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SBA says larger nonprofits eligible for PPP loan forgiveness
On July 8, the SBA added question #71 to its Paycheck Protection Program (PPP) frequently asked questions clarifying whether 501(c)(3) nonprofit organizations with more than 500 employees are eligible for PPP loan forgiveness. SBA explained that while the CARES Act generally provided that “501(c)(3) nonprofit organizations with a total of 500 or fewer employees were eligible to receive a First Draw PPP Loan,” the American Rescue Plan Act (ARPA) later “increased the size eligibility standard for 501(c)(3) nonprofit organizations for First Draw PPP Loans from a total of 500 or fewer employees to no more than 500 employees per physical location of the 501(c)(3) nonprofit organization.” On March 22, 2021, SBA published an interim final rule (IFR) implementing recent PPP changes that were included in the ARPA enacted on March 11, 2021 (covered by InfoBytes here).
Exercising her broad authority under the PPP, and in light of litigation earlier this year, on July 8 the SBA administrator announced that “any 501(c)(3) nonprofit organization that received a loan before March 11, 2021, but submits a forgiveness application on or after March 11, 2021, will not be ineligible for forgiveness on the basis that they have more than 500 employees in multiple physical locations” provided it has otherwise complied with all applicable PPP rules.
District Court orders CFPB to issue Section 1071 rulemaking by March 31
On July 11, the U.S. District Court for the Northern District of California issued an order setting March 31, 2023 as the deadline for the CFPB to issue a notice of proposed rulemaking (NPRM) on small business lending data. As previously covered by InfoBytes, the Bureau is obligated to issue an NPRM for implementing Section 1071 of the Dodd-Frank Act, which requires the agency to collect and disclose data on lending to women and minority-owned small businesses. The requirement was established as part of a stipulated settlement reached in 2020 with a group of plaintiffs, including the California Reinvestment Coalition (CRC), who argued that the Bureau’s failure to implement Section 1071 violated two provisions of the Administrative Procedures Act, and harmed the CRC’s ability to advocate for access to credit, advise organizations working with women and minority-owned small businesses, and work with lenders to arrange investment in low-income and communities of color (covered by InfoBytes here).
Find continuing Section 1071 coverage here.
CFPB publishes rulemaking agenda
Recently, the Office of Information and Regulatory Affairs released the CFPB’s spring 2022 rulemaking agenda. According to the preamble, the information in the agenda is current as of April 1, 2022 and identifies regulatory matters that the Bureau “reasonably anticipates having under consideration during the period from June 1, 2022 to May 31, 2023.”
Key rulemaking initiatives include:
- Consumer Access to Financial Records. The Bureau notes that it is considering rulemaking to implement section 1033 of the Dodd-Frank Act to address the development and use of standardized formats for information made available to consumers. The Bureau will release materials in advance of convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA), in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy.
- Amendments to FIRREA Concerning Automated Valuation Models. The Bureau is participating in interagency rulemaking with the Fed, OCC, FDIC, NCUA, and FHFA to develop regulations to implement the amendments made by the Dodd-Frank Act to FIRREA concerning appraisal automated valuation models (AVMs). The FIRREA amendments require implementing regulations for quality control standards for AVMs. The Bureau released a SBREFA outline in February 2022 and estimates in the agenda that the agencies will issue an NPRM in December 2022 (covered by InfoBytes here).
- Property Assessed Clean Energy Financing. The Bureau issued an ANPR in March 2019 to extend TILA’s ability-to-repay requirements to PACE transactions (covered by InfoBytes here). The Bureau is working to develop a proposed rule to implement Economic Growth, Regulatory Relief, and Consumer Protection Act section 307 in May 2023.
- Small Business Lending Data Collection Under the Equal Credit Opportunity Act. Section 1071 of the Dodd-Frank Act amended ECOA to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses, and directed the Bureau to promulgate rules for this reporting. The Bureau issued an NPRM in August 2021, and the comment period ended January 6 (covered by InfoBytes here). The agenda indicates that the Bureau estimates issuance of a final rule in March 2023.
