Business Loan Program Temporary Changes; Paycheck Protection Program-Requirements-Disbursements, 26321-26324 [2020-09398]

Download as PDF Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Rules and Regulations with their mortgage transaction and disclose them on the Loan Estimate.13 For purposes of determining good faith under the TRID Rule, creditors may use revised estimates of such costs in a limited number of situations pursuant to Regulation Z, § 1026.19(e)(3)(iv).14 One such situation is if there are ‘‘changed circumstances’’ that affect the settlement charges consumers would incur.15 The TRID Rule specifies that changed circumstances includes ‘‘an extraordinary event beyond the control of any interested party,’’ with the commentary to the TRID Rule clarifying that a ‘‘war or natural disaster’’ is an example of such an extraordinary event.16 Economic disruptions and shortages during the COVID–19 pandemic may affect the ability of stakeholders to provide accurate estimates of some settlement charges. Stakeholders have sought guidance from the Bureau as to whether the COVID–19 pandemic is an extraordinary event that permits creditors to provide consumers with revised estimates reflecting changes in settlement charges. For example, a stakeholder asked to clarify whether, for purposes of establishing good faith, a creditor could provide a revised estimate of the appraisal fee based on changed circumstances where (1) the amount disclosed on the Loan Estimate was based on a reasonable market price at the time of the estimate and (2) the actual appraisal fee was higher because of a shortage of available appraisers due to the effects of the COVID–19 pandemic. Upon consideration of the interpretive issues, the Bureau concludes that, as with wars or natural disasters, the COVID–19 pandemic is an example of an extraordinary event beyond the control of any interested jbell on DSKJLSW7X2PROD with RULES 13 12 CFR 1026.19(e)(3). As a general rule, an estimated closing cost disclosed on the Loan Estimate pursuant to § 1026.19(e)(1)(i) is in good faith if the charge paid by or imposed on the consumer does not exceed the amount originally disclosed. 12 CFR 1026.19(e)(3)(i). For certain categories of settlement charges, good faith is determined with reference to whether: (1) The aggregate amount of certain charges paid by or imposed on the consumer does not exceed the aggregate amount of those charges disclosed pursuant to § 1026.19(e)(1)(i) by more than 10 percent (see 12 CFR 1026.19(e)(3)(ii)(A)); or (2) the charge was estimated consistent with the best information reasonably available at the time it was disclosed, regardless of whether the final amount exceeds the estimated amount (see 12 CFR 1026.19(e)(3)(iii)). 14 12 CFR 1026.19(e)(3)(iv); 12 CFR 1026.19(e)(4)(i). Under § 1026.19(e)(4)(i), the revised estimates must be reflected on a revised version of the Loan Estimate, on the Closing Disclosure, or on a corrected Closing Disclosure. 15 12 CFR 1026.19(e)(3)(iv)(A). 16 12 CFR 1026.19(e)(3)(iv)(A)(1); comment 19(e)(3)(iv)(A)–2. VerDate Sep<11>2014 16:47 May 01, 2020 Jkt 250001 party, and thus is a changed circumstance. Accordingly, for purposes of determining good faith, creditors may use revised estimates of settlement charges that consumers would incur in connection with the mortgage transaction if the COVID–19 pandemic has affected the estimate of such settlement charges.17 3. Legal Authority and TILA Safe Harbor Provisions The Bureau is issuing this interpretive rule based on its authority to interpret TILA and Regulation Z, including under section 1022(b)(1) of the Dodd-Frank Act, which authorizes guidance as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws.18 By operation of TILA section 130(f), no provision of TILA sections 108(b), 108(c), 108(e), 112, or 130 imposing any liability applies to any act done or omitted in good faith in conformity with this interpretive rule, notwithstanding that after such act or omission has occurred, this interpretive rule is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.19 II. Effective Date Because this rule is solely interpretive, it is not subject to the 30day delayed effective date for substantive rules under section 553(d) of the Administrative Procedure Act.20 Therefore, this rule is effective on May 4, 2020, the same date that it is published in the Federal Register. This rule articulates the Bureau’s interpretation of Regulation Z and TILA. As an interpretive rule, it is exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.21 Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an id.; 12 CFR 1026.19(e)(4)(i). As noted above, the revised estimates must be reflected on a revised version of the Loan Estimate, on the Closing Disclosure, or on a corrected Closing Disclosure. 12 CFR 1026.19(e)(4)(i). See also 12 CFR 1024.2(b) (definition of ‘‘Changed circumstances’’ in Regulation X, which predates the TRID Rule changed circumstance definition, includes ‘‘Acts of God, war, disaster, or other emergency’’). 18 12 U.S.C. 5512(b)(1). The relevant provisions of TILA and Regulation Z form part of Federal consumer financial law. See 12 U.S.C. 5481(12)(O), (14). 19 15 U.S.C. 1640(f). 20 5 U.S.C. 553(d). 