In letter to congress, AG calls for more fairness, transparency & flexibility in implementation of program
Follows James’ requests to 11 banks for details on how PPP loans were allocated
Earlier this week, New York Attorney General Letitia James and a coalition of 23 additional attorneys general called for key changes to the Paycheck Protection Program (PPP) to ensure that funds are distributed fairly and equitably to the small businesses that were the originally intended recipients of the loans.
In a letter to congressional leadership, James and the coalition express concern the program – while created to help struggling small businesses survive the economic fallout of the coronavirus disease 2019 (COVID-19) public health crisis – has been implemented in such a way that funds have been excessively distributed to large, well-connected corporations. The coalition asserts that both the first and second rounds of funding with this program have left many of the hardest-hit small businesses across the country underserved.
“Small businesses are the backbone of our economy, and deserve full access to the funds intended to help them,” James said. “The PPP was created to help small businesses affected by the coronavirus, including the many women- and minority-owned and operated businesses, but, instead, much of this money has gone to large corporations. We are calling on Congress to enshrine changes into the PPP to ensure these small businesses have the resources to continue and thrive on after this pandemic passes. Separately, my office has requested information from 11 big banks to determine how loan determinations were made.”
In addition to the letter to Congress, the AG wrote last week to 11 large financial institutions seeking information to establish whether they engaged in practices that may have resulted in PPP loans being awarded to larger businesses or borrowers, instead of to all eligible applicants on a first-come, first-served basis. The letters request detailed information on each of these banks’ practices in marketing, issuing, and servicing PPP loans and information concerning banks’ fair lending practices to determine if women- or minority-owned businesses were negatively affected by the banks’ PPP loan practices.
In the new letter, the coalition calls for Congress to adopt the following measures before they allocate additional PPP funding:
Increase Fair Access to Funding for Small Businesses: The coalition of attorneys general calls for Congress to require the Small Business Administration to provide stronger, explicit guidance to lenders to ensure that funding goes to small businesses and not large, publicly traded companies. Additionally, the coalition urges Congress to adopt rules that prohibit lenders from giving preference to certain categories of customers over others, such as existing, larger customers or customers whose current debts could create conflicts of interest for the lender.
Ensure Equitable Distribution: The coalition calls for a portion of any future funding for the program to be allocated exclusively for minority-owned small businesses, for funding to be fairly distributed across metropolitan areas, and for small banks and credit unions to be fairly represented as lending sources involved in the program. The coalition also calls for the SBA to create a simple and straightforward process for “unbanked” or “lesser-banked” small businesses or those that do not wish to apply through their current financial institution to receive funding.
Better Communication and Transparency: The coalition urges Congress to direct the SBA to provide more direct guidance to businesses during the application process. They also call for the SBA to be required to disclose more granular data on the percentage of loans in various size categories; the number and amount of loans processed by each lender; the geographic distribution of all loans by metropolitan statistical area and borrower demographics, including gender, race, and ethnicity; and comprehensive data on the businesses that receive funding.
More Flexibility and Technical Support: The coalition said the PPP does not adequately serve small businesses and requires more flexibility. The coalition calls for longer time limits for businesses looking to rehire employees, that businesses be able to allocate a smaller amount of revenue toward salaries in order to qualify, and for expanding qualifications for loan forgiveness. They also urge Congress to provide the SBA with greater funding to improve technical support and mandate a uniform, user-friendly process for use by lenders.
Joining AG James in sending the letter to Congress are the attorneys general of California, Connecticut, Colorado, Delaware, Hawaii, Iowa, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, Nevada, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, Wisconsin and the District of Columbia.