ALBANY, N.Y. –Legislation that protects federal stimulus money for individuals and families in New York from levies and restraints and which has the strong support of the state’s credit unions has been signed into law by Gov. Andrew Cuomo. Separately, the Fed has OK’d an extension of a rule change that allows financial institution directors to apply for PPP loans.
The New York Credit Union Association called the bill a “major victory.”
“When Congress passed the American Rescue Plan Act of 2021 earlier this year, it did not include language exempting the payments from levy and restraint,” the NYCUA stated. “Credit unions and other financial institutions are generally required to honor third-party requests for levies and restraints. The new law ensures third-party debt collectors cannot garnish any direct payments from the American Rescue Plan to New Yorkers.”
According to the association, the law builds on credit unions’ efforts to support New Yorkers who have struggled financially as a result of the COVID-19 pandemic.
‘One Succinct Phrase’
“The credit union mission boils down to one succinct phrase: people helping people,” said NYCUA President and CEO William J. Mellin. “The direct payments in the American Rescue Plan Act were intended to lift up those who are hurting financially. While we are disappointed no legislation at the federal level has included protections from levies and restraints, Gov. Andrew Cuomo and the Legislature should be commended for recognizing the imminent need to protect these funds and guarantee they end up in the pockets of New Yorkers – not the hands of a debt collector. On behalf of the credit union movement and all New Yorkers, I thank the governor and leaders in the Legislature for overseeing this important legislation and ensuring it became law.”
Fed Extends Rule Change
Meanwhile, the Federal Reserve Board on Friday announced the third extension of a rule that temporarily modifies its rules so that certain bank directors and shareholders can apply to their banks for PPP loans for their small businesses.
To prevent favoritism, the board said it limits the types and quantity of loans that bank directors, shareholders, officers, and businesses owned by these persons can receive from their affiliated banks. However, these limits have prevented some small business owners from accessing PPP loans—especially in rural areas, the Fed stated.
The SBA clarified last year that PPP lenders can make PPP loans to businesses owned by their directors and certain shareholders, subject to certain limits, and without favoritism. The Board's rule extension will allow those individuals to apply for PPP loans, consistent with SBA's rules and restrictions. The extension only applies to PPP loans.
The Fed said it is providing the rule extension for PPP loans made since March 31, and to allow banks to continue to make PPP loans to a broad range of small businesses within their communities. The SBA explicitly has prohibited banks from prioritizing or providing favorable processing time to PPP loan applications from a director or equity holder, and the Fed will administer the rule extension accordingly.
The Details
The rule extension, which is effective immediately, applies to PPP loans made from March 31 through June 30, 2021. The rule change will continue to apply if the PPP is extended, with the change ultimately sunsetting on March 31, 2022. Comments will be accepted for 45 days after publication in the Federal Register.