US Treasury urged PPP lenders to focus on existing clients: Congressional report
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WASHINGTON (Reuters) – The U.S. Treasury Department has urged banks to prioritize existing customers when granting pandemic paycheck protection program loans, putting small businesses at a disadvantage against the intent of lawmakers, a said a congressional panel Friday.
“The Trump administration and many large banks have failed to prioritize small businesses in underserved markets, including minority and women-owned businesses,” wrote the select crisis subcommittee of coronaviruses in his report.
Congress passed legislation in March creating the program to help small businesses weather the economic crisis caused by COVID-19, leading banks to provide more than $ 520 billion in government-guaranteed repayable loans.
As part of the program, banks can waive normal underwriting standards, but must include anti-money laundering documents, which can take weeks to assemble. This documentation was already in place for existing customers, the banks said.
Typically, larger, wealthier corporations tend to have pre-existing banking relationships, according to federal data.
“From the start of the Paycheck Protection Program, the Treasury and (the Small Business Administration) have consistently urged PPP lenders to serve all eligible businesses,” a spokesperson for the Treasury said.
“We have encouraged all banks to offer loans to their existing small business clients, but no Treasury official has ever suggested that banks should do so to the exclusion of new clients.”
According to an American Bankers Association (ABA) email obtained by the committee, the Treasury encouraged banks on a call to prioritize existing customers.
“The Treasury would like the banks to go to their existing customer base because the lenders will have all the business information,” ABA chief executive Rob Nichols told the business group’s board of directors in th -mail of March 28, according to the report.
Banks have been urged to start processing loans as quickly as possible to support the deteriorating economy, Nichols said in an emailed statement Friday.
“To achieve this goal, many banks first processed applications from existing borrowers, as they already had the necessary borrower information to meet regulatory requirements,” he said. “Over time, as the Treasury and (Small Business Administration) provided more clarity, it became easier to gather information to deal with new customers.”
Reporting by Michelle Price; Editing by Richard Chang and Sonya Hepinstall
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