21 5 U.S.C. 553(b). PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 initial or final regulatory flexibility analysis.22 The Bureau has determined that this interpretive rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring OMB approval under the Paperwork Reduction Act.23 IV. Congressional Review Act Pursuant to the Congressional Review Act,24 the Bureau will submit a report containing this interpretive rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to the rule’s published effective date. The Office of Information and Regulatory Affairs has designated this interpretive rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). V. Signing Authority The Director of the Bureau, having reviewed and approved this document, is delegating the authority to electronically sign this document to Laura Galban, a Bureau Federal Register Liaison, for purposes of publication in the Federal Register. Dated: April 29, 2020. Laura Galban, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2020–09515 Filed 5–1–20; 8:45 am] BILLING CODE 4810–AM–P SMALL BUSINESS ADMINISTRATION III. Regulatory Requirements 17 See 26321 13 CFR Part 120 [Docket Number SBA–2020–0022] RIN 3245–AH38 Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements— Disbursements U. S. Small Business Administration. ACTION: Interim final rule. AGENCY: On April 2, 2020, the U.S. Small Business Administration (SBA) posted an interim final rule (the First PPP Interim Final Rule) announcing the implementation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). The Act SUMMARY: 22 5 U.S.C. 603(a), 604(a). U.S.C. 3501 et seq. 24 5 U.S.C. 801 et seq. 23 44 E:\FR\FM\04MYR1.SGM 04MYR1 26322 Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Rules and Regulations jbell on DSKJLSW7X2PROD with RULES temporarily adds a new program, titled the ‘‘Paycheck Protection Program,’’ to the SBA’s 7(a) Loan Program. The Act also provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program (PPP). The PPP is intended to provide economic relief to small businesses nationwide adversely impacted by the Coronavirus Disease 2019 (COVID–19). SBA posted additional interim final rules on April 3, 2020, April 14, 2020, and April 24, 2020. This interim final rule supplements the previously posted interim final rules with additional guidance. This interim final rule supplements SBA’s implementation of the Act and requests public comment. DATES: Effective date: This rule is effective May 4, 2020. Applicability date: This interim final rule applies to applications submitted under the Paycheck Protection Program through June 30, 2020, or until funds made available for this purpose are exhausted. Comment date: Comments must be received on or before June 3, 2020. ADDRESSES: You may submit comments, identified by number SBA–2020–0022, through the Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please send an email to ppp-ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination whether it will publish the information. FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833–572– 0502, or the local SBA Field Office; the list of offices can be found at https:// www.sba.gov/tools/local-assistance/ districtoffices. SUPPLEMENTARY INFORMATION: I. Background Information On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID–19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all States, territories, and the District of Columbia. With the COVID–19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, tribal, and local public VerDate Sep<11>2014 16:47 May 01, 2020 Jkt 250001 health measures that are being taken to minimize the public’s exposure to the virus. These measures, some of which are government-mandated, are being implemented nationwide and include the closures of restaurants, bars, and gyms. In addition, based on the advice of public health officials, other measures, such as keeping a safe distance from others or even stay-athome orders, are being implemented, resulting in a dramatic decrease in economic activity as the public avoids malls, retail stores, and other businesses. On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 116–136) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (SBA) received funding and authority through the Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID–19 emergency. Section 1102 of the Act temporarily permits SBA to guarantee 100 percent of 7(a) loans under a new program titled the ‘‘Paycheck Protection Program.’’ Section 1106 of the Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program. On April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116–139), which provided additional funding and authority for the Paycheck Protection Program. II. Comments and Immediate Effective Date The intent of the Act is that SBA provide relief to America’s small businesses expeditiously. This intent, along with the dramatic decrease in economic activity nationwide, provides good cause for SBA to dispense with the 30-day delayed effective date provided in the Administrative Procedure Act. Specifically, it is critical to meet lenders’ and borrowers’ need for clarity concerning program requirements as rapidly as possible because the last day eligible borrowers can apply for and receive a loan is June 30, 2020. This interim final rule supplements previous regulations and guidance on several important, discrete issues. The immediate effective date of this interim final rule will benefit lenders so that they can swiftly close and disburse loans to small businesses. This interim final rule is effective without advance notice and public comment because PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 section 1114 of the Act authorizes SBA to issue regulations to implement Title I of the Act without regard to notice requirements. This rule is being issued to allow for immediate implementation of this program. Although this interim final rule is effective immediately, comments are solicited from interested members of the public on all aspects of the interim final rule, including section III below. These comments must be submitted on or before June 3, 2020. SBA will consider these comments and the need for making any revisions as a result of these comments. III. Paycheck Protection Program Requirements for Disbursements Overview The CARES Act was enacted to provide immediate assistance to individuals, families, and organizations affected by the COVID–19 emergency. Among the provisions contained in the CARES Act are provisions authorizing SBA to temporarily guarantee loans under the Paycheck Protection Program (PPP). Loans under the PPP will be 100 percent guaranteed by SBA, and the full principal amount of the loans and any accrued interest may qualify for loan forgiveness. Additional information about the PPP is available in the First PPP Interim Final Rule (85 FR 20811), a second interim final rule (85 FR 20817) (the Second PPP Interim Final Rule), a third interim final rule (85 FR 21747) (the Third PPP Interim Final Rule), a fourth interim final rule (85 FR 23450) (the Fourth PPP Interim Final Rule), and in an interim final rule issued by the Department of the Treasury, which was posted for public inspection at the Federal Register on April 28, 2020 (FR Doc. 2020–09239) (collectively, the PPP Interim Final Rules). 1. Disbursements a. Can a borrower take multiple draws from a PPP loan and thereby delay the start of the eight-week covered period? No. The lender must make a one-time, full disbursement of the PPP loan within ten calendar days of loan approval; for the purposes of this rule, a loan is considered approved when the loan is assigned a loan number by SBA.1 For loans that received an SBA loan number prior to the posting of this interim final rule but have not yet been fully disbursed, the following transition rules apply: 1 If the tenth calendar day is a Saturday, Sunday, or legal holiday, the period continues to run until the end of the next business day. E:\FR\FM\04MYR1.SGM 04MYR1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Rules and Regulations • The ten calendar-day period described above begins on April 28, 2020. • The eight-week covered period began on the date of first disbursement. Notwithstanding this limitation, lenders are not responsible for delays in disbursement attributable to a borrower’s failure to timely provide required loan documentation, including a signed promissory note. Loans for which funds have not been disbursed because a borrower has not submitted required loan documentation within 20 calendar days of loan approval shall be cancelled by the lender, subject to the transition rules above. When disbursing loans, lenders must send any amount of loan proceeds designated for the refinance of an EIDL loan directly to SBA and not to the borrower. The Administrator, in consultation with the Secretary, determined that requiring a single loan disbursement will best serve the interests of both borrowers and lenders and promote the purposes of the CARES Act. A single loan disbursement will eliminate the risk of delays in processing loan disbursement installments, advance the goal of payroll continuity for employees, and provide borrowers with faster access to the full loan amount so that they can immediately cover payroll costs. b. By when must a lender electronically submit an SBA Form 1502 indicating that PPP loan funds have been disbursed? SBA will make available a specific SBA Form 1502 reporting process through which PPP lenders will report on PPP loans and collect the processing fee on fully disbursed loans to which they are entitled. Lenders must electronically upload SBA Form 1502 information within 20 calendar days after a PPP loan is approved or, for loans approved before availability of the updated SBA Form 1502 reporting process, by May 18, 2020. The lender must report on SBA Form 1502 whether it has fully disbursed PPP loan proceeds. A lender will not receive a processing fee: (1) Prior to full disbursement of the PPP loan; (2) if the PPP loan is cancelled before disbursement; or (3) if the PPP loan is cancelled or voluntarily terminated and repaid after disbursement (including if a borrower repays the PPP loan proceeds to conform to the borrower’s certification regarding the necessity of the PPP loan request). In addition to providing ACH credit information to direct payment of the requested processing fee, lenders will be required to confirm that all PPP loans for which the lender is requesting a