Business Loan Program Temporary Changes; Paycheck Protection Program-Extension of Lender Records Retention Requirements, 68090-68094 [2024-18083]
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Federal Register / Vol. 89, No. 164 / Friday, August 23, 2024 / Rules and Regulations
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amount financed, any finance charge,
and the annual percentage rate.51
If the contract for deed is considered
to be secured by a dwelling by the
applicable law in the relevant
jurisdiction but is not a high-cost
mortgage loan, the seller will qualify as
a creditor if the seller has extended
credit secured by a dwelling more than
five times in the preceding or current
calendar year and all other elements of
the ‘‘creditor’’ definition are met.52 In
such a case, the seller is subject to TILA
and Regulation Z’s general disclosure
requirements, as well as additional
mortgage disclosure requirements.53
The transaction would generally also
qualify as a residential mortgage loan.54
These transactions are subject to
important additional requirements,
including the requirement that a
creditor make a reasonable, good faith
determination of the consumer’s ability
to repay the loan as well as the
prohibition on mandatory arbitration
clauses.55 These transactions may also
be subject to rules regarding servicing,
origination, and fees under TILA.56
If the contract for deed is secured by
a dwelling and qualifies as a high-cost
mortgage,57 a seller who extends credit
more than once in any 12-month period
can qualify as a creditor.58 A seller who
originates one or more such credit
extensions through a mortgage broker
can also qualify as a creditor.59
High-cost mortgage transactions will
also trigger HOEPA requirements and
protections, including required
disclosures.60 Specific prohibitions also
apply to high-cost mortgages, including
a prohibition on extending high-cost
mortgages without written certification
that a consumer has obtained
counseling, a prohibition on opening a
plan without regarding a consumer’s
51 What specific protections and requirement
apply will depend on the particular loan. See 15
U.S.C. 1631, 1632; see also 12 CFR 1026.17–.18.
52 12 CFR 1026.2(a)(17)(v) (the person must
regularly extend credit ‘‘more than 5 times for
transactions secured by a dwelling’’).
53 15 U.S.C. 1631, 1632; 12 CFR 1026.17–.18; see
also 15 U.S.C. 1638; 12 CFR 1026.19(e), 1026.37,
1026.38. Specific disclosure requirements will
depend on whether the dwelling-secured credit is
also secured by real property.
54 15 U.S.C. 1602(dd)(5).
55 12 CFR 1026.43(c); 12 CFR 1026.36(h)(1).
56 See generally 12 CFR 1026.36; 15 U.S.C. 1639a,
1639b, 1639e, 1639c(a)–(h). Some provisions only
apply if the loan is secured by the consumers’
principal dwelling. See, e.g., 12 CFR 1026.23.
57 A high-cost mortgage is any consumer credit
transaction secured by a principal dwelling and
which meets certain conditions as described in 12
CFR 1026.32. 15 U.S.C. 1602(bb), 1639; see also 12
CFR 1026.31, 1026.32, 1026.34.
58 12 CFR 1026.2(a)(17)(v).
59 Id.
60 12 CFR 1026.32, 1026.34.
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ability to repay, and prohibitions on
certain fees, among others.61
Regulatory Matters
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2024–18620 Filed 8–22–24; 8:45 am]
BILLING CODE 4810–AM–P
61 12 CFR 1026.34(a)(4) (open-end, high-cost
mortgage repayment prohibitions), 1026.34(a)(5)
(pre-loan counseling requirements), 1026.34(a)(7)–
(8), 1026.34(a)(10) (requirements and prohibitions
related to fees).
62 12 U.S.C. 5512(b)(1).
63 15 U.S.C. 1640(f).
64 5 U.S.C. 801 et seq.
65 44 U.S.C. 3501 through 3521.
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13 CFR Part 120
[Docket Number SBA–2024–0006]
This advisory opinion is an
interpretive rule issued under the
CFPB’s authority to interpret TILA and
Regulation Z, including under section
1022(b)(1) of the Consumer Financial
Protection Act of 2010, which
authorizes guidance as may be
necessary or appropriate to enable the
CFPB to administer and carry out the
purposes and objectives of Federal
consumer financial laws.62
By operation of TILA section 130(f),
no provision of TILA sections 130,
108(b), 108(c), 108(e), or section 112
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, the interpretive
rule is amended, rescinded, or
determined by judicial or other
authority to be invalid for any reason.63
Pursuant to the Congressional Review
Act,64 the CFPB will submit a report
containing this advisory opinion 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).
The CFPB has determined that this
advisory opinion 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
approval by the Office of Management
and Budget under the Paperwork
Reduction Act.65
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SMALL BUSINESS ADMINISTRATION
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RIN 3245–AI17
Business Loan Program Temporary
Changes; Paycheck Protection
Program—Extension of Lender
Records Retention Requirements
U.S. Small Business
Administration.
ACTION: Interim final rule.
AGENCY:
This interim final rule
lengthens the required records retention
for lenders that made loans under the
Paycheck Protection Program (PPP) to
ten years. PPP was established under
the Coronavirus Aid, Relief, and
Economic Security Act as a temporary
emergency guaranteed loan program to
provide economic relief to small
businesses nationwide adversely
impacted by the Coronavirus Disease
2019 (COVID–19), as amended. SBA has
issued a number of final rules
implementing the PPP Program. This
interim final rule harmonizes the PPP
lender records retention requirements
with subsequent legislation extending
the statute of limitations for criminal
charges and civil enforcement actions
for alleged PPP borrower fraud to ten
years after the offense.
DATES:
Effective date: The provisions of this
interim final rule are effective August
22, 2024.
Applicability date: This interim final
rule applies to all PPP lender loan
records. This includes PPP loan
applications that were withdrawn,
approved, denied or cancelled, and all
other PPP lender loan records for PPP
loans with an outstanding balance, PPP
loans that have been forgiven, and PPP
loans that are in repayment or have been
paid in full by the borrower as of the
effective date of this rule.1
Comment date: Comments must be
received on or before September 23,
2024.
ADDRESSES: You may submit comments,
identified by docket number SBA–
2024–0006 through the Federal
eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
SUMMARY:
1 To the extent that a federally regulated PPP
lender destroyed any PPP loan records before the
effective date of this rule in accordance with a
general internal records retention policy that was
acceptable to the PPP lender’s federal regulator,
SBA will not enforce compliance by that federally
regulated PPP lender with respect to the PPP loan
records that were destroyed before the effective date
of this rule.
