May 11, 2020
Authored by: Benjamin Saul and Samantha Goldberg-Seder
The past few weeks have seen increasing scrutiny of the lenders and borrowers participating in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”), including by the Treasury Department, SBA Inspector General, U.S. Department of Justice, and Congress with the Special Inspector General for Pandemic Recovery surely soon to follow.
Against this backdrop, the Consumer Financial Protection Bureau (“CFPB”) has recently raised concerns related to fair lending for lenders participating in the PPP. On May 6, 2020, the CFPB issued guidance related to the timing for Equal Credit Opportunity Act (“ECOA”)-mandated adverse action notices under the PPP. On April 27, 2020, the CFPB published a statement in which the Bureau emphasized that lenders must comply with ECOA when extending small business credit, outlining key bases for discrimination claims under ECOA and encouraging women and minority-owned businesses who feel they have suffered lending discrimination to submit complaints to the CFPB through its complaint portal.
The CFPB’s recent focus on institutional fair lending compliance accords with that of federal banking regulators. For example, on April 27, 2020, the Office of the Comptroller of the Currency released “OCC Bulletin 2020-45,” which, among other things, encourages institutions to “prudently document their implementation and lending decisions” under the SBA’s PPP.
Given recent regulatory focus on fair lending compliance in connection with PPP lending, banks and other lenders should consider the following proactive risk mitigation steps.