Economy7 hours ago (Oct 16, 2020 05:35PM ET)
© Reuters. FILE PHOTO: FILE PHOTO: The United States Department of the Treasury is seen in Washington, D.C.
By Michelle Price
WASHINGTON (Reuters) – The U.S. Treasury Department encouraged banks to prioritize existing customers when dishing out Paycheck Protection Program pandemic loans, disadvantaging smaller businesses against the intent of lawmakers, a Congressional panel said on Friday.
“The Trump Administration and many big banks failed to prioritize small businesses in underserved markets, including minority and women-owned businesses,” the Select Subcommittee on the Coronavirus Crisis wrote in its report.
Congress in March passed legislation creating the program to help small companies weather the economic shutdown caused by COVID-19, leading banks to dish out more than $520 billion in forgivable government-guaranteed loans.
Under the program, banks can waive normal underwriting standards, but must include anti-money laundering paperwork, which can take weeks to assemble. That documentation was already in place for existing customers, banks have said.
Typically, larger, wealthier companies tend to have pre-existing banking relationships, federal data show.
“From the outset of the Paycheck Protection Program, Treasury and (the Small Business Administration) consistently urged PPP lenders to serve all eligible businesses,” a spokeswoman for the Treasury said.
“We encouraged all banks to offer loans to their existing small business customers, but no Treasury official ever suggested that banks should do so to the exclusion of new customers.”
According to an American Bankers Association (ABA) email obtained by the committee, the Treasury encouraged banks on a call to prioritize existing customers.
“Treasury would like for banks to go to their existing customer base as lenders will have all of the business information,” ABA Chief Executive Rob Nichols told the trade group’s board in the March 28 email, the report said.
Banks were urged to start processing loans as quickly as possible to support the deteriorating economy, Nichols said in an emailed statement on Friday.
“To achieve that goal, many banks processed applications from existing borrowers first since they already had the necessary borrower information needed to meet regulatory requirements,” he said. “Over time, as the Treasury and (Small Business Administration) provided more clarity, it became easier to gather information to process new customers.”
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.