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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. All
other comments must be submitted
through the Federal eRulemaking Portal
described above. 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. If you use a
telecommunications device for the deaf
(TDD) or a text telephone (TTY), call the
Federal Relay Service (FRS), toll free, at
1–800–877–8339. Individuals with
disabilities can obtain this document in
an accessible format that may be
provided in Rich Text Format (RTF) or
text format (txt), a thumb drive, an mp3
file, Braille, large print, audiotape, or
compact disc, or other accessible
formats.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 27, 2020, the Coronavirus
Aid, Relief, and Economic Security Act
(CARES Act) (Pub. L. 116–136) was
enacted to provide emergency assistance
and health care response for
individuals, families, and businesses
affected by the Coronavirus Disease
2019 (COVID–19) pandemic. Section
1102 of the CARES Act temporarily
permitted the Small Business
Administration (SBA) to guarantee 100
percent of 7(a) loans made by
participating lenders under a new
program titled the ‘‘Paycheck Protection
Program’’ (PPP), pursuant to section
7(a)(36) of the Small Business Act (15
U.S.C. 636(a)(36)) (First Draw PPP
Loans). Section 1102(F)(ii)(I) of the
CARES Act stated that all PPP lenders
were deemed to have been delegated
authority by the SBA Administrator to
make and approve PPP loans (15 U.S.C.
636(a)(36)(F)(ii)(I)). Section 1106 of the
CARES Act provided for forgiveness of
up to the full principal amount of
qualifying loans guaranteed under the
PPP. On April 24, 2020, the Paycheck
Protection Program and Health Care
Enhancement Act (Pub. L. 116–139) was
enacted, which provided additional
funding and authority for the PPP
Program.
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On June 5, the Paycheck Protection
Program Flexibility Act of 2020 (PPP
Flexibility Act) (Pub. L. 116–142) was
enacted, which changed provisions of
the PPP relating to the maturity of PPP
loans, the deferral of PPP loan
payments, and the forgiveness of PPP
loans. On July 4, 2020, Public Law 116–
147 extended SBA’s authority to
guarantee PPP loans to August 8, 2020.
On December 27, 2020, the Economic
Aid to Hard-Hit Small Businesses,
Nonprofits and Venues Act (Economic
Aid Act) (Pub. L. 116–260) was enacted.
The Economic Aid Act reauthorized
lending under the PPP through March
31, 2021. The Economic Aid Act added
a new temporary section 7(a)(37) to the
Small Business Act, which authorized
SBA to guarantee additional PPP loans
(Second Draw PPP Loans) to certain
eligible borrowers that previously
received a First Draw PPP Loan under
generally the same terms and conditions
available under section 7(a)(36) of the
Small Business Act. The Economic Aid
Act also redesignated section 1106 of
the CARES Act as section 7A of the
Small Business Act, to appear after
section 7 of the Small Business Act.
On March 11, 2021, the American
Rescue Plan Act (ARPA) (Pub. L. 117–
2) was enacted, and among other things,
expanded eligibility for First Draw PPP
Loans and Second Draw PPP Loans. On
March 30, 2021, the PPP Extension Act
of 2021 (Pub. L. 117–6) was enacted,
extending SBA’s PPP program authority
through June 30, 2021.
From April 3, 2020, through August 8,
2020, when the 2020 round of PPP
expired, SBA guaranteed over 5.2
million PPP loans made by over 5,000
PPP lenders under delegated authority.
Of the approximately 5,000 lenders that
participated in the PPP Program,
approximately 4,900 were federally
regulated lenders and several hundred
were SBA Supervised Lenders (as
defined in 13 CFR 120.10). From
January 11, 2021, when the PPP
reopened, through June 30, 2021, when
the PPP program authority expired, SBA
guaranteed over 6.6 million additional
PPP loans made by PPP lenders under
delegated authority. Thus, the total
number of PPP loans guaranteed by SBA
exceeds 11.8 million.2 The total dollar
amount of the PPP loans guaranteed by
SBA exceeds $806 billion.
Because the approximately 5,000 PPP
lenders processed PPP loans under the
delegated authority provided by the
CARES Act, the PPP lenders were
2 In addition to the approximately 11.8 million
loans guaranteed by SBA, there were also loans
where the borrower’s application was withdrawn by
the borrower, declined by the PPP lender, or the
PPP lender cancelled the loan guaranty.
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responsible for obtaining loan
applications and supporting
documentation and preparing the loan
note and other closing documentation.
The PPP lenders were not required to
provide SBA with copies of the loan
origination and closing documentation,
but instead when the PPP lenders
applied to SBA for the issuance of a PPP
loan number, the PPP lenders were
required to certify that they would
retain those documents in their files.
See, SBA Form 2484 (Lender’s
Application—Paycheck Protection
Program Loan Guaranty) and SBA Form
2484–SD (Lender’s Application—
Second Draw Loan Guaranty). The
forms did not specify the length of time
required to retain documents in their
files.
SBA posted the first interim final rule
implementing the PPP on SBA’s website
on April 2, 2020, and published the rule
in the Federal Register on April 15,
2020 (85 FR 20811). SBA subsequently
issued numerous additional interim
final rules. In particular, on February 5,
2021, SBA published an interim final
rule implementing Economic Aid Act
changes related to the forgiveness and
review of PPP loans (86 FR 8283)
(Consolidated Forgiveness and Loan
Review IFR).
On August 5, 2022, President Biden
signed the PPP and Bank Fraud
Enforcement Harmonization Act of 2022
(Harmonization Act) (Pub. L. 117–166).
The Harmonization Act amends section
7(a) of the Small Business Act to
provide, for both First Draw PPP Loans
and Second Draw PPP Loans, that
notwithstanding any other provision of
law, any criminal charge or civil
enforcement action alleging that a
borrower engaged in fraud with respect
to a PPP loan guaranteed by SBA shall
be filed not later than 10 years after the
offense was committed. The
Harmonization Act was necessitated by
the unprecedented volume of PPP loans,
law enforcement estimates of the
amount of fraud associated with these
loans, and the tremendous strain on law
enforcement resources in dealing not
only with PPP Program fraud, but fraud
in the other COVID–19 pandemic
assistance programs administered by
SBA and other Federal agencies.3
SBA, with support from the
Department of Justice (DOJ) and SBA’s
Office of Inspector General (OIG), which
3 On August 5, 2022, President Biden also signed
the COVID–19 EIDL Fraud Statute of Limitations
Act of 2022 extending the statute of limitations for
criminal or civil enforcement actions alleging that
a borrower engaged in fraud in SBA’s COVID EIDL
disaster loan program, EIDL Advance program and
Targeted EIDL Advance program to not later than
ten years after the offense was committed.