processing fee VerDate Sep<11>2014 16:47 May 01, 2020 Jkt 250001 have been fully disbursed on the disbursement dates and in the loan amounts reported. A lender must report through either Etran Servicing or the SBA Form 1502 report any PPP loans that have been cancelled before disbursement or that have been cancelled or voluntarily terminated and repaid after disbursement. The Administrator, in consultation with the Secretary, determined that requiring lenders to report on disbursement within 20 calendar days of loan approval ensures that disbursement of funds to eligible borrowers will occur more rapidly. This requirement also will enhance SBA’s ability to track program data. 2. Additional Information SBA may provide further guidance, if needed, through SBA notices that will be posted on SBA’s website at www.sba.gov. Questions on the Paycheck Protection Program may be directed to the Lender Relations Specialist in the local SBA Field Office. The local SBA Field Office may be found at https://www.sba.gov/tools/ local-assistance/districtoffices. Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601–612) Executive Orders 12866, 13563, and 13771 This interim final rule is economically significant for the purposes of Executive Orders 12866 and 13563, and is considered a major rule under the Congressional Review Act. SBA, however, is proceeding under the emergency provision at Executive Order 12866 Section 6(a)(3)(D) based on the need to move expeditiously to mitigate the current economic conditions arising from the COVID–19 emergency. This rule’s designation under Executive Order 13771 will be informed by public comment. Executive Order 12988 SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation, eliminate ambiguity, and reduce burden. The rule has no preemptive or retroactive effect. Executive Order 13132 SBA has determined that this rule will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 26323 various layers of government. Therefore, SBA has determined that this rule has no federalism implications warranting preparation of a federalism assessment. Paperwork Reduction Act, 44 U.S.C. Chapter 35 SBA has determined that this rule will not impose new or modify existing recordkeeping or reporting requirements under the Paperwork Reduction Act. Regulatory Flexibility Act (RFA) The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a proposed rule, or a final rule pursuant to section 553(b) of the APA or another law, the agency must prepare a regulatory flexibility analysis that meets the requirements of the RFA and publish such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, the RFA normally requires agencies to describe the impact of a rulemaking on small entities by providing a regulatory impact analysis. Such analysis must address the consideration of regulatory options that would lessen the economic effect of the rule on small entities. The RFA defines a ‘‘small entity’’ as (1) a proprietary firm meeting the size standards of the Small Business Administration (SBA); (2) a nonprofit organization that is not dominant in its field; or (3) a small government jurisdiction with a population of less than 50,000. 5 U.S.C. 601(3)–(6). Except for such small government jurisdictions, neither State nor local governments are ‘‘small entities.’’ Similarly, for purposes of the RFA, individual persons are not small entities. The requirement to conduct a regulatory impact analysis does not apply if the head of the agency ‘‘certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.’’ 5 U.S.C. 605(b). The agency must, however, publish the certification in the Federal Register at the time of publication of the rule, ‘‘along with a statement providing the factual basis for such certification.’’ If the agency head has not waived the requirements for a regulatory flexibility analysis in accordance with the RFA’s waiver provision, and no other RFA exception applies, the agency must prepare the regulatory flexibility analysis and publish it in the Federal Register at the time of promulgation or, if the rule is promulgated in response to an emergency that makes timely compliance impracticable, within 180 days of publication of the final rule. 5 U.S.C. 604(a), 608(b). Rules that are exempt from notice and comment are also exempt from the RFA requirements, including conducting a E:\FR\FM\04MYR1.SGM 04MYR1 26324 Federal Register / Vol. 85, No. 86 / Monday, May 4, 2020 / Rules and Regulations regulatory flexibility analysis, when among other things the agency for good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to the public interest. SBA Office of Advocacy guide: How to Comply with the Regulatory Flexibility Act, Ch.1. p.9. Accordingly, SBA is not required to conduct a regulatory flexibility analysis. Jovita Carranza, Administrator. [FR Doc. 2020–09398 Filed 5–1–20; 8:45 am] BILLING CODE P SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 [Docket Number SBA–2020–0023] RIN 3245–AH39 Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements—Corporate Groups and Non-Bank and NonInsured Depository Institution Lenders U. S. Small Business Administration. ACTION: Interim final rule. AGENCY: On April 2, 2020, the U.S. Small Business Administration (SBA) posted an