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FINRA adds new Covid-19 FAQs
On April 6, FINRA added new FAQs to its Covid-19 regulatory relief FAQs document, which was launched in March (covered by InfoBytes here). The newly added FAQs state that (i) firms may electronically transmit required copies of the Uniform Termination Notice for Securities Industry Registration (Form U5) to terminated individuals; (ii) the prescribed period in which continuing education must be completed will be extended through May 31 for persons whose window is currently expired or set to expire before June; and (iii) late filing fees for Forms U4/U5 may be refunded or reduced upon request.
Previously, FINRA added FAQs regarding the “Net Capital Treatment of Covered Loans Under the CARES Act.” The FAQs cover adding back to net capital the “Forgivable Expense Amount” of a loan during the “covered period,” and excluding the loan amount from “aggregate indebtedness.” FINRA will continue to update the FAQ document as necessary, and it will issue a regulatory notice when a date for the termination of the temporary relief measures is determined.
Louisiana governor encourages Louisiana banks and small businesses to continue to be diligent as federal Paycheck Protection Program is implemented
On April 4, the Louisiana governor issued a statement encouraging Louisiana banks and small businesses to continue to be diligent as the federal Paycheck Protection Program is rolled out. Banks are encouraged to continue pursuing access to federal funding and to be patient as the program moves forward. The statement also reiterated additional help for small businesses is available through the previously-announced Louisiana Loan Portfolio Guaranty Program.
Lawsuit alleges bank is prioritizing lending clients for access to the PPP
On April 4, a group of plaintiffs filed an action against a national bank, alleging that prioritizing existing lending clients and limiting access to the Paycheck Protection Program (PPP) to depository clients and other small firms violates the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Small Business Administration’s (SBA) 7(a) loan program. As previously covered by Buckley Special Alerts (see here and here), the PPP expands 7(a) eligibility for SBA-guaranteed loans that will provide loan forgiveness of up to eight weeks of payroll (based on employee retention and salary levels), as well as additional relief for eligible borrowers. (See Buckley’s dedicated SBA page for additional information.) The plaintiffs contend that the bank declined initially to accept PPP loan applications for small businesses that were not lending clients of the bank. According to the amended complaint, the bank updated its policy on April 4 to allow customers with depository relationships only to apply for PPP loans, provided they do not have a credit card or loan with another financial institution. The plaintiffs argue that the bank has “no legal authority under the CARES Act to deny access, restrict or otherwise impede” small business access, notwithstanding that there is no such prohibition in the CARES Act.
Alaska promotes SBA Paycheck Protection Program
On April 3, the Alaska commissioner of Commerce, Community, and Economic Development released a memorandum to community leaders and small business owners in the state promoting the CARES Act’s Paycheck Protection Program for small businesses and encouraging interested borrowers to participate in the program.
Iowa Division of Credit Unions issues regulatory bulletin on the Paycheck Protection Program
On April 3, the Iowa Division of Credit Unions issued a regulatory advisory bulletin pertaining to small business lending during the Covid-19 crisis. The bulletin provides details on the new Paycheck Protection Program offered through the Small Business Administration as part of the broader CARES Act. The guidelines provide application details for credit unions seeking to participate in the PPP, and specify that SBA-approved 7(a) lenders already qualify to issue PPP loans. The regulatory changes apply only PPP loans, and do not impact or otherwise change traditional 7(a) loans.
New Hampshire bank regulator exempts PPP loans from legal lending limits
On April 3, the New Hampshire Banking Department issued guidance to state-chartered banks indicating that loans made under the Small Business Administration’s Payment Protection Program are exempt from applicable legal lending limits because the loans are guaranteed by the Small Business Administration.