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are charged with investigating and
prosecuting PPP fraud, is seeking to
harmonize the records retention
requirements applicable to PPP lenders
by extending those requirements so that
they are consistent with expanded
statute of limitations in the
Harmonization Act.
As of December 31, 2023, U.S.
Attorneys’ Offices had criminally
charged approximately 3,500 defendants
in 2,388 pandemic fraud related cases,
of which approximately 2,005
defendants had pleaded guilty or been
convicted at trial.4 The fraud loss
associated with these completed cases is
more than $1.2 billion. While not all of
the cases were related to the PPP
Program, a substantial number were,
and the U.S. Attorneys’ Offices have a
similar number of investigations open
that are yet to be charged. Further, more
than $1.4 billion in seizures and
forfeiture orders have been issued to
recover stolen CARES Act funds.
To date, the DOJ Civil Frauds Division
has opened more than 800 new
investigations relating to potential civil
fraud enforcement in connection with
the PPP Program. These include
investigations implicating more than
5,000 individuals and entities and
billions of dollars in pandemic relief
funds. To date, DOJ has obtained more
than 450 civil settlements and
judgments relating to the PPP Program,
totaling more than $200 million. The
number of civil fraud investigations
relating to PPP borrowers has grown in
volume every year since 2020, and DOJ
believes that trend is likely to continue.
Extending the PPP lender records
retention requirements will ensure that
PPP loan records remain available to
law enforcement while they continue to
investigate and prosecute PPP fraud
during the expanded ten-year statute of
limitations period authorized by the
Harmonization Act.
II. Current SBA Records Retention
Requirements for PPP Lenders
The Consolidated Forgiveness and
Loan Review IFR sets forth the current
SBA records retention requirements for
PPP lenders as follows:
Lenders must comply with applicable
SBA requirements for records retention,
which for federally regulated lenders
means compliance with the
requirements of their federal financial
institution regulator and for SBA
supervised lenders (as defined in 13
CFR 120.10 and including PPP lenders
with authority under SBA Form 3507)
4 See, COVID–19 Fraud Enforcement Task Force
2024 Report (April 2024), https://www.justice.gov/
coronavirus/media/1347161/dl?inline.
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means compliance with 13 CFR
120.461. (86 FR 8283, 8295). These
records retention requirements apply to
all PPP loan records, including First
Draw PPP Loans and Second Draw PPP
Loans.
The records retention requirements in
13 CFR 120.461 for SBA Supervised
Lenders provide as follows:
• Other preservation of records. An
SBA Supervised Lender must preserve
for at least 6 years following final
disposition of each individual SBA
loan:
All applications for financing;
Lending, participation, and escrow
agreements;
Financing instruments; and
Æ All other documents and
supporting material relating to such
loans, including correspondence.
Id.
As noted previously, several hundred
SBA Supervised Lenders participated in
the PPP Program. An SBA Supervised
Lender is defined in 13 CFR 120.10 as
a 7(a) Lender that is either a Small
Business Lending Company or a NFRL.
A 7(a) Lender is defined in 13 CFR
120.10 as an institution that has
executed a participation agreement with
SBA under the guaranteed loan
program.5 A Small Business Lending
Company (SBLC) is defined in 13 CFR
120.10 as a non-depository lending
institution that is SBA-licensed and is
authorized by SBA to make loans
pursuant to section 7(a) of the Small
Business Act and loans to
Intermediaries in SBA’s Microloan
program. An NFRL or Non-Federally
Regulated Lender is defined in 13 CFR
120.10 as a business concern that is
authorized by the SBA to make loans
under section 7(a) and is subject to
regulation by a state but whose lending
activities are not regulated by a federal
financial institution regulator. Many of
the several hundred SBA Supervised
Lenders that participated in the PPP
Program did so under their existing SBA
Form 750 (Loan Guaranty Agreement
(Deferred Participation)) or SBA Form
750CA (Community Advantage Pilot
Program Loan Guaranty Agreement
(Deferred Participation)). Other SBA
Supervised Lenders participated in PPP
by signing an SBA Form 3507 (CARES
Act Section 1102 Lender Agreement—
Non-Bank and Non-Insured Depository
Institution Lenders).6
The overwhelming majority of lenders
that participated in the PPP Program are
5 Because PPP is authorized under section 7(a) of
the Small Business Act, all lenders participating in
the PPP Program are 7(a) Lenders.
6 SBA Form 3507 lenders included numerous
fintechs.
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not SBA Supervised Lenders. Instead,
they are federally regulated lenders. The
approximately 4,900 federally regulated
lenders that participated in the PPP
Program included those PPP lenders
regulated by the Federal Deposit
Insurance Corporation, the Federal
Reserve, the Office of the Comptroller of
the Currency, the National Credit Union
Administration, and the Farm Credit
Administration. Many of these federally
regulated lenders participated in PPP
under their existing SBA Form 750
(Loan Guaranty Agreement (Deferred
Participation)). Other federally regulated
lenders participated in PPP by signing
an SBA Form 3506 (CARES Act Section
1102 Lender Agreement).
Under the Consolidated Forgiveness
and Loan Review IFR, federally
regulated lenders that participated in
the PPP Program are currently required
to retain their PPP loan records in
accordance with the records retention
requirements imposed by their federal
financial institution regulator. SBA has
determined that there do not appear to
be any consistent or specific time
requirements imposed by federal
financial institution regulators that are
applicable to PPP records retention as a
whole. Instead, federally regulated PPP
lenders may implement and follow
general internal records retention
policies that are acceptable to their
regulators. It is likely that many of these
general internal records retention
policies allow for periodic destruction
of certain records after a loan is paid in
full, which for PPP would include
payment in full through forgiveness or
otherwise.7 SBA has been making
forgiveness payments to lenders on PPP
loans since late 2020, so there is
considerable time sensitivity associated
with the need to extend the current PPP
records retention requirements for
federally regulated lenders.
This interim final rule extends the
records retention requirements for all
PPP lenders to ten years from the date
of final disposition of each individual
PPP loan.
III. Interim Final Rule With Immediate
Effective Date
This interim final rule is being issued
without advance notice and public
comment because section 1114 of the
CARES Act and section 303 of the
Economic Aid Act authorize SBA to
issue regulations to implement the PPP
Program without regard to notice
requirements. Congress designed the
PPP as a temporary emergency program,
and the issuance of this interim final
rule under the statutory rulemaking
7 See,
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e.g., 12 CFR part 749, Appendix A.