interim final rule announcing the implementation of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act temporarily adds a new program, titled the ‘‘Paycheck Protection Program,’’ to the SBA’s 7(a) Loan Program. The CARES Act also provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program (PPP). The PPP is intended to provide economic relief to small businesses nationwide adversely impacted by the Coronavirus Disease 2019 (COVID–19). SBA posted additional interim final rules on April 3, 2020, April 14, 2020, April 24, 2020, and April 28, 2020, and the Department of the Treasury posted an additional interim final rule on April 28, 2020. This interim final rule supplements the previously posted interim final rules by limiting the amount of PPP loans that any single corporate group may receive and provides additional guidance on the criteria for non-bank lender participation in the PPP, and requests public comment. DATES: Effective date: This rule is effective May 4, 2020. Applicability date: This interim final rule applies to applications submitted under the Paycheck Protection Program jbell on DSKJLSW7X2PROD with RULES SUMMARY: VerDate Sep<11>2014 16:47 May 01, 2020 Jkt 250001 through June 30, 2020, or until funds made available for this purpose are exhausted. Comment date: Comments must be received on or before June 3, 2020. ADDRESSES: You may submit comments, identified by number SBA–2020–0023 through the Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. SBA will post all comments on www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at www.regulations.gov, please send an email to ppp-ifr@sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination whether it will publish the information. FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833–572– 0502, or the local SBA Field Office; the list of offices can be found at https:// www.sba.gov/tools/local-assistance/ districtoffices. SUPPLEMENTARY INFORMATION: I. Background Information On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID–19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all States, territories, and the District of Columbia. With the COVID–19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, tribal, and local public health measures that are being taken to minimize the public’s exposure to the virus. These measures, some of which are government-mandated, are being implemented nationwide and include the closures of restaurants, bars, and gyms. In addition, based on the advice of public health officials, other measures, such as keeping a safe distance from others or even stay-athome orders, are being implemented, resulting in a dramatic decrease in economic activity as the public avoids malls, retail stores, and other businesses. On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) (Pub. L. 116–136) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (SBA) received funding and authority through the CARES Act to modify PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID–19 emergency. Section 1102 of the CARES Act temporarily permits SBA to guarantee 100 percent of 7(a) loans under a new program titled the ‘‘Paycheck Protection Program.’’ Section 1106 of the CARES Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program. On April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116–139), which provided additional funding and authority for the Paycheck Protection Program. As described below, to preserve the limited resources available to the PPP program, this interim final rule limits the aggregate amount of PPP loans that any single corporate group may receive. This interim final rule also provides additional guidance regarding lenders eligible to make PPP loans. II. Comments and Immediate Effective Date The intent of the CARES Act is that SBA provide relief to America’s small businesses expeditiously. This intent, along with the dramatic decrease in economic activity nationwide, provides good cause for SBA to dispense with the 30-day delayed effective date provided in the Administrative Procedure Act. Specifically, it is critical to meet lenders’ and borrowers’ need for clarity concerning program requirements as rapidly as possible because the last day eligible borrowers can apply for and receive a loan is June 30, 2020. This interim final rule supplements previous regulations and guidance on certain important, discrete issues. The immediate effective date of this interim final rule will benefit lenders so that they can swiftly close and disburse loans to small businesses. This interim final rule is effective without advance notice and public comment because section 1114 of the CARES Act authorizes SBA to issue regulations to implement Title I of the CARES Act without regard to notice requirements. This rule is being issued to allow for immediate implementation of this program. Although this interim final rule is effective immediately, comments are solicited from interested members of the public on all aspects of this interim final rule, including section III below. These comments must be submitted on or before June 3, 2020. SBA will consider these comments and the need for making any revisions as a result of these comments. E:\FR\FM\04MYR1.SGM 04MYR1

