Update: Stimulus Checks, SBA Loans, and CU Concerns

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The California and Nevada Credit Union Leagues are continuing discussions with credit unions, legislators, and regulators as concerns mount regarding the ability of all financial institutions to safely and efficiently process stimulus checks that are scheduled to be mailed out soon. 

Credit unions should be prepared: branches or ATMs could experience unusually high activity in members physically depositing or cashing checks in the coming weeks and months. California and Nevada residents will receive a sizeable portion of the estimated 70 million paper stimulus checks scheduled for mailing from the Treasury Department to individuals starting in early May, after direct-deposit stimulus monies are disbursed in April.

California-state and federally chartered credit unions are permitted — but not required — to cash stimulus checks for non-members as long as the individual is within the credit union’s field of membership (See CA Financial Code 14800.1 and NCUA Regulations Part 701.30).

In Nevada, federally chartered credit unions are allowed to do the same (NCUA Regulations Part 701.30). Many credit unions in both states serve under-banked and unbanked communities where this could pose issues.

More Payroll Protection Program Guidance
The SBA hosted a recent conference call regarding PPP loans, providing valuable information and updates. Here are key takeaways:

  • 282,000 loan applications had been submitted by 3,350 lenders, totaling $76 billion, as of late afternoon on April 7. In addition, 301 new lenders had been approved.
  • The SBA encouraged lenders and small businesses to be patient; it is still working things out while handling the flood of requests. New lender applications are being processed as fast as possible.
  • The SBA does not expect to run out of funds.
  • If lenders have trouble accessing the Capital Access Financial System (CAFS) or the E-Tran service, they can call 833-572-0502.
  • For questions regarding the PPP loan program, email 7aPaycheckLoanProgramQuestions@sba.gov.
  • More information on loan authorizations and loan note language “is forthcoming.”
  • Lenders may use their own loan documents for loan-closing or use the SBA Form 147; however, the SBA will be providing specific PPP loan note language. Furthermore, lenders don’t have to wait until the SBA has a PPP Loan Note — if a loan is approved, a lender can use its own loan note or Form 147 to close and disburse funds and then amend the note later.
  • Regarding liquidity issues, the SBA is working on guidance on advance purchases of estimated loan forgiveness (7 weeks); purchases of loan forgiveness (8 weeks); using PPP loans as collateral at the Fed Discount Window; and selling loans on the secondary market.
  • If a lender submits an application and receives approval and loan number for a dollar amount, and then renegotiates the amount with the borrower, the lender must go back into E-Tran to update the loan amount to ensure adequate funds are set aside to guarantee all loans.
  • The loan must be fully funded before the lender can request payment of processing fees from the SBA. Beyond that, the SBA will issue guidance on how to request payment.
  • Additionally, the SBA is still working on processes for servicing the loans, including purchases of loan forgiveness and how long it will take the administration to pay a lender when a request for loan forgiveness is submitted. Guidance is forthcoming.
     

SBA and PPP Update
Congress is considering appropriating an additional $200 – $250 billion in funding for small business lending programs under the CARES Act, which has already allowed for up to $350 billion to be administered by the Treasury Department and U.S. Small Business Administration for lenders to help borrowers.

This past week, the SBA released a FAQ sheet on the Treasury Department’s Payroll Protection Program (PPP) for borrowers and lenders. The SBA says this document will be updated on a regular basis.

In a recent letter, the Credit Union National Association (CUNA)/League system highlights credit union concerns regarding the PPP to fund forgivable loans to small businesses for employee payroll, including 1) the compressed timeline for basic guidelines and an interim final rule; 2) unreasonably short loan terms; 3) lender liability; and 4) inability of credit unions to borrow for their employee payroll. The Leagues have additional concerns that have not been addressed solely in this letter.

Moreover, the Leagues are working to address, highlight and flag issues that can be resolved via Treasury guidance. You can view the letter recently sent by CUNA and the American Association of Credit Union Leagues (AACUL) to Treasury Department Secretary Steven Mnuchin and SBA Administrator Jovita Carranza.

If you have questions regarding the PPP, the SBA has a new lender-only call center number: 833-572-0502.

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