Attorney General Becerra Denies SBA Move To Close Small Businesses On Emergency Loans – YubaNet

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SACRAMENTO, Sept. 29, 2020 – California Attorney General Xavier Becerra joined a coalition of 18 attorneys general in a letter of comment against a proposed Small Business Administration (SBA) rule that governs the appeal process for an emergency loan program that will help small businesses during the pandemic target . When the COVID-19 pandemic led to layoffs across the country in March, the federal government launched the Paycheck Protection Program (PPP) loan under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) to provide a direct incentive for small businesses to keep their workers on payroll during the COVID-19 pandemic. The program enabled the SBA to guarantee and waive the entire principal loan amount when companies use the funds to cover payroll and other selected expenses. However, on August 27, 2020, the SBA issued a provisional final regulation outlining the appeal process for decisions on the review of PPP loans. In the comment letter, the coalition argues that the rule would make it more difficult for small businesses to access the relief they need by creating an appeal process that is opaque, undermines borrowers’ rights and violates due process.

“Small businesses have suffered a devastating blow from this COVID-19 pandemic and the last thing they need is bureaucratic bureaucracy and cryptic decisions about why they have been denied or denied credit.” said Attorney General Becerra. “A lot of companies are just trying to stay afloat right now, and these paycheck protection loans are vital. This proposed rule is confusing and puts borrowers at a disadvantage – we need to better protect small businesses during this unprecedented pandemic. “

For many companies suffering from the COVID-19 pandemic, a PPP loan is the only way to stay in business. However, not all small businesses have the resources to defend their PPP loan in response to an SBA investigation and therefore rely heavily on appeals against negative credit decisions. The new rules apply to the appeal process in cases where the SBA determines that a borrower was not eligible for the PPP loan, was not eligible for the PPP loan amount received, or is not eligible for a PPP loan waiver. The attorneys general argue that the appeal process introduced by the proposed rule is confusing and puts borrowers at a disadvantage.

Attorney General Becerra and the coalition are calling on the SBA to establish an appeal process for PPP loan decisions with each level of review being independent and neutral. This would ensure that the same person who made an initial decision about the loan cannot review an appeal against their own decision. In their comment letter, the coalition also argues that the proposed rule:

  • Failure to formulate procedures for initial credit decisions: The SBA failed to articulate how it rates PPP loans in its research. This means that while filing an appeal, the borrower does not know which facts or which law the SBA has taken into account in its credit assessment decision. In addition, due to the lack of procedures, the borrowers’ confidential information is not protected from disclosure;
  • Creates a circular review process without external oversight: Without independent and neutral decision-makers, the proposed regulation denies borrowers due process and violates the Administrative Procedure Act;
  • There is a lack of fair trials: The proposed rule requires borrowers to submit an appeal prior to the publication of the administrative log on which their appeal depends; and
  • Is unfair: The proposed rule will force borrowers to continue making payments on a loan while waiting for the outcome of their appeal against the refusal to issue that loan.

Attorney General Becerra is committed to protecting Californians and people across the country during the COVID-19 public health emergency. He secured a win in late September after US Secretary of Education Betsy DeVos abandoned her illegal rule that would have withdrawn pandemic aid from public schools under the CARES act. He had obtained an injunction against DeVos’ lawsuit in the US District Court for the Northern District of California the previous month. Also in September, Attorney General Becerra filed an amicus brief to support Harris County, Texas, efforts to protect voter rights and health during COVID-19. In August, he filed a petition asking the Supreme Court to order two egg producers to comply with a series of pending investigative submissions and interrogations as part of an ongoing investigation into egg price practices during the pandemic. He also sent a letter to 33 mortgage service providers reminding companies of their obligations to California homeowners and tenants under the Homeowner Bill of Rights during COVID-19. In April, Attorney General Becerra urged the Trump administration to exempt COVID-19 financial relief from debt collection purposes and continue to enforce the Fair Credit Reporting Act.

Attorney General Becerra joined attorneys general of Illinois, Connecticut, Delaware, Hawaii, Iowa, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Rhode Island, Oregon, Virginia, Vermont, Washington, and the District of Columbia on the comment letter.

A copy of the letter can be found here.

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