A Democratic congresswoman is urging the Small Business Administration to forgive Paycheck Protection Program loans that did not convert into grants due to accidental errors on loan amounts made by small-business owners.
Rep. Chrissy Houlahan, a Pennsylvania Democrat, said during a press conference Wednesday that while PPP loans were “instrumental in helping keep our main streets open during the pandemic,” there are still “broken promises” that need to be addressed.
Earlier this month, Houlahan and 39 other Democratic lawmakers signed onto a letter to SBA Administrator Isabella Guzman inquiring if her agency “has the legal authority needed to make amounts of PPP loans received due to ‘excess loan amount errors’ eligible for loan forgiveness.” The letter noted that over 300,000 small-business owners face unexpected debt, despite in many cases having used the loan proceeds “for eligible and forgivable uses.”
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“The unfairness of this situation is especially acute in cases where a lender made a good-faith error, meaning that there are some PPP borrowers who will now be liable for unexpected debt due to no fault or mistake of their own,” the letter states.
Houlahan, a member of the House Small Business Committee, was joined Wednesday by several small-business owners whose PPP loans were unexpectedly not fully forgiven, where she noted that the average excess loan amount error is $12,403.
“It’s an unexpected bill that’s hurting our smallest of small businesses, just as they’re trying to recover from a global pandemic,” she said. “These are businesses that used these funds for their intended purposes, for keeping workers on payroll, for keeping our customers safe and our main streets open.”
An SBA procedural note issued Jan. 15, 2021, explained that “a borrower may not receive loan forgiveness for any amount that exceeds the correct maximumloan amount permitted by statute for that borrower” regardless of “whether the excess loan amount was caused by borrower error or lender error.” It also distinguished between good-faith errors and intentional errors, which could lead to fraud charges.
Sunny Glottman, a researcher at the nonprofit research firm Center for Responsible Lending, said at the press conference that “the confusing and chaotic rollout of PPP made errors inevitable” and that minority business owners have been disproportionately affected by the lack of good-faith error reform.
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“Despite their best efforts to comply with rapidly changing PPP rules, many of the smallest businesses now owe an unexpected debt that threatens their very survival,” Glottman said in a statement. “This burden is disproportionately shouldered by microbusinesses and businesses owned by people of color. Congress and the SBA should rescind the Good Faith Error rule and remove additional barriers to loan forgiveness.”
One recipient of a PPP loan, Amy Yassinger, said: “We have now become ping pong balls between Congress, the SBA and our banks, who have the capacity to fix this insurmountable debt for over 300,000 small businesses who employ millions of people.”
Another business owner, Ember Seamen, said her PPP loan of almost $77,000 was retroactively requalified and now she has “to pay the full amount back with exorbitant fees.”
“Shock is not a strong enough word to describe the feeling when I was told my repayment plan would be $9,761.26 per month,” she said, adding that she is a single mother who has been thrust into financial instability.
Houlahan introduced a bill in September 2021 that would include excess loan amount errors in the forgiveness of a PPP loan. It has one Democratic co-sponsor. She also dismissed concerns about fraud playing a role in good-faith errors, saying she thinks it is “a real atrocity that we assume that of our small-business owners and operators.”
This is report was first published on Sept. 28, 2022.