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authority in the CARES Act and the
Economic Aid Act is consistent with
Congressional intent.
SBA finds good cause for forgoing the
advance notice-and-public-comment
procedure because that procedure
would be impracticable. The earliest
PPP loan was made in April 2020 and
SBA began forgiving PPP loans in late
2020, so it is urgent that the PPP lender
records retention requirements be
extended to prevent the lapse of records
retention requirements for and potential
destruction of PPP records by federally
regulated lenders that could result in
the loss of records that need to be
preserved for law enforcement
purposes. As noted previously, the
overwhelming majority of PPP lenders
are federally regulated lenders. Under
the Consolidated Forgiveness and Loan
Review IFR, those approximately 4,900
lenders are currently required to follow
the records retention requirements of
their federal financial institution
regulators. SBA has determined that
there do not appear to be any consistent
or specific time requirements imposed
by federal financial institution
regulators that are applicable to PPP
records retention as a whole. Instead,
federally regulated PPP lenders may
implement and follow general internal
records retention policies that are
acceptable to their regulators. It is likely
that many of these general internal
records retention policies allow for
periodic destruction of certain records
after a loan is paid in full, which for PPP
would include payment in full through
forgiveness or otherwise. Since SBA
began making forgiveness payments to
PPP lenders starting in late 2020, it is
urgent that the current PPP records
retention requirements be extended to
prevent the destruction of PPP loan
records.
Additionally, advising PPP lenders of
the extended records retention
requirement expeditiously will allow
those lenders to adjust their systems and
processes as soon as possible in order to
comply with the newly extended
records retention period. If SBA were to
follow the advance notice-and-publiccomment process, that would delay
issuance of the rule by at least three
months, during which time records that
need to be preserved for law
enforcement purposes are at risk of loss.
For related reasons, SBA has
determined that there is good cause to
make this rule effective immediately. 5
U.S.C. 553(d)(3). An immediate effective
date will prevent potential loss of
records that need to be preserved for
law enforcement purposes. Given the
urgent need to preserve PPP loan
records for law enforcement purposes,
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SBA has determined that it is
impractical and not in the public
interest to provide a delayed effective
date. An immediate effective date will
allow PPP lenders to adjust their
systems and processes to prevent the
loss of PPP loan records that need to be
preserved for law enforcement
purposes. In this rule, SBA is not
imposing a new requirement on PPP
lenders, rather SBA is extending an
existing requirement of records
retention. The systems and process that
will need to be adjusted are those that
prevent the periodic destruction of
records, and SBA believes that PPP
lenders do not need a delayed effective
date to make these adjustments.
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. These comments must be
submitted on or before September 23,
2024. SBA will consider these
comments and the need for making any
revisions as a result of these comments.
IV. Revisions to Prior PPP Rule
To harmonize the PPP lender records
retention requirements with the ten-year
PPP fraud statute of limitations in the
Harmonization Act, SBA is extending
the records retention requirements for
all PPP lenders to ten years from the
date of final disposition of each
individual PPP loan. The extended
records retention requirements apply
equally to federally regulated lenders
(including lenders that executed an SBA
Form 3506) and SBA Supervised
Lenders (including lenders that
executed an SBA Form 3507).
Therefore, the following change is
made to the Consolidated Forgiveness
and Loan Review IFR:
The last paragraph of Part V.1.c. of the
Consolidated Forgiveness and Loan
Review IFR (86 FR 8283, 8295) is
revised to read as follows:
1. SBA Reviews of Individual PPP
Loans
* * *
c. When will SBA undertake a loan
review?
* * *
All PPP lenders must preserve for at
least 10 years following final disposition
of each individual PPP loan:
i. All applications for financing
(including applications for withdrawn,
approved, declined and cancelled
loans);
ii. Lending, participation, and escrow
agreements;
iii. Financing instruments; and
iv. All other documents and
supporting material relating to such
loans, including correspondence.
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68093
V. 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 PPP
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 and 13563, the
Congressional Review Act, the
Administrative Procedure Act, the
Paperwork Reduction Act (44 U.S.C.
Ch. 35), and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
Executive Orders 12866 and 13563
OMB’s Office of Information and
Regulatory Affairs (OIRA) has
determined that this interim final rule is
significant for the purposes of Executive
Orders 12866 and 13563. 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 preserve the PPP
lender records for law enforcement
purposes.
This rule is necessary to prevent the
loss of PPP loan records during the
expanded statute of limitations period
under the Harmonization Act. SBA
anticipates that this rule will result in
substantial benefits to law enforcement.
As discussed above, as of December 31,
2023, DOJ has prosecuted thousands of
cases of pandemic-related criminal
fraud involving over a billion dollars in
fraud loss. DOJ has a similar number of
investigations that are open and yet to
be charged. There have also been over
a billion dollars in seizures and
forfeitures issued in connection with
stolen CARES Act funds. Further, the
DOJ Civil Frauds Division has over 800
pending investigations for civil fraud
enforcement actions related to the PPP
Program, involving thousands of
individuals and entities and billions of
dollars in losses. DOJ believes that the
numbers of these civil fraud
investigations will continue to grow.
Extending the records retention
requirements for PPP loan records will
provide a substantial benefit to the
government and the public by
preserving records to allow law
enforcement to continue to investigate
and prosecute these criminal and civil
fraud cases and recover taxpayer funds
that were wrongfully obtained by these
individuals and entities.
In this rule, SBA is not imposing new
records retention requirements on the
PPP lenders. Instead, SBA is extending
existing records retention requirements
E:\FR\FM\23AUR1.SGM
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68094
Federal Register / Vol. 89, No. 164 / Friday, August 23, 2024 / Rules and Regulations
for an additional period of time to allow
continued investigation and prosecution
of criminal and civil fraud cases. For
this reason, SBA expects the costs
incurred by PPP lenders due to the
expanded records retention
requirements to be de minimis.
Congressional Review Act and
Administrative Procedure Act
The Congressional Review Act, 5
U.S.C. 801 et seq., as amended by the
Small Business Regulatory Enforcement
Fairness Act of 1996, generally provides
a major rule cannot take effect until 60
days after it is published in the Federal
Register. This rulemaking has been
reviewed and determined by OMB not
to be a ‘‘major rule’’ under 5 U.S.C.
804(2).
As explained above, SBA has found
good cause to bypass the Administrative
Procedure Act’s notice-and-comment
and 30-day effective date delay
requirements. 5 U.S.C. 553(b)(B), (d)(3).