Agencies

[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Rules and Regulations]
[Pages 26321-26324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09398]


=======================================================================
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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket Number SBA-2020-0022]
RIN 3245-AH38


Business Loan Program Temporary Changes; Paycheck Protection 
Program--Requirements--Disbursements

AGENCY: U. S. Small Business Administration.

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: On April 2, 2020, the U.S. Small Business Administration (SBA) 
posted an interim final rule (the First PPP Interim Final Rule) 
announcing the implementation of the Coronavirus Aid, Relief, and 
Economic Security Act (CARES Act or the Act). The Act

[[Page 26322]]

temporarily adds a new program, titled the ``Paycheck Protection 
Program,'' to the SBA's 7(a) Loan Program. The Act also provides for 
forgiveness of up to the full principal amount of qualifying loans 
guaranteed under the Paycheck Protection Program (PPP). The PPP is 
intended to provide economic relief to small businesses nationwide 
adversely impacted by the Coronavirus Disease 2019 (COVID-19). SBA 
posted additional interim final rules on April 3, 2020, April 14, 2020, 
and April 24, 2020. This interim final rule supplements the previously 
posted interim final rules with additional guidance. This interim final 
rule supplements SBA's implementation of the Act and requests public 
comment.

DATES: 
    Effective date: This rule is effective May 4, 2020.
    Applicability date: This interim final rule applies to applications 
submitted under the Paycheck Protection Program through June 30, 2020, 
or until funds made available for this purpose are exhausted.
    Comment date: Comments must be received on or before June 3, 2020.

ADDRESSES: You may submit comments, identified by number SBA-2020-0022, 
through the Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. SBA will post all 
comments on www.regulations.gov. If you wish to submit confidential 
business information (CBI) as defined in the User Notice at 
www.regulations.gov, please send an email to [email protected]. Highlight 
the information that you consider to be CBI and explain why you believe 
SBA should hold this information as confidential. SBA will review the 
information and make the final determination whether it will publish 
the information.

FOR FURTHER INFORMATION CONTACT: A Call Center Representative at 833-
572-0502, or the local SBA Field Office; the list of offices can be 
found at https://www.sba.gov/tools/local-assistance/districtoffices.

SUPPLEMENTARY INFORMATION:

I. Background Information

    On March 13, 2020, President Trump declared the ongoing Coronavirus 
Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude 
to warrant an emergency declaration for all States, territories, and 
the District of Columbia. With the COVID-19 emergency, many small 
businesses nationwide are experiencing economic hardship as a direct 
result of the Federal, State, tribal, and local public health measures 
that are being taken to minimize the public's exposure to the virus. 
These measures, some of which are government-mandated, are being 
implemented nationwide and include the closures of restaurants, bars, 
and gyms. In addition, based on the advice of public health officials, 
other measures, such as keeping a safe distance from others or even 
stay-at-home orders, are being implemented, resulting in a dramatic 
decrease in economic activity as the public avoids malls, retail 
stores, and other businesses.
    On March 27, 2020, the President signed the Coronavirus Aid, 
Relief, and Economic Security Act (the CARES Act or the Act) (Pub. L. 
116-136) to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic. The Small Business Administration (SBA) received funding and 
authority through the Act to modify existing loan programs and 
establish a new loan program to assist small businesses nationwide 
adversely impacted by the COVID-19 emergency. Section 1102 of the Act 
temporarily permits SBA to guarantee 100 percent of 7(a) loans under a 
new program titled the ``Paycheck Protection Program.'' Section 1106 of 
the Act provides for forgiveness of up to the full principal amount of 
qualifying loans guaranteed under the Paycheck Protection Program. On 
April 24, 2020, the President signed the Paycheck Protection Program 
and Health Care Enhancement Act (Pub. L. 116-139), which provided 
additional funding and authority for the Paycheck Protection Program.

II. Comments and Immediate Effective Date

    The intent of the Act is that SBA provide relief to America's small 
businesses expeditiously. This intent, along with the dramatic decrease 
in economic activity nationwide, provides good cause for SBA to 
dispense with the 30-day delayed effective date provided in the 
Administrative Procedure Act. Specifically, it is critical to meet 
lenders' and borrowers' need for clarity concerning program 
requirements as rapidly as possible because the last day eligible 
borrowers can apply for and receive a loan is June 30, 2020.
    This interim final rule supplements previous regulations and 
guidance on several important, discrete issues. The immediate effective 
date of this interim final rule will benefit lenders so that they can 
swiftly close and disburse loans to small businesses. This interim 
final rule is effective without advance notice and public comment 
because section 1114 of the Act authorizes SBA to issue regulations to 
implement Title I of the Act without regard to notice requirements. 
This rule is being issued to allow for immediate implementation of this 
program. Although this interim final rule is effective immediately, 
comments are solicited from interested members of the public on all 
aspects of the interim final rule, including section III below. These 
comments must be submitted on or before June 3, 2020. SBA will consider 
these comments and the need for making any revisions as a result of 
these comments.

