Banks withdraw from forgiveness of PPP loans

At least three big banks have opted out of a new process to get Paycheck Protection Program loans canceled directly by the Small Business Administration, The Intercept has learned, leaving their small business clients no other recourse if the banks refuse to cancel loans or drag out the process.

Bank of America, JPMorgan Chase and PNC have all decided to step down, according to emails shared with The Intercept.

They are major players in the program, which Congress created to provide loans to businesses to spend on payroll and other qualifying expenses to help overcome closures. At the end of May, JPMorgan Chase was the number one PPP lender, followed by Bank of America in second place; PNC is No. 11. In total, lenders representing only half of all outstanding PPP loan cancellation requests have opted, according to the SBA.

PNC recently emailed Jesse Grund, owner of Unconventional Strength personal training studio in Orlando, Florida, saying, “Considering we’ve already built a streamlined end-to-end digital portal and review process. partner for your PPP pardon request; we will refuse to use the SBA Forgiveness Portal.

Grund still did not get his $ 5,000 PPP loan canceled and instead the PNC told him that his “correct maximum loan amount” was only $ 917, leaving him on the hook for the rest. . “It’s PNC’s fault that I got this money,” he said. “Now you want to come back to me for that. “

At the onset of the pandemic, small business owners were urged to flock to the Paycheck Protection Program. The loans were made with the promise that they would be canceled and essentially turned into grants if used properly.

But many small business owners have struggled to get their loans canceled by the banks that issued them. Banks have been enticed to issue PPP loans because of the fees they have generated, but they do not charge any fees to pass the pardon, and they have dragged their feet. Of the total PPP loans that have been issued, less than half have been canceled so far.

In response, the Small Business Administration, the government agency responsible for managing the program, announced in late July that it would offer small business owners who took out PPP loans of $ 150,000 or less a way to bypass intransigent banks. and to ask for forgiveness directly from the agency. . Congress had, at one point at the end of last year, considered automatically waiving all loans under $ 150,000, but never followed through.

But there was a fine print in the recent SBA announcement that many may have missed: Banks actually have to go through the direct process for small business owners to access it. And at least three greats refused.

“Forcing lenders to go into the process could have been disruptive,” SBA spokesman Terrence D. Clark said in an email. He noted that lenders continue to participate and the agency is carrying out outreach activities to encourage them to participate. “[W]e talk to lenders every day, ”he said. In a statement, Patrick Kelley, SBA associate administrator for the Office of Capital Access, said, “We encourage all lenders to join this tested portal.”

When asked to explain why the bank decided to ban its customers from the SBA’s direct forgiveness option, a PNC spokesperson pointed to a statement that read: “[L]enders who participate in the SBA Forgiveness Portal are still responsible for reviewing and issuing forgiveness decisions to the SBA. So we would always need to make sure that borrowers meet the loan eligibility and forgiveness requirements, whether or not we choose to use the SBA’s remittance portal.

Chase offered no explanation in his correspondence to his clients. In an email to a small business owner, he simply said, “[W]We continue our simple process and do not participate in the new direct SBA program. In response to a request for comment, a spokesperson for Chase said via email, “Chase customers must submit their pardon requests through our platform,” adding, “We have a simple process that takes less time. of 10 minutes.

For some business owners, being cut off from the SBA direct program could mean they can’t get some or all of their loans canceled at all. Some banks have contacted small business owners in recent months and told them they should not have received the original amount they received – which the banks themselves have approved – and demanded owners that they reimburse the difference. But many told The Intercept that they were using the money correctly and expected their entire loans to be canceled.

This is what happened to Warren Davis, owner of fundraising consultancy Warren Davis Consulting, LLC, who received his loan from Chase and was recently told the bank would not let him beg for forgiveness directly. at the SBA. After the bank initially granted him a PPP loan of $ 6,812, he was later told that he was only entitled to a $ 1,795.53 cashback. Now he has to pay Chase $ 460.01 on the first of every month, with two years to pay off the rest of the loan. “This loan payment is the second highest payment I have now on top of my rent, which is also due on the 1st,” he said in an email. “I tried to get answers from Chase several times without success over the months.”

Responding to situations like Davis’, the spokesperson for Chase said, “Small businesses have to meet the standards in order to qualify for a rebate, whether they go through their lender or directly through the SBA.

When asked why Bank of America has unsubscribed, spokesman Bill Halldin said, “Because our portal is simplified and has been around for six months,” adding that if the bank does opt, “we will have to develop a new interface ”. The bank is considering whether to join the SBA process, but “at this point our streamlined portal is delivering what people want,” he said.

But this portal does not provide what Amy Yassinger needs. Yassinger, owner of a music company that offers party bands for weddings in Illinois, was encouraged by Bank of America to apply for a PPP loan early in the pandemic. The bank helped her with the process, assuring her that her underwriting team “would make sure everything was solid,” she said in an email. She used the $ 38,730 to pay employees as if they were working on their regular event list, despite widespread cancellations, as well as to cover some non-salary expenses.

Still, 11 months after getting her loan, the bank told her it would only submit $ 2,436 to the SBA for a remission. “It was one thing that my life was completely shattered for over a year because my business was forced to cancel or postpone over 60 events in 2020,” she said. “It is quite another to ask Bank of America to recover $ 36,000 out of $ 38,730 over the next 5 years. “