The Consumer Financial Protection Bureau, May 6, 2020,  issued a Compliance Aid with FAQ’s to provide clarification for small businesses who have applied for loans under the Small Business Administration Paycheck Protection Program. The clarifications address when creditors must provide notification of action taken under the Equal Credit Opportunity Act and Regulation B to SBA PPP applicants affected by the COVID-19 emergency.

The CFPB notes:

●       Under ECOA and Regulation B, creditors must notify applicants of their application status (approval, counteroffer, denial, or other) within 30 days of receiving a “completed application”.

●       A “completed application” 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.” 12 CFR 1002.2(f).

The CFPB’s FAQs include:

Under the ECOA and implementation of Regulation B, creditors are required to notify an applicant of action taken within 30 days after receiving a “completed application”. Is the application deemed “completed” before the creditor has received a loan number from the SBA or a response about the availability of funds?

●       A PPP application is not a “completed application” until the creditor receives a loan number from the SBA or a response about the availability of funds.

●       This makes certain that the 30-day timeline awaiting this information from the SBA does not count. Applications will therefore not “time out” during the process.

●       A creditor must give notice of adverse action on a PPP application within 30 days after taking that action.

If a creditor receives an SBA PPP loan application without ever submitting the PPP loan to the SBA and denies based on incompletion, does the creditor need to provide a Regulation B adverse action notification?

●       If an application is missing information but provides sufficient data for a credit decision, the creditor may evaluate the application, make its credit decision, and notify the applicant accordingly.

●       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).

●       A creditor cannot deny a loan application based on incompleteness unless an application is incomplete regarding information that the applicant can provide and the creditor lacks sufficient data for a credit decision.

●       Alternatively, if an application is incomplete regarding matters that an applicant can complete, a creditor has the option of providing a notice of incompleteness under section 1002.9(c)(1)(ii).

Can a creditor deny an application based on incompleteness if the missing information is the loan number or response about the availability of funds from the SBA? Assume sufficient data about the PPP applicant has been collected by the creditor.

●       The creditor cannot deny the application based on incompleteness or provide a notice of incompleteness based on not yet receiving a loan number from the SBA or response about the availability of funds if the PPP application is complete, because the lacking information is not information that an applicant can provide to the creditor.

Given quickly evolving facts and updates on requirements, along with piecemeal other guidance, lenders would do well to stay focused on updates emanating from the various sources of guidance. 

For more information, contact Troy Garris directly at 301-461-8952 or troy@garrishorn.com.