WASHINGTON–Both credit union trade groups say they are working to get answers to all the questions credit unions and others have around the just-launched Paycheck Protection Program, the $349-billion loan fund created by Congress.
Launched on April 3 on short notice, the Small Business Administration has been swamped with demand, leading to jammed phone lines and a clunky online portal, and frustration as reports indicate the SBA is processing up to $1 billion in loans per hour while other businesses and lenders say they can’t get started.
CUToday.info has coverage of how day one of the program went here.
The Paycheck Protection Program (PPP) provides loans to businesses with up to 500 employees to cover payroll and other costs. The loans are to be forgiven if the company uses at least 75% of the funds received to cover payroll rather than laying people off during the coronavirus pandemic.
Credit unions themselves have also expressed another frustration over what appears to be a prohibition on participating the program as recipients of funds. The new law currently allows nonprofits to participate, but prohibits companies that are lenders from taking part.
Working the Weekend
NAFCU’s EVP and General Counsel Carrie Hunt the association staff spent much of the weekend—as was also the case with many credit unions—attempting to work through issues related to the PPP.
“There has definitely been a lot of confusion,” said Hunt.
Hunt said two different issues are contributing to all of the questions and confusion. The first is related to how the program itself works. It falls under SBA’s 7 (a) loan umbrella and as such the paycheck protection loans carry many of the same requirements as standard SBA loans. Under the PPP, the loans are forgivable if the business meets certain criteria, including making a request of the lender the loan be forgiven.
“It’s a unique product, and there has not been as much guidance from the SBA as we would have liked to see,” said Hunt, adding numerous NAFCU-member credit unions have complained of being unable to get their local SBA offices on the phone to answer questions.
The second issue many credit unions have confronted, according to Hunt, is problems with the SBA portal. The volume of inquiries has led to multiple technical issues, and due to security concerns
‘It’s Frustrating’
“It can take a couple of days to get a password, and there have been delays,” said Hunt. “It’s frustrating to read Bank of America is issuing all these loans.”
Credit unions cannot make the PPP loans unless they are certified as SBA lenders, and that has led to a mini-wave of CUs seeking the certification. For those CUs, the task is only more challenging, noted Hunt, as they face lots of basic questions, such as what does a 7(a) loan document look like and what are the responsibilities of a CU in servicing the loan.
“There is a lot of drinking from the fire hose,” said Hunt. “In the end, it’s about trying to help members.”
As for credit unions also qualifying to become recipients of PPP loans to cover their own payrolls, Hunt said credit unions have expressed an interest in participating and noted SBA programs in which institutions are both lenders and borrowers are not without precedent.
NAFCU noted while currently ineligible for PPP loans, credit unions can receive economic injury disaster loans from the SBA.
CUNA: ‘Very Brief Time to Prepare’
Lance Noggle, senior director of advocacy and senior counsel for payments and cybersecurity, said the trade group has spent much of its time since Friday trying to sort through the same issue.
“This kicked off with a very brief time for credit unions and banks to prepare,” said Noggle. “The interim final rule, which is the guidance to follow for the next 30 days, was released late on Thursday. Credit unions are excited to offer these loans. What they really are is more of a grant at the end of the day.
“As far as making the loans credit unions have had some difficulty, I think, partly by design,” said Noggle. “It’s been reported many are having a hard time logging into the SBA system, and part of that was they want to have extra due-diligence with the log-in credentials, due to concerns over fraud. Part of this is also people getting signed up and familiar with the process. I heard this morning SBA is processing a billion-dollars an hour in loans, which is more than SBA has ever processed.”
About Those Stimulus Checks
Separately, credit unions also continue to virtually legislate on the Hill over the $1,200 checks that are supposed to be sent to most Americans over the next few months.
Noggle said Treasury had indicated at one point payments could be sent to Americans for whom it has direct deposit information on April 15, but that date is also a payday, which would mean a surge in volume at financial institutions.
“After that, if there is no direct deposit information, it remains to be seen if Treasury will issue checks or debit cards or some combination,” said Noggle.
CUNA joined with a number of other groups in a letter to Treasury expressing concerns over using paper checks due to personal contact issues amidst the coronavirus pandemic (see separate story).
“Paper checks seem to be the least popular among financial institutions,” said Noggle.