WBA has joined other state and national banking trade groups in calling on Congress and SBA to change the Paycheck Protection Program (again) to provide clarity for banks and help small businesses weather the coronavirus storm.
The first letter, sent to Speaker of the House Nancy Pelosi and Minority Leader Kevin McCarthy, expresses strong support for H.R. 7777, the Paycheck Protection Small Business Forgiveness Act. The bipartisan legislation, sponsored by Reps. Chrissy Houlahan (D-Pa.) and Fred Upton (R-Mich.), provides much-needed changes to the PPP forgiveness process by making it easier and less technical for smaller borrowers, whose businesses are already at greatest risk due to the COVID-19 pandemic.
H.R. 7777 would forgive PPP loans of less than $150,000 upon the borrower’s completion of a simple, one-page forgiveness document. According to the SBA data, PPP loans of $150,000 and under account for approximately 85% of total recipients, but less than 26% of loan dollars. "Simplifying the forgiveness application process for the smallest borrowers will provide additional relief to struggling small businesses by eliminating the existing requirement to spend hours dealing with unnecessarily complicated paperwork," the letter states.
The second letter, sent to Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza, requests immediate action from SBA to establish guidance and clarity regarding fees for agents involved in the preparation of PPP loan applications. Under PPP, lenders may work with an agent—an authorized representative of the lender, being an attorney, accountant, consultant, loan broker, or other assistant—in the processing of a PPP application on behalf of the borrower. The agent is then paid out of the fee the lender receives from SBA for the PPP loan (agents may not collect fees from the borrower).
The issue, the letter explains, is lack of guidance around the relationship between the lender and agent, particularly the distinction between an agent providing a legitimate service to the borrower in helping get the loan processed and agents initiating the relationship without lender consent (and sometimes without the lender’s knowledge) and then seeking payment on the backend. The letter asks SBA and Treasury to provide clarity on the contractual relationship between agents and lenders so bankers can focus on serving their customers rather than fending off numerous lawsuits.
Note: WBA has long stressed to lenders that the lenders are not required to pay the maximum amount allowed and are permitted to ask for documentation to support the work done by the agent. Lenders are not required to honor an invoice for work that was not contracted for by the lender up front.
Having a rule that would further flush out such matters would be helpful so that the agents who truly did not do any work in connection with PPP loan are not being unduly enriched by receiving a fee the agent did not rightfully earn.