Compliance Blog

One key aspect of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is the Paycheck Protection Program (PPP), generated many questions last week as credit unions worked to understand how they could participate in the program. The CARES Act and implementing pieces for this program are rather technical, so this blog has a very high-level overview of some of the issues that came up last week, and a round up of resources for credit unions seeking more information.

The CARES Act provided the Small Business Administration (SBA) with funds and authority to modify existing loan programs to establish a new loan program, the PPP, to assist small businesses adversely impacted by COVID-19. Section 1102 of the CARES Act provides the details of the new lending program, and section 1106 provides forgiveness provisions up to the full principal amount of qualifying loans under the PPP. Late last week, the SBA published an interim final rule implementing section 1102 and 1106.

Federally insured credit unions can offer PPP loans to their members, if the credit union is an SBA 7(a) authorized lender. Existing 7(a) lenders were automatically approved to make PPP loans, and the SBA can authorize additional lenders to participate in the program. However, a credit union cannot participate if it is in troubled condition or subject to formal enforcement action with NCUA. If a credit union is not an existing 7(a) lender, the CARES Act allowed the SBA to create a designation specifically for the PPP loans. The SBA published an application for lenders that would like to participate in the program but are not already 7(a) lenders which can be submitted to DelegatedAuthority@sba.gov. Lenders then use the SBA’s eTRAN system.

The launch of this program has not been without issues. Some credit unions reported delays in receiving credentials to log in to the SBA's system. Other credit unions reported issues with accessing the eTRAN system itself even when they had log in credentials. NAFCU has heard that at this time, eTRAN's system for adding new authorized users is down and it is unclear whether this will be fixed before the set amount of funds approved by Congress is exhausted. 

For those credit unions participating, to underwrite the loan, the credit union must do the following:

• Confirm receipt of borrower certifications found in the PPP Application, SBA Form 2484;
• Confirm receipt of information that demonstrates a borrower had employees that the borrower paid salaries to and payroll taxes for on or around February 15, 2020;
• Confirm the dollar amount of average monthly payroll costs for the preceding calendar year through review of payroll information submitted with the borrower’s application; and
• Follow applicable BSA requirements – meaning existing procedures.

These are just a few basics, overall the PPP has complexities especially if a credit union is new to the SBA 7(a) program. The SBA has published multiple resources on the PPP that may be helpful to credit unions:

• PPP Affiliation Interim Final Rule;
• SBA size standards for business eligibility;
• Capital Access Financial Systems (CAFS) instructions for creating a new account and gaining access to the E-Tran system; and
• Lenders who need assistance accessing SBA's E-Tran system to process loan guarantee requests may call the Lender Customer Service Line at 1-833-572-0502.

The SBA also has other coronavirus funding programs detailed here,

Overall, the provisions for participating in this program are rather technical. Credit unions may need to evaluate whether becoming a PPP lender makes sense for their institution.

NAFCU also has several resources here, including some FAQs on the SBA program. NAFCU members may also find our Final Regulation summarizing the final interim rule helpful (log in required). NAFCU is also holding a webinar today on the PPP.