On August 11, 2020, the U.S. Small Business Administration (“SBA”) posted a twenty-third Interim Final Rule on Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program. This Interim Final Rule supplements the interim final rule on Loan Review Procedures and Related Borrower and Lender Responsibilities posted on SBA’s website on May 22, 2020, as revised by the interim final rule posted on SBA’s website on June 22, 2020, in order to inform Paycheck Protection Program (“PPP”) borrowers and lenders of the process for a PPP borrower to appeal certain SBA loan review decisions under the PPP to the SBA Office of Hearings and Appeals (“OHA”), by establishing a new subpart L for 13 CFR part 134. 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.
Subpart L for 13 CFR part 134 provides a process to appeal certain SBA loan review decisions under the PPP to OHA, as well as any other PPP matter referred to OHA by the Administrator. Section 134.1201 defines the term “SBA loan review decision” as an official written decision by SBA, after SBA completes a review of a PPP loan, that finds a borrower:
- was ineligible for a PPP loan;
- was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses;
- is ineligible for PPP loan forgiveness in the amount determined by the lender in its full or partial approval decision issued to SBA (except for the deduction of any Economic Injury Disaster Loan advance in accordance with section 1110(e)(6) of the CARES Act); and/or
- is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to SBA.
Only final SBA loan review decisions (as defined in this rule) can be appealed to OHA; a PPP borrower cannot file an OHA appeal of any decision made by a lender concerning a PPP loan. A PPP borrower can request an SBA review of a lender decision to deny the borrower’s loan forgiveness application in full, in accordance with Part III.2.b. of the Loan Review IFR, as amended; but that request is for a review by SBA, not an OHA appeal. A borrower may exercise any other rights it has under applicable law against a PPP lender regarding a lender decision.
The Interim Final Rule summarizes all the rules of procedure related to appealing SBA loan review decisions, including requests for review by the SBA Administrator of OHA decisions, alternative dispute resolution procedures and judicial review. SBA’s loan forgiveness application portal opened on August 10, 2020, and lenders can now begin submitting borrower forgiveness applications for review. The issuance of this Interim Final Rule is very timely, considering borrowers and lenders had many questions about the process for appealing SBA loan review decisions, especially now that the application portal is open and SBA has (presumably) begun reviewing forgiveness applications.
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