House bill would protect PPP lenders from regulator penalties

CUNA wrote Reps. Barry Loudermilk (R-Ga.) and David Scott (D-Ga.) Thursday in support of their legislation that would prevent regulatory penalties for Paycheck Protection Program (PPP) lenders.

“For many reasons, including a complex forgiveness process, PPP loans are remaining on financial institutions’ balance sheets for longer than was originally anticipated and this is creating unintended consequences for these institutions that put so much effort into helping Americans,” the letter reads. “One important effect on PPP lending credit unions is that it can cause a credit union to cross an asset-based regulatory threshold. For credit unions this occurs when net worth ratio falls below 7%, which causes a credit union to lose its status of being well capitalized.

“A less than well capitalized credit union becomes subject to NCUA’s rules for prompt corrective action, which requires credit unions to comply with many additional onerous regulations designed to increase their capital,” it adds. “PPP loans should not impact a credit union’s balance sheet as they are meant to be short term and are fully guaranteed by the SBA. This bill will remedy this unintended consequence to credit unions that made PPP loans and thus is necessary to mitigate the negative impact on these credit unions.”

 

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