- Adverse Information in Cases of Human Trafficking Under the Debt Bondage Repair Act. The National Defense Authorization Act amended the FCRA to prohibit consumer reporting agencies from providing reports containing any adverse items of information resulting from human trafficking. In June 2022, the CFPB issued a final rule implementing amendments to the FCRA intended to assist victims of human trafficking (covered by InfoBytes here).
FTC bans MCA providers, returns $2.7 million to consumers
On June 6, the FTC obtained a stipulated court order permanently banning a company and owner from participating in the merchant cash advance and debt collection industries. As previously covered by InfoBytes, last June the FTC filed an amended complaint against two New York-based small-business financing companies and a related entity and individuals (including the settling defendants), claiming the defendants engaged in deceptive and unfair practices by, among other things, misrepresenting the terms of their merchant cash advances, using unfair collection practices, deceiving consumers about personal guarantees, forcing consumers and businesses to sign confessions of judgment, providing less funding than promised due to undisclosed fees, and making unauthorized withdrawals from consumers’ accounts. Under the terms of the stipulated order, the settling defendants are required to pay a more than $2.7 million monetary judgment to go towards refunds for harmed consumers and must vacate any judgments against former customers and release any liens against their customers’ property. The announcement notes that the settling defendants are also “prohibited from misleading consumers about any key facts about any good or service, including any fees, the total cost of the product, and other facts that reflect their deceptions in this case.”
Earlier in January, a stipulated order was entered against two other defendants (covered by InfoBytes here), which permanently banned them from participating in the merchant cash advance and debt collection industries and required the payment of a $675,000 monetary judgment.
FDIC, Census launch small business lending survey
On May 3, FDIC acting Chairman Martin J. Gruenberg and U.S. Census Bureau (Census) Director Robert L. Santos announced that approximately 2,000 U.S. banks of all sizes and from all geographic areas in the U.S. have been invited to participate in the 2022 Small Business Lending Survey (SBLS)—a nationally representative online survey regarding small business lending practices and volumes. According to the FDIC, banks are the most common source of external financing for small businesses, however “there is little high-quality data on this activity.” The last SBLS occurred in 2016 and the 2022 survey intends to provide further understanding about current bank lending. Sponsored by the FDIC and administered by Census, the SBLS, according to the announcement, “provides a comprehensive view of small business lending by banks and will significantly expand the FDIC’s and the public’s understanding of the impact banks have on the nation’s small businesses.” The selected banks include all FDIC-insured institutions with assets of $3 billion or more as well as a random sample of banks with assets of less than $3 billion. The survey responses will be confidential and anonymous and the FDIC will only report the aggregated results.
SBA offers additional deferment for Covid-19 EIDL loans
On March 15, SBA extended the deferment period for the Covid-19 Economic Injury Disaster Loan (EIDL) program, to provide a total of 30 months deferment from inception on all approved Covid EIDL loans. The extended deferment of principal and interest payments on existing EIDL loans approved in calendar years 2020, 2021, and 2022 is intended to provide additional flexibility for small business owners affected by Covid-19. While borrowers are not required to make payments during the deferment period, interest will continue to accrue on the loans during the deferment. SBA warned that deferments may result in balloon payments and will not stop any established preauthorized debit or recurring payments on a loan. Borrowers will need to contact their SBA servicing center to pause recurring payments during the extended deferment period. Once the deferment period ends, borrowers will be required to make regular principal and interest payments beginning 30 months from the date of the note.
