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Fed provides FAQs on PPP liquidity facility
On April 20, the Federal Reserve Board (Fed) released a series of frequently asked questions (FAQs) and answers relating to the agency’s newly launched Paycheck Protection Program Liquidity Facility (PPPLF). As previously covered by InfoBytes, the PPPLF was up and running on April 16 to provide liquidity to banks making loans to small businesses pursuant to the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The SBA-guaranteed PPP loans are used as collateral for term financing provided by the PPPLF. The PPPLF extends credit to financial institutions participating in the PPP at a fixed rate of 35 basis points. Additional information regarding the PPPLF, including a term sheet, borrowing documentation, and operational documentation including samples can be found on the Fed website here.
OCC bulletin highlights Covid-19 assistance to businesses, consumers, and governments through Fed facilities
On April 20, the OCC issued a bulletin to spotlight the many Federal Reserve (Fed) lending programs established to provide relief from the effects of the Covid-19 pandemic and to highlight how the programs benefit consumers, businesses, and state and local governments. The Fed has supported the economy in a number of ways, particularly through establishing or expanding loan, credit, and liquidity facilities including (i) the Paycheck Protection Liquidity Facility (PPPLF); (ii) the Term Asset-Backed Securities Loan Facility (TALF); (iii) the Primary and Secondary Market Corporate Credit Facilities (PMCCF) and (SMCCF); (iv) the Municipal Liquidity Facility (MLF); and (v) the new Main Street Facility. As previously covered by a Buckley Special Alert, the PPPLF provides liquidity to banks to enable them to lend to small business owners so they can keep their businesses running and pay their employees. The TALF, PMCCF, and SMCCF ensure the flow of credit to consumers and businesses for things such as auto loans, credit card loans, and student loans. The MLF facilitates the flow of cash into states, counties, and cities so that their governments may continue to provide services to residents. Finally, the Main Street Facility—like the PPPLF—supports lending to businesses, in which banks originate Main Street Lending Program loans to small and medium-sized businesses by selling the majority of the loans to the Main Street Facility. Further details about the Main Street Facility can be found in a Buckley Special Alert here.
OFAC advises risk-based compliance approach during Covid-19 crisis
On April 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a statement reminding businesses—including financial institutions—to adhere to a risk-based administration of their sanctions compliance plans. The release notes that, in light of Covid-19, businesses may need to reassign resources otherwise dedicated to sanctions compliance to other areas. If apparent violations are made due to this reallocation of resources, OFAC asserts that it will take this into consideration when determining the appropriate response to the business. Also, businesses and persons subject to OFAC regulatory authority are urged to contact OFAC if the businesses anticipate any delays in satisfying deadlines or in filing required submissions and reports, including meeting the 10-day deadline for filing reject reports. The statement provides OFAC contact information appropriate to a number of situations, including matters related to reject reports, subpoenas, license reports, requests for reconsideration, and self-disclosures.
Debt collection trade association claims Massachusetts emergency regulation is unconstitutional
On April 20, a debt collection trade association filed a complaint in the U.S. District Court for the District of Massachusetts against the Massachusetts attorney general, challenging the state’s emergency regulation issued in March, which makes numerous standard debt collection actions an unfair and deceptive act or practice during the Covid-19 pandemic. As previously covered by InfoBytes, the emergency regulation includes provisions that prohibit both creditors and debt collectors from (i) initiating, filing, or threatening to file debt collection lawsuits; (ii) garnishing wages and repossessing vehicles; and (iii) initiating phone calls with debtors, unless necessary to discuss a rescheduled court appearance or at the request of the debtor. Alleging violations of both state and federal law, including the First Amendment, Fourteenth Amendment, and the separation of powers, the trade association argues that the emergency regulations are a content-based restriction on free speech and unconstitutional because they, among other things, exclude six classes of collectors from the prohibition on placing collection calls, and do not treat all “communications” equally by excluding certain types of collections communications. The trade association also contends that the restrictions block members from providing consumers with possible resolutions, such as “temporary hardship repayment plans that may provide a variety of options for deferring payments or determining longer-term payment plans tailored to individual consumer situations where income has been interrupted for any reason.” The complaint also cites examples from debt collectors in the state that detail the negative impact the emergency regulation has had on their businesses. The trade association filed an emergency motion seeking a temporary restraining order and preliminary injunction enjoining enforcement of the regulation.