SEC highlights the need for top-quality financial reporting due to Covid-19
On April 3, the SEC Office of the Chief Accountant (OCA) released a statement regarding “the Importance of High-Quality Financial Reporting in Light of the Significant Impacts of COVID-19.” In the statement, the SEC Chief Accountant states that capital markets cannot function optimally without the free flow of “high quality financial information” that enables informed decision-making from lenders, investors, and other stakeholders. The statement points out that accounting and financial reporting may be challenging due to Covid-19 and that financial institutions may have to make “significant judgments and estimates,” but that the OCA does not intend to oppose “well-reasoned judgments.” Accounting areas that may require these judgments and estimates include (i) “[f]air value and impairment”; (ii) “[l]eases”; (iii) “[d]ebt modifications or restructuring”; (iv) “[h]edging”; (v) “[r]evenue recognition”; (vi) “[g]oing concern”; (vii) “[s]ubsequent events”; and (viii) “[a]doption of new accounting standards.” Regarding auditing, the OCA advises that auditor independence is of paramount importance to financial institutions and notes its willingness to consult on these issues. The statement also emphasizes the OCA’s engagement with the Financial Accounting Standards Board and the Public Company Accounting Oversight Board, as well as with international accounting groups regarding issues created by Covid-19. Finally, the OCA encourages those involved in the financial reporting system to collaborate, and reiterates the OCA’s willingness to answer Covid-19 related questions.
CFPB releases video to explain mortgage forbearance
On April 3, the CFPB announced the release of a video, which seeks to explain mortgage forbearance provided pursuant to the CARES Act. The announcement provides links to additional resources for consumers experiencing financial hardship due to the Covid-19 pandemic. In addition to the video, the resources include (i) mortgage relief, covered by InfoBytes here; (ii) student loans, covered by InfoBytes here; (iii) warning about scams; and (iv) “[o]nline and mobile banking tips for beginners.” Also on April 3, the Bureau updated guidance entitled Protect yourself financially from the impact of the coronavirus.
HUD issues mortgage relief for FHA single-family homeowners
On April 1, HUD issued guidance detailing mortgage relief options for single-family homeowners with FHA mortgages impacted by Covid-19. HUD explains that the CARES Act requires mortgage servicers to provide mortgage relief to borrowers with options for payment deferral or payment forbearance “for up to six months, and must provide an additional six months of forbearance if requested by the borrower.” In addition, Mortgagee Letter 2020-06 states that borrowers with forbearance plans will have all late charges, fees, and penalties waived as long as the plans are in effect. Although servicers are required to comply with the FCRA, the Mortgagee Letter instructs servicers not to report a borrower as delinquent if the borrower is in a Covid-19 forbearance plan and “performing as agreed,” and further suggests that servicers should “consider the impacts” of Covid-19 “on Borrowers’ financial situations and any flexibilities a Servicer may have under the FCRA.” The Mortgagee Letter also provides a mortgage relief option for “seniors with Home Equity Conversion Mortgages” who can request an extension of up to six months initially, which may be extended up to an additional six months. This mortgage relief option also requires that all late fees, charges, and penalties be waived during the extension period. Borrowers with owner-occupied properties who are granted forbearance plans must also be evaluated for a “C[ovid]-19 National Emergency Standalone Partial Claim” prior to the end of the plan. This option will allow borrowers to reinstate their loans after the plan ends.
CFPB plans credit reporting supervisory flexibility during Covid-19 pandemic, contingent on accurate reporting
On April 1, the CFPB issued a policy statement directed at consumer reporting agencies (CRAs) and furnishers. Taking into consideration the Covid-19 pandemic, the statement explains that the Bureau will take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Reporting Act [(FCRA)] and Regulation V.” The Bureau states that it will be flexible with CRAs and furnishers by refraining from taking enforcement actions and citing during exams in certain situations. Two examples of when the Bureau will be flexible include: (i) furnishers that continue to furnish accurate data to CRAs, including regarding payment relief arrangements (the Bureau notes that the CARES Act obliges furnishers to report consumer accounts as current when furnishers grant payment accommodations requested by consumers impacted by Covid-19); and (ii) CRAs and furnishers that make good faith efforts to investigate consumer disputes but take longer than the FCRA-prescribed 30 days. The statement notes that “the continued operation of the consumer reporting system…will enable consumers, as well as lenders, insurers, employers and other consumer report users, to maintain confidence in the consumer reporting system.”