On May 6, 2020, the CFPB issued an ECOA/Regulation B “Compliance Aid” containing three FAQs that clarify certain issues related to notification of action taken on Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loan applications. We understand that the Bureau provided the guidance in response to inquiries from banking trade associations on behalf of their members concerning technical compliance with Regulation B in managing the large influx of PPP loan applications.
FAQ No. 1 concerns when the 30-day timeline to provide notification of action taken on a “completed” application begins to run for a PPP loan application. The Bureau references the Regulation B provision that states that an application is deemed to be completed when “a creditor has received all the information that the creditor regularly obtains and considers in evaluating applications for the amount and type of credit requested…”. It also references the Regulation B comment that provides that this information includes, but is not limited to, “any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral.” Under the PPP, creditors have delegated authority to approve a loan, but the SBA must issue a loan number for a PPP loan to be guaranteed by the SBA. The question to which the Bureau responds is whether an application is deemed “completed” before the creditor receives a loan number from the SBA or a response about the availability of funds. The Bureau clarifies that the 30-day timeline to provide notice of action taken on a completed application does not begin until a creditor has received either a loan number or a response about the availability of funds from the SBA. It also includes a reminder that Regulation B requires a creditor to “act with reasonable diligence to collect information needed to complete an application.”
FAQ No. 2 concerns whether a creditor that receives an SBA PPP loan application and refuses to grant the credit request without ever submitting the application to the SBA must provide a Regulation B adverse action notice. The Bureau confirms that a creditor must provide an adverse action notice within 30 days after taking adverse action on a PPP application. It references the Regulation B comment that states that (1) if an application is missing information but provides enough information for a credit decision, the creditor can evaluate the application, make its credit decision, and notify the applicant accordingly, and (2) if the credit is denied, the applicant must be given the specific reasons for the credit denial or notice of the right to receive the reasons.
FAQ No. 3 concerns whether a creditor that has gathered sufficient data from an SBA PPP loan applicant for a credit decision, but has not yet received a loan number from the SBA or a response about the availability of funds, can deny the application based on incompleteness. The Bureau references the Regulation B comment that states that an application can be denied for incompleteness only if it is incomplete regarding information that the applicant can provide and the creditor lacks sufficient data for a credit decision. The Bureau clarifies that if a creditor has not received a loan number or a response about the availability of funds from the SBA, but the PPP application is otherwise complete, the creditor cannot deny the application based on incompleteness or provide a notice of incompleteness because a loan number or response from the SBA is not information that an applicant can provide to the creditor.
The Compliance Aid is available here.