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.
khammond on DSKJM1Z7X2PROD with RULES
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 require revisions to existing
recordkeeping or reporting requirements
of the PPP Program information
collection, OMB Control Number 3245–
0407. The revisions will have a de
minimis effect on the costs associated
with PPP lender recordkeeping. SBA
has requested Office of Management and
Budget (OMB) emergency approval of
the revisions to the PPP lender
recordkeeping requirements to prevent
the loss of PPP loan records.
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
Administrative Procedure Act or
VerDate Sep<11>2014
16:00 Aug 22, 2024
Jkt 262001
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.
Rules that are exempt from notice and
comment are also exempt from the RFA
requirements, including conducting a
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. Since this rule
is exempt from notice and comment,
SBA is not required to conduct a
regulatory flexibility analysis.
Authority: 15 U.S.C. 636(a)(36); 15 U.S.C.
636(a)(37); and 15 U.S.C. 636m; Coronavirus
Aid, Relief, and Economic Security Act, Pub.
L. 116–136, section 1114, and Economic Aid
to Hard-Hit Small Businesses, Nonprofits,
and Venues Act, Pub. L. 116–260, section
303; PPP and Bank Fraud Enforcement
Harmonization Act of 2022, Pub. L. 117–166.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024–18083 Filed 8–22–24; 8:45 am]
BILLING CODE 8026–09–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Parts 25, 91, 121, and 125
[Docket No. FAA–2024–2052; Amdt. Nos.
25–153, 91–377, 121–393, 125–76]
RIN 2120–AM00
Modernization of Passenger
Information Requirements Relating to
‘‘No Smoking’’ Sign Illumination
Federal Aviation
Administration (FAA), Department Of
Transportation (DOT).
ACTION: Direct final rule; request for
comments.
AGENCY:
The Federal Aviation
Administration (FAA) is amending its
regulations to allow aircraft to operate
either with ‘‘No Smoking’’ signs
continuously illuminated or with ‘‘No
Smoking’’ signs a crewmember can turn
on and off. Currently, crewmembers
must be able to manually turn aircraft
‘‘No Smoking’’ signs on and off.
However, the current regulations were
drafted when the Department of
Transportation (DOT) permitted
smoking at times on commercial flights.
These amendments bring FAA
regulations into alignment with current
SUMMARY:
PO 00000
Frm 00014
Fmt 4700
Sfmt 4700
practice for aircraft manufacturing and
operations.
DATES: This direct final rule is effective
October 22, 2024.
Submit comments on or before
September 23, 2024. If the FAA receives
an adverse comment, the FAA will
advise the public by publishing a
document in the Federal Register before
the effective date of this direct final
rule. That document may withdraw the
direct final rule in whole or in part.
ADDRESSES: Send comments identified
by docket number FAA–2024–2052
using any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov/ and follow
the online instructions for sending your
comments electronically.
• Mail: Send comments to Docket
Operations, M–30; U.S. Department of
Transportation (DOT), 1200 New Jersey
Avenue SE, Room W12–140, West
Building Ground Floor, Washington, DC
20590–0001.
• Hand Delivery or Courier: Take
comments to Docket Operations in
Room W12–140 of the West Building
Ground Floor at 1200 New Jersey
Avenue SE, Washington, DC, between 9
a.m. and 5 p.m., Monday through
Friday, except Federal holidays.
• Fax: Fax comments to Docket
Operations at (202) 493–2251.
Docket: Background documents or
comments received may be read at
https://www.regulations.gov/ at any
time. Follow the online instructions for
accessing the docket or go to the Docket
Operations in Room W12–140 of the
West Building Ground Floor at 1200
New Jersey Avenue SE, Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT:
Catherine Burnett, Flight Standards
Implementation and Integration Group,
Air Transportation Division, Federal
Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone (202) 267–8166;
email Catherine.Burnett@faa.gov.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
Currently, crewmembers must be able
to manually turn aircraft ‘‘No Smoking’’
signs on and off. This requirement was
implemented prior to the prohibition on
smoking in passenger cabins during all
phases of flight. As a general matter,
there is no longer a need for the signs
to indicate two different states of
smoking permissibility because smoking
is not typically permitted at any time on
most transport category aircraft operated
commercially in the United States.
However, when smoking is permitted on
E:\FR\FM\23AUR1.SGM
23AUR1
]]>Agencies
[Federal Register Volume 89, Number 164 (Friday, August 23, 2024)]
[Rules and Regulations]
[Pages 68090-68094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18083]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
[Docket Number SBA-2024-0006]
RIN 3245-AI17
Business Loan Program Temporary Changes; Paycheck Protection
Program--Extension of Lender Records Retention Requirements
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: This interim final rule lengthens the required records
retention for lenders that made loans under the Paycheck Protection
Program (PPP) to ten years. PPP was established under the Coronavirus
Aid, Relief, and Economic Security Act as a temporary emergency
guaranteed loan program to provide economic relief to small businesses
nationwide adversely impacted by the Coronavirus Disease 2019 (COVID-
19), as amended. SBA has issued a number of final rules implementing
the PPP Program. This interim final rule harmonizes the PPP lender
records retention requirements with subsequent legislation extending
the statute of limitations for criminal charges and civil enforcement
actions for alleged PPP borrower fraud to ten years after the offense.
DATES:
Effective date: The provisions of this interim final rule are
effective August 22, 2024.
Applicability date: This interim final rule applies to all PPP
lender loan records. This includes PPP loan applications that were
withdrawn, approved, denied or cancelled, and all other PPP lender loan
records for PPP loans with an outstanding balance, PPP loans that have
been forgiven, and PPP loans that are in repayment or have been paid in
full by the borrower as of the effective date of this rule.\1\
---------------------------------------------------------------------------
\1\ To the extent that a federally regulated PPP lender
destroyed any PPP loan records before the effective date of this
rule in accordance with a general internal records retention policy
that was acceptable to the PPP lender's federal regulator, SBA will
not enforce compliance by that federally regulated PPP lender with
respect to the PPP loan records that were destroyed before the
effective date of this rule.
---------------------------------------------------------------------------
Comment date: Comments must be received on or before September 23,
2024.
ADDRESSES: You may submit comments, identified by docket number SBA-
2024-0006 through the Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments.
[[Page 68091]]
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].
All other comments must be submitted through the Federal eRulemaking
Portal described above. 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. If
you use a telecommunications device for the deaf (TDD) or a text
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339. Individuals with disabilities can obtain this document in
an accessible format that may be provided in Rich Text Format (RTF) or
text format (txt), a thumb drive, an mp3 file, Braille, large print,
audiotape, or compact disc, or other accessible formats.
