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#2235123 - 04/17/20 05:01 PM Re: PPP Loans and Adverse Action Banker57
Cbigun Offline
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Since these are business loans, these can be done orally (and if totally by phone, can receive the ECOA notice over the phone) at application, right if that was put in place in the beginning?

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#2235147 - 04/17/20 06:51 PM Re: PPP Loans and Adverse Action Cbigun
Christy Campbell Offline
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Unfortunatly, it doesn't appear to have been done at application. Although, we have some time for potentially additional funding to be provided, we've elected to send written AAN to applicants if and when we're required to.

Question: Because these are commercial requests, some with multiple entities or individuals applying, who is required to receive the notice? All (natural person) applicants AND one to the business entity? I've been looking for clarification on this. Historically, our institution has sent notice to all parties, but I'm not confident that's necessary.

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#2235282 - 04/20/20 07:50 PM Re: PPP Loans and Adverse Action Banker57
David Dickinson Offline
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Central City, NE
Who is your applicant? The natural persons may represent the entity, but are probably not the borrower. For Reg B purposes, you only need to send an AAN to the primary applicant (most likely the business).

This might also help:
…a creditor need not provide a guarantor with an adverse action notice (FCRA or Regulation B), even if the application is denied in whole or in part based upon information from the consumer report of the guarantor. Regulation B states that only an “applicant” can experience “adverse action” in a credit context and excludes a guarantor from it’s definition of “applicant.” [2011 FTC Staff Interpretations page 83]

…only an applicant can experience adverse action. Further, a guarantor or co-signer is not deemed an applicant under §1002.2(e). Sections 603(k)(1)(A) and 603(k)(1)(B)(2) of the FCRA provide that adverse action has the same meaning for purposes of the FCRA as is provided in the ECOA and Regulation B in the context of a credit application. Therefore, a guarantor or co-signer would not receive an adverse action notice under the ECOA or the FCRA. [Federal Register/Vol. 76, No. 136/7-15-11/Rules and Regulations – Page 41597]
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#2235366 - 04/21/20 08:58 PM Re: PPP Loans and Adverse Action Banker57
mnbanker09 Offline
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With the potential for more funding to become available, our lenders continue to receive inquiries on PPP. They would like to have applicant's information ready for submission. I assume that if the lender has to deny because the program doesn't become available, that an AA notice must be sent? Should they even be collecting information for a program not currently available?

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#2235428 - 04/22/20 03:19 PM Re: PPP Loans and Adverse Action Banker57
David Dickinson Offline
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David Dickinson
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Central City, NE
Quote
They would like to have applicant's information ready for submission.

That sounds like an application to me. They are either applying or they are inquiring.

It sounds like the PPP is going to be funded again. Do these become applications only because the PPP is being funded? OR were they already applications?

Quote
Should they even be collecting information for a program not currently available?

You can certainly discuss policy with potential applicants (terms, products, etc.) and call it an inquiry. But if you start collecting information in anticipation of the PPP being funded again, I think you are definitely taking an application. That's not wrong, but if the PPP is not funded (or these applicants don't get funded), they you owe them an AAN.
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#2236367 - 05/08/20 12:15 PM Re: PPP Loans and Adverse Action Banker57
Adam Witmer Offline
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FYI - The CFPB issued a "Compliance Aid" this week talking about AA notices for PPP loan applications: https://files.consumerfinance.gov/f/documents/cfpb_ecoa-regulation-b_faqs-covid-19.pdf
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#2236384 - 05/08/20 03:17 PM Re: PPP Loans and Adverse Action Adam Witmer
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According to Reg. B, can't such AAN be done orally for business applications? Basing this question, off of the following information from Reg. B (with the ORALLY emphasis being mine):

(3) Notification to business credit applicants. For business credit, a creditor shall comply with the notification requirements of this section in the following manner:

(i) With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year (other than an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit), a creditor shall comply with paragraphs (a)(1) and (2) of this section, except that:

(A) The statement of the action taken may be given ORALLY or in writing, when adverse action is taken;

(B) Disclosure of an applicant's right to a statement of reasons may be given at the time of application, instead of when adverse action is taken, provided the disclosure contains the information required by paragraph (a)(2)(ii) of this section and the ECOA notice specified in paragraph (b)(1) of this section;

(C) For an application made entirely by telephone, a creditor satisfies the requirements of paragraph (a)(3)(i) of this section by an oral statement of the action taken and of the applicant's right to a statement of reasons for adverse action.

(ii) With regard to a business that had gross revenues in excess of $1 million in its preceding fiscal year or an extension of trade credit, credit incident to a factoring agreement, or other similar types of business credit, a creditor shall:

(A) Notify the applicant, within a reasonable time, ORALLY or in writing, of the action taken; and

(B) Provide a written statement of the reasons for adverse action and the ECOA notice specified in paragraph (b)(1) of this section if the applicant makes a written request for the reasons within 60 days of the creditor's notification.