III. Paycheck Protection Program Requirements for Disbursements

Overview

    The CARES Act was enacted to provide immediate assistance to 
individuals, families, and organizations affected by the COVID-19 
emergency. Among the provisions contained in the CARES Act are 
provisions authorizing SBA to temporarily guarantee loans under the 
Paycheck Protection Program (PPP). Loans under the PPP will be 100 
percent guaranteed by SBA, and the full principal amount of the loans 
and any accrued interest may qualify for loan forgiveness. Additional 
information about the PPP is available in the First PPP Interim Final 
Rule (85 FR 20811), a second interim final rule (85 FR 20817) (the 
Second PPP Interim Final Rule), a third interim final rule (85 FR 
21747) (the Third PPP Interim Final Rule), a fourth interim final rule 
(85 FR 23450) (the Fourth PPP Interim Final Rule), and in an interim 
final rule issued by the Department of the Treasury, which was posted 
for public inspection at the Federal Register on April 28, 2020 (FR 
Doc. 2020-09239) (collectively, the PPP Interim Final Rules).

1. Disbursements

    a. Can a borrower take multiple draws from a PPP loan and thereby 
delay the start of the eight-week covered period?
    No. The lender must make a one-time, full disbursement of the PPP 
loan within ten calendar days of loan approval; for the purposes of 
this rule, a loan is considered approved when the loan is assigned a 
loan number by SBA.\1\ For loans that received an SBA loan number prior 
to the posting of this interim final rule but have not yet been fully 
disbursed, the following transition rules apply:
---------------------------------------------------------------------------

    \1\ If the tenth calendar day is a Saturday, Sunday, or legal 
holiday, the period continues to run until the end of the next 
business day.

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[[Page 26323]]

     The ten calendar-day period described above begins on 
April 28, 2020.
     The eight-week covered period began on the date of first 
disbursement.
    Notwithstanding this limitation, lenders are not responsible for 
delays in disbursement attributable to a borrower's failure to timely 
provide required loan documentation, including a signed promissory 
note. Loans for which funds have not been disbursed because a borrower 
has not submitted required loan documentation within 20 calendar days 
of loan approval shall be cancelled by the lender, subject to the 
transition rules above. When disbursing loans, lenders must send any 
amount of loan proceeds designated for the refinance of an EIDL loan 
directly to SBA and not to the borrower.
    The Administrator, in consultation with the Secretary, determined 
that requiring a single loan disbursement will best serve the interests 
of both borrowers and lenders and promote the purposes of the CARES 
Act. A single loan disbursement will eliminate the risk of delays in 
processing loan disbursement installments, advance the goal of payroll 
continuity for employees, and provide borrowers with faster access to 
the full loan amount so that they can immediately cover payroll costs.
    b. By when must a lender electronically submit an SBA Form 1502 
indicating that PPP loan funds have been disbursed?
    SBA will make available a specific SBA Form 1502 reporting process 
through which PPP lenders will report on PPP loans and collect the 
processing fee on fully disbursed loans to which they are entitled. 
Lenders must electronically upload SBA Form 1502 information within 20 
calendar days after a PPP loan is approved or, for loans approved 
before availability of the updated SBA Form 1502 reporting process, by 
May 18, 2020. The lender must report on SBA Form 1502 whether it has 
fully disbursed PPP loan proceeds. A lender will not receive a 
processing fee: (1) Prior to full disbursement of the PPP loan; (2) if 
the PPP loan is cancelled before disbursement; or (3) if the PPP loan 
is cancelled or voluntarily terminated and repaid after disbursement 
(including if a borrower repays the PPP loan proceeds to conform to the 
borrower's certification regarding the necessity of the PPP loan 
request). In addition to providing ACH credit information to direct 
payment of the requested processing fee, lenders will be required to 
confirm that all PPP loans for which the lender is requesting a 
processing fee have been fully disbursed on the disbursement dates and 
in the loan amounts reported. A lender must report through either Etran 
Servicing or the SBA Form 1502 report any PPP loans that have been 
cancelled before disbursement or that have been cancelled or 
voluntarily terminated and repaid after disbursement.
    The Administrator, in consultation with the Secretary, determined 
that requiring lenders to report on disbursement within 20 calendar 
days of loan approval ensures that disbursement of funds to eligible 
borrowers will occur more rapidly. This requirement also will enhance 
SBA's ability to track program data.
2. Additional Information
    SBA may provide further guidance, if needed, through SBA notices 
that will be posted on SBA's website at www.sba.gov. Questions on the 
Paycheck Protection Program may be directed to the Lender Relations 
Specialist in the local SBA Field Office. The local SBA Field Office 
may be found at https://www.sba.gov/tools/local-assistance/districtoffices.