CFPB reviewing 2,100 comments on small business data collection
On February 22, the CFPB filed its eighth status report in the U.S. District Court for the Northern District of California, as required under a stipulated settlement reached in February 2020 with a group of plaintiffs, including the California Reinvestment Coalition, related to the collection of small business lending data. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. The current status report states that the Bureau has met the deadlines under the stipulated settlement, which included issuing its long-awaited proposed rule (NPRM) last September. As covered by a Buckley Special Alert, the NPRM would require a broad swath of lenders to collect small business loan data, including information about the loans themselves, borrower characteristics, and demographic information regarding the borrower’s principal owners. This information would be reported annually to the Bureau and published by the Bureau on its website. The Bureau notes in its status report that the NPRM’s comment period ended on January 6. The Bureau is currently reviewing approximately 2,100 comments submitted via the public docket and will confer with plaintiffs regarding an appropriate deadline for issuing a final rule.
Find continuing Section 1071 coverage here.
NYDFS proposes partnership with CDFIs
On February 25, NYDFS announced a proposal to partner with Community Development Financial Institutions (CDFIs) to deliver $150 million to small businesses. According to the announcement, the partnership was announced after Governor Kathy Hochul held a roundtable related to “how New York State can spur economic recovery in Black and brown communities,” as well as “new efforts to fight structural racism embedded in the financial system and support innovative community lending programs and economic development services focused on reaching communities of color.” The announcement pointed out that the partnership is part of the governor’s FY2023 budget, which proposed an unprecedented assistance package for small businesses, including more than $500 million to the state. Governor Hochul also announced an advisory council of New York State-chartered CDFIs and minority depository institutions, which will be led by NYDFS Superintendent Adrienne Harris, and “will elevate the specific concerns of New York CDFIs and MDIs to support communities of color and ensure their needs are met.”
CBA urges CFPB to supervise nonbank small business lenders
On February 9, the Consumer Bankers Association (CBA) sent CFPB Director Rohit Chopra a letter regarding the supervision of nonbank small business lenders. The letter noted that the landscape for business lending has recently altered “substantially,” specifically with the alternative banking options offered by financial technology companies having “significant market share.” The letter considered small businesses to be “vulnerable” because the activities of fintechs engaged in small business lending are not supervised by the Bureau. The letter urged the Bureau to “evaluate all possible avenues for supervising these nonbank small business lenders, including adding nonbank small business lending to the larger participant rule.” The letter also pointed out that the “lack of supervisory authority over nonbank small business lenders” undermines the CFPB’s other regulatory efforts, such as identifying and addressing fair lending concerns through a final rule covering small business lending data collection pursuant to Section 1071 of Dodd-Frank. The CBA argued that the absence of authority over nonbank lenders “will negatively impact the accuracy and utility of any data the Bureau receives under a Section 1071 final rule.” The CBA also advised the Bureau to utilize its ability under 12 U.S.C. Section 5514 to increase its authority over larger participants in the small business lending market.
Borrowers may request SBA loan review of partially forgiven PPP loans
On January 27, SBA issued Procedural Notice 5000-827666 outlining a new process for borrowers to request an SBA loan review of partially approved forgiveness decisions by their Paycheck Protection Program (PPP) lenders. Effective immediately, when a PPP lender receives a forgiveness remittance from SBA on a partial approval decision (including instances when the lender required a borrower to apply for forgiveness in an amount less than the full amount of the loan), the lender must inform the borrower that the borrower has 30 calendar days from receipt of the notification to seek an SBA loan review of the lender’s partial approval decision. The lender must then notify SBA within 5 calendar days of receiving the borrower’s timely request for review. If SBA selects the loan for review, the borrower must continue to make payments on the remaining balance. Additionally, SBA noted that borrowers should be aware that the agency “may determine that the borrower is entitled to forgiveness in an amount less than what the [l]ender decided (including zero if, for example, the borrower is determined to be ineligible for the PPP loan), an amount more than what the [l]ender decided, or the same amount as the [l]ender decided.” The SBA notice outlined details related to forgiveness payment remittances resulting from a partial approval loan review, and noted that SBA will provide lenders additional guidance through the platform, including step-by-step instructions. The notice expires January 1, 2023.