SUPPLEMENTARY INFORMATION:
I. Background Information
On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) (Pub. L. 116-136) was enacted to provide
emergency assistance and health care response for individuals,
families, and businesses affected by the Coronavirus Disease 2019
(COVID-19) pandemic. Section 1102 of the CARES Act temporarily
permitted the Small Business Administration (SBA) to guarantee 100
percent of 7(a) loans made by participating lenders under a new program
titled the ``Paycheck Protection Program'' (PPP), pursuant to section
7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)) (First Draw
PPP Loans). Section 1102(F)(ii)(I) of the CARES Act stated that all PPP
lenders were deemed to have been delegated authority by the SBA
Administrator to make and approve PPP loans (15 U.S.C.
636(a)(36)(F)(ii)(I)). Section 1106 of the CARES Act provided for
forgiveness of up to the full principal amount of qualifying loans
guaranteed under the PPP. On April 24, 2020, the Paycheck Protection
Program and Health Care Enhancement Act (Pub. L. 116-139) was enacted,
which provided additional funding and authority for the PPP Program.
On June 5, the Paycheck Protection Program Flexibility Act of 2020
(PPP Flexibility Act) (Pub. L. 116-142) was enacted, which changed
provisions of the PPP relating to the maturity of PPP loans, the
deferral of PPP loan payments, and the forgiveness of PPP loans. On
July 4, 2020, Public Law 116-147 extended SBA's authority to guarantee
PPP loans to August 8, 2020.
On December 27, 2020, the Economic Aid to Hard-Hit Small
Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. L. 116-
260) was enacted. The Economic Aid Act reauthorized lending under the
PPP through March 31, 2021. The Economic Aid Act added a new temporary
section 7(a)(37) to the Small Business Act, which authorized SBA to
guarantee additional PPP loans (Second Draw PPP Loans) to certain
eligible borrowers that previously received a First Draw PPP Loan under
generally the same terms and conditions available under section
7(a)(36) of the Small Business Act. The Economic Aid Act also
redesignated section 1106 of the CARES Act as section 7A of the Small
Business Act, to appear after section 7 of the Small Business Act.
On March 11, 2021, the American Rescue Plan Act (ARPA) (Pub. L.
117-2) was enacted, and among other things, expanded eligibility for
First Draw PPP Loans and Second Draw PPP Loans. On March 30, 2021, the
PPP Extension Act of 2021 (Pub. L. 117-6) was enacted, extending SBA's
PPP program authority through June 30, 2021.
From April 3, 2020, through August 8, 2020, when the 2020 round of
PPP expired, SBA guaranteed over 5.2 million PPP loans made by over
5,000 PPP lenders under delegated authority. Of the approximately 5,000
lenders that participated in the PPP Program, approximately 4,900 were
federally regulated lenders and several hundred were SBA Supervised
Lenders (as defined in 13 CFR 120.10). From January 11, 2021, when the
PPP reopened, through June 30, 2021, when the PPP program authority
expired, SBA guaranteed over 6.6 million additional PPP loans made by
PPP lenders under delegated authority. Thus, the total number of PPP
loans guaranteed by SBA exceeds 11.8 million.\2\ The total dollar
amount of the PPP loans guaranteed by SBA exceeds $806 billion.
---------------------------------------------------------------------------
\2\ In addition to the approximately 11.8 million loans
guaranteed by SBA, there were also loans where the borrower's
application was withdrawn by the borrower, declined by the PPP
lender, or the PPP lender cancelled the loan guaranty.
---------------------------------------------------------------------------
Because the approximately 5,000 PPP lenders processed PPP loans
under the delegated authority provided by the CARES Act, the PPP
lenders were responsible for obtaining loan applications and supporting
documentation and preparing the loan note and other closing
documentation. The PPP lenders were not required to provide SBA with
copies of the loan origination and closing documentation, but instead
when the PPP lenders applied to SBA for the issuance of a PPP loan
number, the PPP lenders were required to certify that they would retain
those documents in their files. See, SBA Form 2484 (Lender's
Application--Paycheck Protection Program Loan Guaranty) and SBA Form
2484-SD (Lender's Application--Second Draw Loan Guaranty). The forms
did not specify the length of time required to retain documents in
their files.
SBA posted the first interim final rule implementing the PPP on
SBA's website on April 2, 2020, and published the rule in the Federal
Register on April 15, 2020 (85 FR 20811). SBA subsequently issued
numerous additional interim final rules. In particular, on February 5,
2021, SBA published an interim final rule implementing Economic Aid Act
changes related to the forgiveness and review of PPP loans (86 FR 8283)
(Consolidated Forgiveness and Loan Review IFR).
On August 5, 2022, President Biden signed the PPP and Bank Fraud
Enforcement Harmonization Act of 2022 (Harmonization Act) (Pub. L. 117-
166). The Harmonization Act amends section 7(a) of the Small Business
Act to provide, for both First Draw PPP Loans and Second Draw PPP
Loans, that notwithstanding any other provision of law, any criminal
charge or civil enforcement action alleging that a borrower engaged in
fraud with respect to a PPP loan guaranteed by SBA shall be filed not
later than 10 years after the offense was committed. The Harmonization
Act was necessitated by the unprecedented volume of PPP loans, law
enforcement estimates of the amount of fraud associated with these
loans, and the tremendous strain on law enforcement resources in
dealing not only with PPP Program fraud, but fraud in the other COVID-
19 pandemic assistance programs administered by SBA and other Federal
agencies.\3\
---------------------------------------------------------------------------
\3\ On August 5, 2022, President Biden also signed the COVID-19
EIDL Fraud Statute of Limitations Act of 2022 extending the statute
of limitations for criminal or civil enforcement actions alleging
that a borrower engaged in fraud in SBA's COVID EIDL disaster loan
program, EIDL Advance program and Targeted EIDL Advance program to
not later than ten years after the offense was committed.
---------------------------------------------------------------------------
SBA, with support from the Department of Justice (DOJ) and SBA's
Office of Inspector General (OIG), which
[[Page 68092]]
are charged with investigating and prosecuting PPP fraud, is seeking to
harmonize the records retention requirements applicable to PPP lenders
by extending those requirements so that they are consistent with
expanded statute of limitations in the Harmonization Act.
