in response to the recent Supreme Court opinion in Bostock v Clayton County (holding that prohibitions against sex discrimination in the workplace contained in Title VII of the Civil Rights Act of 1964 extend to and include discrimination on the basis of sexual orientation and gender identity). The memorandum notes that “the [FHA’s] sex discrimination provisions are comparable in text and purpose to those of Title VII of the Civil Rights Act,” thus HUD intends to enforce the FHA to prevent and combat similar discrimination. The memorandum directs HUD’s Office of Fair Housing and Equal Opportunity to, among other things, (i) “accept and investigate all jurisdictional complaints of sex discrimination, including discrimination because of gender identity or sexual orientation…”; (ii) “conduct all activities involving the application, interpretation, and enforcement of the [FHA]’s prohibition on sex discrimination consistent with its conclusion that such discrimination includes discrimination because of sexual orientation and gender identity”; and (iii) ensure FHEO regional offices and other associated agencies review, within 30 days, all allegations of alleged discrimination based on gender identity or sexual orientation received since January 20, 2020.
OCC issues LIBOR self-assessment tool
On February 10, the OCC issued Bulletin 2021-7, which provides a self-assessment tool for banks to evaluate their preparedness for the LIBOR cessation. The Bulletin reminds banks that they should “develop and implement risk management plans to identify and control risks related to expected [LIBOR] cessation,” and that banks are expected to cease entering into new contracts using LIBOR as a reference rate by December 31, 2021. The self-assessment tool may be used by banks to identify and mitigate the bank’s transition risks, and management should use the tool to “consider all applicable risks (e.g., operational, compliance, strategic, and reputation) when scoping and completing [LIBOR] cessation preparedness assessments.” Not all sections of the tool will apply to all banks, based on the size and complexity of the bank’s LIBOR exposure.
Continuing InfoBytes coverage on the LIBOR transition available here.
Ueijo says CFPB focus is on the economically vulnerable; urges attention to consumer complaints
On February 10, CFPB acting Director Dave Uejio published a blog post sharing his “broad vision” for the Division of Consumer Education and External Affairs (CEEA). This guidance, Uejio emphasized, will help to immediately advance the Bureau’s policy priorities and protect economically vulnerable consumers, which includes making sure consumers who submit complaints to the Bureau “get the response and the relief they deserve.” Observing that some companies have not met their obligations to respond to consumer complaints, Uejio reiterated that “[i]t is the Bureau’s expectation that companies provide substantive responses that address the issues consumers describe in their complaints.” He also noted that because consumer advocates have identified disparities in certain companies’ responses to Black, Brown, and Indigenous communities, he asked Consumer Response to provide an analysis identifying companies with poor track records on these issues. To achieve his goal of assisting economically vulnerable consumers, Uejio asked CEEA to take the following steps:
- Target resources to ensure struggling homeowners in delinquency or at risk of foreclosure and renters at risk of eviction know their rights.
- Increase coordination efforts with other agencies to provide assistance and information to at-risk homeowners and renters.
- Collaborate with coalitions of stakeholders, including consumer advocates, civil rights groups, grassroots, community-based organizations, and individual consumers to ensure homeowners receive information and assistance in languages and terminology they understand.
- Help ensure homeowners and renters can access HUD-approved housing counseling organizations so they can manage financial hardships due to Covid-19.
- Take the lead on updating the Bureau’s website so it is more user friendly and focused on consumers rights, and expand the Bureau’s social media presence so consumers can be heard from directly.
- Aggressively rebuild and repair the Bureau’s relationships with external stakeholders who support economically vulnerable consumers, including consumer, civil rights, racial justice, and tribal and Indigenous rights groups.
Since being named acting Director, Uejio has also published blog posts conveying his visions for the Division of Research, Markets, and Regulations and the Office of Supervision, Enforcement, and Fair Lending (covered by InfoBytes here and here).
SBA addresses PPP loan error codes
On February 10, the Small Business Administration (SBA) issued an updated procedural notice providing instructions for lenders addressing Paycheck Protection Program (PPP) loan error codes. The notice, which revises guidance provided in a previously issued procedural notice (covered by InfoBytes here), addresses (i) Second Draw PPP loan guaranty applications where there is a hold code on the borrower’s First Draw PPP loan, as well as (ii) First Draw PPP loan guaranty applications and Second Draw PPP loan guaranty applications with compliance check error messages. SBA provides lenders with several methods for resolving hold codes and compliance check error messages, including resolution through lender certification or resolution through SBA review. The notice also addresses how SBA handles duplicate loans, loans with multiple DUNS numbers, and other hold codes that cannot be resolved by these processes. The same day, SBA also announced plans to take additional steps to improve the PPP, including (i) enabling “lenders to directly certify eligibility of borrowers for First Draw and Second Draw PPP loan applications with validation errors to ensure businesses who need funds and are eligible receive them as quickly as possible”; (ii) allowing “lenders to upload supporting documentation of borrowers with validation errors during the forgiveness process”; and (iii) creating “additional communication channels with lenders to assure [SBA is] constantly improving equity, speed, and integrity of the program, including an immediate national lender call to brief them on the Platform’s added capabilities.”