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#2236385 - 05/08/20 03:24 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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Galveston, TX
If you are complying with (3)(i)(B) for those with less than $1M in revenue - yes

Unless these were all telephone applications.
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#2236387 - 05/08/20 03:35 PM Re: PPP Loans and Adverse Action rlcarey
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Want to be sure I understand this... So if we deny and provide reason orally (on business with revenues less than $1M), we must have provided a statement or disclosure informing the applicant at the time of application that they have a right to the statement of reasons for denial (in the event their application is denied)? Is this notification requirement required to be in writing or can this be done orally at application?

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#2236388 - 05/08/20 03:50 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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1002.4(d) Form of disclosures. (1) General rule. A creditor that provides in writing any disclosures or information required by this part must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by §§1002.5 and 1002.13, in a form the applicant may retain.
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#2236392 - 05/08/20 04:16 PM Re: PPP Loans and Adverse Action rlcarey
TeamComply Offline
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rlcarey - thanks for clarifying all this!

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#2236394 - 05/08/20 04:25 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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Galveston, TX
Creditors that take advantage of that provision either deliver a separate document at the time of application or their application contains a tear-off on the application that the applicant can keep.
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#2236395 - 05/08/20 04:29 PM Re: PPP Loans and Adverse Action rlcarey
TeamComply Offline
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Ok, one additional question...what about a withdrawn PPP application....we submitted, SBA approved and gave us a "number" then applicant comes back to us and says...nevermind. Is an AAN required in this scenario? We didn't actually make any adverse action on this request...so I'm thinking no?

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#2236396 - 05/08/20 04:32 PM Re: PPP Loans and Adverse Action Banker57
Adam Witmer Offline
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It sounds to me like that application was expressly withdrawn.

2. Expressly withdrawn applications. When an applicant expressly withdraws a credit application, the creditor is not required to comply with the notification requirements under §1002.9. (The creditor must comply, however, with the record retention requirements of the regulation. See §1002.12(b)(3).)
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#2236398 - 05/08/20 04:47 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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Based on the guidance issued from the regulators, if you received a SBA loan number, the application is considered completed. So either the application was withdrawn or it was approved but not accepted. I am not that familiar with the logistical process. Is the assignment of a loan number a separate step from the SBA approving the application? I think you know where I am going with that question. But either way - no AAN,
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#2236399 - 05/08/20 04:47 PM Re: PPP Loans and Adverse Action Adam Witmer
TeamComply Offline
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Thanks Adam. Can you provide the exact regulatory citation to this information in item 2. that you referenced in your response?

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#2236400 - 05/08/20 04:52 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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Official Interpretation

Section 1002.9—Notifications

2. Expressly withdrawn applications. When an applicant expressly withdraws a credit application, the creditor is not required to comply with the notification requirements under §1002.9. (The creditor must comply, however, with the record retention requirements of the regulation. See §1002.12(b)(3).)
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#2236402 - 05/08/20 05:04 PM Re: PPP Loans and Adverse Action Banker57
TeamComply Offline
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Thanks again rlcarey!

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#2236434 - 05/08/20 09:23 PM Re: PPP Loans and Adverse Action Banker57
Angela Offline
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I would like to add a question to this conversation please. Our bank had a online application for the PPP loans. So we received hundreds of applications. Some of the applicants did not meet the SBA guidelines to apply in the first place. And some of the applicants did not provide all the documentation needed to submit the application to the SBA. So if we have these applications that were never sent to the SBA in order to receive an SBA loan number, and they didn't qualify to apply, are we required to send an AA? We are not denying the applicant based on credit, we are simply saying they are "not eligible" to send the application in.

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#2236445 - 05/09/20 12:10 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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Galveston, TX
You either have incomplete applications or you denied them. So, yes notification is required.
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#2236637 - 05/13/20 06:17 PM Re: PPP Loans and Adverse Action Banker57
Nicole Offline
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if we have reached our lending limit and we have applications that we were not able to process what would our denial reason be?

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#2236640 - 05/13/20 07:04 PM Re: PPP Loans and Adverse Action Banker57
rlcarey Offline
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Galveston, TX
"we have reached our lending limit" ??
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#2236771 - 05/15/20 08:01 PM Re: PPP Loans and Adverse Action Banker57
Christy Campbell Offline
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We have some applications that have been submitted to one of our lenders but then withdrawn before being submitted to SBA. Technically, we never had a "complete application" according to CFPB's guidance. Would we abide by the same retention procedures as we do on any other expressly withdrawn application?

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#2236774 - 05/15/20 08:25 PM Re: PPP Loans and Adverse Action Banker57
Jerod Moyer Offline
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Jerod Moyer
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Sioux Falls, SD
As you stated, if the applicant "expressly" withdrew the application (Commentary to §1002.9 #2), it would be considered "withdrawn" and you would then follow the 1002.12(b) 12 month retention requirements for non-consumer applications.
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