As of December 31, 2023, U.S. Attorneys' Offices had criminally
charged approximately 3,500 defendants in 2,388 pandemic fraud related
cases, of which approximately 2,005 defendants had pleaded guilty or
been convicted at trial.\4\ The fraud loss associated with these
completed cases is more than $1.2 billion. While not all of the cases
were related to the PPP Program, a substantial number were, and the
U.S. Attorneys' Offices have a similar number of investigations open
that are yet to be charged. Further, more than $1.4 billion in seizures
and forfeiture orders have been issued to recover stolen CARES Act
funds.
---------------------------------------------------------------------------
\4\ See, COVID-19 Fraud Enforcement Task Force 2024 Report
(April 2024), https://www.justice.gov/coronavirus/media/1347161/dl?inline.
---------------------------------------------------------------------------
To date, the DOJ Civil Frauds Division has opened more than 800 new
investigations relating to potential civil fraud enforcement in
connection with the PPP Program. These include investigations
implicating more than 5,000 individuals and entities and billions of
dollars in pandemic relief funds. To date, DOJ has obtained more than
450 civil settlements and judgments relating to the PPP Program,
totaling more than $200 million. The number of civil fraud
investigations relating to PPP borrowers has grown in volume every year
since 2020, and DOJ believes that trend is likely to continue.
Extending the PPP lender records retention requirements will ensure
that PPP loan records remain available to law enforcement while they
continue to investigate and prosecute PPP fraud during the expanded
ten-year statute of limitations period authorized by the Harmonization
Act.
II. Current SBA Records Retention Requirements for PPP Lenders
The Consolidated Forgiveness and Loan Review IFR sets forth the
current SBA records retention requirements for PPP lenders as follows:
Lenders must comply with applicable SBA requirements for records
retention, which for federally regulated lenders means compliance with
the requirements of their federal financial institution regulator and
for SBA supervised lenders (as defined in 13 CFR 120.10 and including
PPP lenders with authority under SBA Form 3507) means compliance with
13 CFR 120.461. (86 FR 8283, 8295). These records retention
requirements apply to all PPP loan records, including First Draw PPP
Loans and Second Draw PPP Loans.
The records retention requirements in 13 CFR 120.461 for SBA
Supervised Lenders provide as follows:
Other preservation of records. An SBA Supervised Lender
must preserve for at least 6 years following final disposition of each
individual SBA loan:
All applications for financing;
Lending, participation, and escrow agreements;
Financing instruments; and
[cir] All other documents and supporting material relating to such
loans, including correspondence.
Id.
As noted previously, several hundred SBA Supervised Lenders
participated in the PPP Program. An SBA Supervised Lender is defined in
13 CFR 120.10 as a 7(a) Lender that is either a Small Business Lending
Company or a NFRL. A 7(a) Lender is defined in 13 CFR 120.10 as an
institution that has executed a participation agreement with SBA under
the guaranteed loan program.\5\ A Small Business Lending Company (SBLC)
is defined in 13 CFR 120.10 as a non-depository lending institution
that is SBA-licensed and is authorized by SBA to make loans pursuant to
section 7(a) of the Small Business Act and loans to Intermediaries in
SBA's Microloan program. An NFRL or Non-Federally Regulated Lender is
defined in 13 CFR 120.10 as a business concern that is authorized by
the SBA to make loans under section 7(a) and is subject to regulation
by a state but whose lending activities are not regulated by a federal
financial institution regulator. Many of the several hundred SBA
Supervised Lenders that participated in the PPP Program did so under
their existing SBA Form 750 (Loan Guaranty Agreement (Deferred
Participation)) or SBA Form 750CA (Community Advantage Pilot Program
Loan Guaranty Agreement (Deferred Participation)). Other SBA Supervised
Lenders participated in PPP by signing an SBA Form 3507 (CARES Act
Section 1102 Lender Agreement--Non-Bank and Non-Insured Depository
Institution Lenders).\6\
---------------------------------------------------------------------------
\5\ Because PPP is authorized under section 7(a) of the Small
Business Act, all lenders participating in the PPP Program are 7(a)
Lenders.
\6\ SBA Form 3507 lenders included numerous fintechs.
---------------------------------------------------------------------------
The overwhelming majority of lenders that participated in the PPP
Program are not SBA Supervised Lenders. Instead, they are federally
regulated lenders. The approximately 4,900 federally regulated lenders
that participated in the PPP Program included those PPP lenders
regulated by the Federal Deposit Insurance Corporation, the Federal
Reserve, the Office of the Comptroller of the Currency, the National
Credit Union Administration, and the Farm Credit Administration. Many
of these federally regulated lenders participated in PPP under their
existing SBA Form 750 (Loan Guaranty Agreement (Deferred
Participation)). Other federally regulated lenders participated in PPP
by signing an SBA Form 3506 (CARES Act Section 1102 Lender Agreement).
Under the Consolidated Forgiveness and Loan Review IFR, federally
regulated lenders that participated in the PPP Program are currently
required to retain their PPP loan records in accordance with the
records retention requirements imposed by their federal financial
institution regulator. SBA has determined that there do not appear to
be any consistent or specific time requirements imposed by federal
financial institution regulators that are applicable to PPP records
retention as a whole. Instead, federally regulated PPP lenders may
implement and follow general internal records retention policies that
are acceptable to their regulators. It is likely that many of these
general internal records retention policies allow for periodic
destruction of certain records after a loan is paid in full, which for
PPP would include payment in full through forgiveness or otherwise.\7\
SBA has been making forgiveness payments to lenders on PPP loans since
late 2020, so there is considerable time sensitivity associated with
the need to extend the current PPP records retention requirements for
federally regulated lenders.
---------------------------------------------------------------------------
\7\ See, e.g., 12 CFR part 749, Appendix A.
---------------------------------------------------------------------------
This interim final rule extends the records retention requirements
for all PPP lenders to ten years from the date of final disposition of
each individual PPP loan.
III. Interim Final Rule With Immediate Effective Date
This interim final rule is being issued without advance notice and
public comment because section 1114 of the CARES Act and section 303 of
the Economic Aid Act authorize SBA to issue regulations to implement
the PPP Program without regard to notice requirements. Congress
designed the PPP as a temporary emergency program, and the issuance of
this interim final rule under the statutory rulemaking
[[Page 68093]]
authority in the CARES Act and the Economic Aid Act is consistent with
Congressional intent.