Compliance With Executive Orders 12866, 12988, 13132, 13563, and 13771, 
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Orders 12866, 13563, and 13771

    This interim final rule is economically significant for the 
purposes of Executive Orders 12866 and 13563, and is considered a major 
rule under the Congressional Review Act. SBA, however, is proceeding 
under the emergency provision at Executive Order 12866 Section 
6(a)(3)(D) based on the need to move expeditiously to mitigate the 
current economic conditions arising from the COVID-19 emergency. This 
rule's designation under Executive Order 13771 will be informed by 
public comment.

Executive Order 12988

    SBA has drafted this rule, to the extent practicable, in accordance 
with the standards set forth in section 3(a) and 3(b)(2) of Executive 
Order 12988, to minimize litigation, eliminate ambiguity, and reduce 
burden. The rule has no preemptive or retroactive effect.

Executive Order 13132

    SBA has determined that this rule will not have substantial direct 
effects on the States, on the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various layers of government. Therefore, SBA 
has determined that this rule has no federalism implications warranting 
preparation of a federalism assessment.

Paperwork Reduction Act, 44 U.S.C. Chapter 35

    SBA has determined that this rule will not impose new or modify 
existing recordkeeping or reporting requirements under the Paperwork 
Reduction Act.

Regulatory Flexibility Act (RFA)

    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule, or a final rule pursuant to section 
553(b) of the APA or another law, the agency must prepare a regulatory 
flexibility analysis that meets the requirements of the RFA and publish 
such analysis in the Federal Register. 5 U.S.C. 603, 604. Specifically, 
the RFA normally requires agencies to describe the impact of a 
rulemaking on small entities by providing a regulatory impact analysis. 
Such analysis must address the consideration of regulatory options that 
would lessen the economic effect of the rule on small entities. The RFA 
defines a ``small entity'' as (1) a proprietary firm meeting the size 
standards of the Small Business Administration (SBA); (2) a nonprofit 
organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. 5 U.S.C. 
601(3)-(6). Except for such small government jurisdictions, neither 
State nor local governments are ``small entities.'' Similarly, for 
purposes of the RFA, individual persons are not small entities. The 
requirement to conduct a regulatory impact analysis does not apply if 
the head of the agency ``certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' 5 U.S.C. 605(b). The agency must, however, publish 
the certification in the Federal Register at the time of publication of 
the rule, ``along with a statement providing the factual basis for such 
certification.'' If the agency head has not waived the requirements for 
a regulatory flexibility analysis in accordance with the RFA's waiver 
provision, and no other RFA exception applies, the agency must prepare 
the regulatory flexibility analysis and publish it in the Federal 
Register at the time of promulgation or, if the rule is promulgated in 
response to an emergency that makes timely compliance impracticable, 
within 180 days of publication of the final rule. 5 U.S.C. 604(a), 
608(b).
    Rules that are exempt from notice and comment are also exempt from 
the RFA requirements, including conducting a

[[Page 26324]]

regulatory flexibility analysis, when among other things the agency for 
good cause finds that notice and public procedure are impracticable, 
unnecessary, or contrary to the public interest. SBA Office of Advocacy 
guide: How to Comply with the Regulatory Flexibility Act, Ch.1. p.9. 
Accordingly, SBA is not required to conduct a regulatory flexibility 
analysis.

Jovita Carranza,
Administrator.
[FR Doc. 2020-09398 Filed 5-1-20; 8:45 am]
BILLING CODE P
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