October 20, 2020

As Senate preps PPP vote, NAFCU outlines forgiveness, EIDL concerns

Capitol domeAs the Senate today is expected to consider legislation to improve and provide more funds to the paycheck protection program (PPP), NAFCU joined with other trades representing credit unions and banks to urge lawmakers to address an issue related to the program: Borrowers who also received economic injury disaster loan (EIDL) advances are having those funds deducted from their forgivable PPP amount.

"The U.S. Small Business Administration (SBA) [EIDL Advances] were provided directly by the SBA to nearly one million small businesses, without the intermediation of lenders, as emergency grants to help these businesses survive a sudden and unexpected revenue shock," the financial services industry trades wrote to leaders of the House and Senate Small Business Committees. "Many EIDL Advance recipients also applied for PPP loans, but at the time PPP applications were being processed, lenders did not know whether an applicant had received an EIDL Advance or would receive one in the future."

The trades noted that initial guidance from the SBA indicated the EIDL advances would be treated as grants; however, subsequent guidance stated "that the forgiven amount of PPP loans must be reduced by the amount of a borrower's EIDL Advance, effectively transforming a significant portion of a grant into a loan, or wiping out PPP loan forgiveness altogether."

"Whether intentionally or as a result of confusing communications, PPP borrowers were misled and are only now beginning to discover the truth of their situation. Even today, many borrowers remain unaware of the debt burden they will soon face," the trades argued. "Lenders we represent are seeing firsthand the spreading awareness, shock and resentment among borrowers who believe they were deceived about the nature of the EIDL Advance. We do not believe it was the intent of Congress to effectively trap one million vulnerable small businesses with unexpected debt."

As small businesses work to survive and recover from the coronavirus pandemic with the help of lenders, the trades called on Congress and the SBA to find a solution to address this issue.

The Senate's vote today on a revised PPP package would reauthorize the program, provide a simpler forgiveness process for loans under $150,000, and allow the nation's smallest businesses hardest hit by the pandemic the ability to take out a second PPP loan. The vote is expected to be along party lines and therefore might not reach the 60-vote threshold to advance.

NAFCU sent a separate letter ahead of the vote expressing the importance of the PPP for credit unions, reiterating its call for a simplified PPP loan forgiveness process such as proposed in S. 4117, the Paycheck Protection Small Business Forgiveness Act, and flagging the EIDL issue. The association acknowledged the SBA's efforts to simplify the process, but continued to call for automatic forgiveness of loans under $150,000 to reduce burdens on small businesses and credit union lenders. NAFCU also offered support for allowing a second round of PPP loans to certain small businesses, as well as set asides for community financial institutions.

In addition, the Senate is expected to vote on advancing another "skinny" relief measure tomorrow. Negotiations between House Speaker Nancy Pelosi, D-Calif., and the administration on a potential relief agreement are also continuing, though Pelosi has said if a deal is not reached by today the House will not vote on another relief package before the election.

NAFCU Vice President of Legislative Affairs Brad Thaler Monday sent a message to credit unions highlighting key industry issues that Congress could tackle during the lame duck session (see a roundup of the issues here). Credit unions are encouraged to use the association's Grassroots Action Center to contact lawmakers directly.

Stay tuned to NAFCU Today for the latest developments.