SBA finds good cause for forgoing the advance notice-and-public-
comment procedure because that procedure would be impracticable. The
earliest PPP loan was made in April 2020 and SBA began forgiving PPP
loans in late 2020, so it is urgent that the PPP lender records
retention requirements be extended to prevent the lapse of records
retention requirements for and potential destruction of PPP records by
federally regulated lenders that could result in the loss of records
that need to be preserved for law enforcement purposes. As noted
previously, the overwhelming majority of PPP lenders are federally
regulated lenders. Under the Consolidated Forgiveness and Loan Review
IFR, those approximately 4,900 lenders are currently required to follow
the records retention requirements of their federal financial
institution regulators. SBA has determined that there do not appear to
be any consistent or specific time requirements imposed by federal
financial institution regulators that are applicable to PPP records
retention as a whole. Instead, federally regulated PPP lenders may
implement and follow general internal records retention policies that
are acceptable to their regulators. It is likely that many of these
general internal records retention policies allow for periodic
destruction of certain records after a loan is paid in full, which for
PPP would include payment in full through forgiveness or otherwise.
Since SBA began making forgiveness payments to PPP lenders starting in
late 2020, it is urgent that the current PPP records retention
requirements be extended to prevent the destruction of PPP loan
records.
Additionally, advising PPP lenders of the extended records
retention requirement expeditiously will allow those lenders to adjust
their systems and processes as soon as possible in order to comply with
the newly extended records retention period. If SBA were to follow the
advance notice-and-public-comment process, that would delay issuance of
the rule by at least three months, during which time records that need
to be preserved for law enforcement purposes are at risk of loss.
For related reasons, SBA has determined that there is good cause to
make this rule effective immediately. 5 U.S.C. 553(d)(3). An immediate
effective date will prevent potential loss of records that need to be
preserved for law enforcement purposes. Given the urgent need to
preserve PPP loan records for law enforcement purposes, SBA has
determined that it is impractical and not in the public interest to
provide a delayed effective date. An immediate effective date will
allow PPP lenders to adjust their systems and processes to prevent the
loss of PPP loan records that need to be preserved for law enforcement
purposes. In this rule, SBA is not imposing a new requirement on PPP
lenders, rather SBA is extending an existing requirement of records
retention. The systems and process that will need to be adjusted are
those that prevent the periodic destruction of records, and SBA
believes that PPP lenders do not need a delayed effective date to make
these adjustments.
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. These comments must be submitted on or before
September 23, 2024. SBA will consider these comments and the need for
making any revisions as a result of these comments.
IV. Revisions to Prior PPP Rule
To harmonize the PPP lender records retention requirements with the
ten-year PPP fraud statute of limitations in the Harmonization Act, SBA
is extending the records retention requirements for all PPP lenders to
ten years from the date of final disposition of each individual PPP
loan. The extended records retention requirements apply equally to
federally regulated lenders (including lenders that executed an SBA
Form 3506) and SBA Supervised Lenders (including lenders that executed
an SBA Form 3507).
Therefore, the following change is made to the Consolidated
Forgiveness and Loan Review IFR:
The last paragraph of Part V.1.c. of the Consolidated Forgiveness
and Loan Review IFR (86 FR 8283, 8295) is revised to read as follows:
1. SBA Reviews of Individual PPP Loans
* * *
c. When will SBA undertake a loan review?
* * *
All PPP lenders must preserve for at least 10 years following final
disposition of each individual PPP loan:
i. All applications for financing (including applications for
withdrawn, approved, declined and cancelled loans);
ii. Lending, participation, and escrow agreements;
iii. Financing instruments; and
iv. All other documents and supporting material relating to such
loans, including correspondence.
V. 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
PPP 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 and 13563, the
Congressional Review Act, the Administrative Procedure Act, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Orders 12866 and 13563
OMB's Office of Information and Regulatory Affairs (OIRA) has
determined that this interim final rule is significant for the purposes
of Executive Orders 12866 and 13563. 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 preserve the PPP lender
records for law enforcement purposes.
This rule is necessary to prevent the loss of PPP loan records
during the expanded statute of limitations period under the
Harmonization Act. SBA anticipates that this rule will result in
substantial benefits to law enforcement. As discussed above, as of
December 31, 2023, DOJ has prosecuted thousands of cases of pandemic-
related criminal fraud involving over a billion dollars in fraud loss.
DOJ has a similar number of investigations that are open and yet to be
charged. There have also been over a billion dollars in seizures and
forfeitures issued in connection with stolen CARES Act funds. Further,
the DOJ Civil Frauds Division has over 800 pending investigations for
civil fraud enforcement actions related to the PPP Program, involving
thousands of individuals and entities and billions of dollars in
losses. DOJ believes that the numbers of these civil fraud
investigations will continue to grow.
Extending the records retention requirements for PPP loan records
will provide a substantial benefit to the government and the public by
preserving records to allow law enforcement to continue to investigate
and prosecute these criminal and civil fraud cases and recover taxpayer
funds that were wrongfully obtained by these individuals and entities.
In this rule, SBA is not imposing new records retention
requirements on the PPP lenders. Instead, SBA is extending existing
records retention requirements
[[Page 68094]]
for an additional period of time to allow continued investigation and
prosecution of criminal and civil fraud cases. For this reason, SBA
expects the costs incurred by PPP lenders due to the expanded records
retention requirements to be de minimis.
Congressional Review Act and Administrative Procedure Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides a major rule cannot take effect until 60 days after
it is published in the Federal Register. This rulemaking has been
reviewed and determined by OMB not to be a ``major rule'' under 5
U.S.C. 804(2).
As explained above, SBA has found good cause to bypass the
Administrative Procedure Act's notice-and-comment and 30-day effective
date delay requirements. 5 U.S.C. 553(b)(B), (d)(3).
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 require revisions to
existing recordkeeping or reporting requirements of the PPP Program
information collection, OMB Control Number 3245-0407. The revisions
will have a de minimis effect on the costs associated with PPP lender
recordkeeping. SBA has requested Office of Management and Budget (OMB)
emergency approval of the revisions to the PPP lender recordkeeping
requirements to prevent the loss of PPP loan records.
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 Administrative Procedure Act 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.
Rules that are exempt from notice and comment are also exempt from
the RFA requirements, including conducting a 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. Since this rule is
exempt from notice and comment, SBA is not required to conduct a
regulatory flexibility analysis.
Authority: 15 U.S.C. 636(a)(36); 15 U.S.C. 636(a)(37); and 15
U.S.C. 636m; Coronavirus Aid, Relief, and Economic Security Act,
Pub. L. 116-136, section 1114, and Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act, Pub. L. 116-260, section
303; PPP and Bank Fraud Enforcement Harmonization Act of 2022, Pub.
L. 117-166.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024-18083 Filed 8-22-24; 8:45 am]
BILLING CODE 8026-09-P
