April 27, 2020

OCC: Bulletin Clarifies Documentation of SBA Paycheck Protection Program Loans

The Office of the Comptroller of the Currency (OCC) is issuing this bulletin to clarify its statement in OCC Bulletin 2020-44, which is hereby rescinded. Loans made by banks1 under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) are an important part of the federal COVID-19 response program for small business and may qualify for credit under the Community Reinvestment Act (CRA). While not requiring banks to obtain or maintain information beyond what exists in the ordinary course of business, the OCC is encouraging banks providing loans under the SBA PPP to prudently document their implementation and lending decisions. Additionally, banks are encouraged to identify and track the PPP loans made to small business borrowers that have annual revenues of $1 million or less and are located in low- to moderate-income (LMI) areas.

Note for Community Banks

This bulletin applies to community banks engaged in SBA PPP loans.

Highlights

As part of the PPP, banks may accept applications from both existing small business customers and applicants who are not current loan customers. When working with all applicants, in addition to adherence to the SBA PPP program requirements, banks are encouraged to collect and track information provided during the application process regarding borrowers’ annual revenue, and for loans made in LMI census tracts, distressed areas, and underserved areas, and that benefit LMI individuals, families, and communities.2 Maintaining and monitoring this information, where available, in the administration of the SBA PPP is a prudent banking practice consistent with the principles of safety and soundness and fair access and fair treatment of borrowers,3 and other applicable legal requirements. Prudent practices may also include documenting implementation decisions—such as the bank’s business justifications and any alternatives considered—when setting eligibility criteria, establishing processes for considering applications, and approving or denying PPP applications. Relevant business considerations may include estimates of resources needed to implement and offer the SBA PPP, current available resources (including staff resources), and the ability to access needed information about an applicant in a timely way, among other factors.

In addition to thorough documentation of program administration and loan decisions, banks are encouraged to identify and track PPP loan volumes. Such documentation serves to enhance overall credit risk management while enabling the bank to demonstrate the full spectrum of businesses served, including small businesses and those in LMI areas. When exercising supervisory and enforcement responsibilities in this area, the OCC will take into account the unique circumstances resulting from the national emergency and good faith efforts to comply with applicable legal requirements.

Further Information

Please contact Lou Ann Francis, Director for Commercial Credit, at (202) 649-6670 or Vonda Eanes, Director for CRA and Fair Lending, at (202) 649-5470.

This post was originally published here.