NCUA announces Covid-19 relief measures for credit unions
On April 17, the NCUA released a letter to federally insured credit unions to address temporary relief available as a result of Covid-19. The letter covers a number of matters discussed at the NCUA board’s open meeting held on April 16, including an interim final rule (IFR) issued on April 13 (covered by InfoBytes here) that permits credit unions to access the NCUA’s Central Liquidity Facility with no waiting period for advances. The letter also provides details on two real estate appraisal rules approved by the Board to provide regulatory relief for credit unions: (i) an IFR “that temporarily defers real estate-related appraisals and evaluations” for up to 120 days; and (ii) a final rule that increases the threshold amount for which a transaction involving real estate requires an appraisal from $250,000 to $400,000. Both the IFR and the final rule take effect upon publication in the Federal Register and expire on December 31. In addition, the board approved a final rule which (i) increases the maximum aggregate amount of loans a credit union can purchase from one lender without a waiver to “the greater of $5 million or 200 percent of a federally insured credit union’s net worth”; (ii) temporarily suspends the limit “on the eligible obligations that a federal credit union may purchase and hold”; and (iii) also suspends “the required timeframes for the occupancy or disposal of properties not being used to conduct business or that have been abandoned.”
Fed issues rule to temporarily allow bank insiders access to PPP
On April 17, the Federal Reserve Board (Fed) announced an interim final rule to allow “certain bank directors and shareholders” to apply for loans from the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The rule will temporarily suspend some of the requirements of Federal Reserve Act Section 22(h) and Regulation O, to permit banks to extend credit to bank insiders, but only for PPP loans. This announcement comes after the SBA recently issued its own interim final rule regarding eligibility of directors and shareholders to apply for PPP loans for their own small businesses. The Fed’s interim final rule is effective upon publication in the Federal Register and comments must be received within 45 days of publication.
FTC seeks injunction against company posing as SBA lender
On April 17, the FTC filed a complaint against a Rhode Island-based company and its owner (defendants) for allegedly violating the FTC Act by claiming to be an approved lender for the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) even though the defendants are neither affiliated with the SBA nor are they an SBA-authorized lender. The FTC alleges in its complaint that the defendants made deceptive statements on their websites, such as “WE ARE A DIRECT LENDER FOR THE PPP PROGRAM,” and directly contacted small businesses claiming to be representing the SBA in order to solicit loan applications on behalf of the businesses’ banks. The FTC states that the defendants have received hundreds, if not thousands, of loan applications from businesses and continue to claim they can make PPP loans despite receiving a cease-and-desist letter earlier this month from the SBA. The FTC seeks injunctive relief to prevent the defendants from continuing to engage in the unlawful acts and practices, as well as “rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief” that the court deems necessary to redress any consumer harm, and an award of the costs for bringing the action.
Fed's PPP Liquidity Facility is fully operational
On April 16, the Federal Reserve announced that its Paycheck Protection Program Liquidity Facility is fully operational and available to provide liquidity to eligible financial institutions as they help support small businesses. In particular, the facility will extend credit to financial institutions that make PPP loans, with such loans acting as the collateral.
FINRA updates FAQs to address meetings with members by video or audio conferencing and forwarding of firm mail
On April 16, FINRA updated certain questions in its FAQs related to regulatory relief due to Covid-19. The FAQs clarify requirements for a firm to supervise its registered representatives that meet with clients via a live video or audio conferencing platform. For such meetings, FINRA notes that members generally are not required to record live video or audio conferences with customers. However, to the extent the meeting utilizes chat or instant messaging features, or presents slides or other written (including electronic) communications, the member must keep records of these written communications, and their content must be consistent with applicable standards. Recorded live video or audio conversations with customers may need to be produced upon regulatory request. The FAQs also clarify situations in which the firm may redirect firm mail from a branch to an associated person's residence.
Freddie Mac announces system updates to facilitate use of exterior-only appraisals
On April 16, Freddie Mac announced that it will be adding a new feedback message (effective April 17, 2020) to Loan Collateral Advisor and Uniform Collateral Data Portal (UCDP). The message will note when exterior-only appraisals (as identified in the Map Reference field of the appraisal report) are submitted to UCDP using an incorrect appraisal form and will request resubmission to UCDP on the appropriate form.