Top US banks may shun small-business rescue plan on liability worries
Congress last week passed a $2 trillion stimulus package that includes $349 billion aimed at small firms
Top U.S. banks have threatened to give the federal government's small-business rescue program a miss on concerns about taking on too much financial and legal risk, five people with direct knowledge of industry discussions told Reuters.
Seeking to help millions of small businesses whose operations have either shut down or have been dramatically curtailed by the coronavirus pandemic, Congress last week passed a $2 trillion stimulus package that includes $349 billion aimed at small firms.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Borrowers can apply for the loans through participating banks starting from Friday and until June 30. Trump administration officials have said they want the loans disbursed within days.
But representatives of some big lenders, in an industry conference call on Wednesday, expressed serious reservations about participating in the scheme in its current form.
Their main concern is that the Treasury Department has said it expects lenders to verify borrower eligibility, and take steps to prevent fraud, money laundering and protect customer information under the Bank Secrecy Act, sources said. Banks are worried they could face regulatory penalties or legal costs down the line if things go awry in the haste to get money out the door, or get blamed for not moving funds fast enough if they perform due diligence the way they would in ordinary times, the sources said.
SMALL BUSINESS LOANS UNDER CORONAVIRUS STIMULUS BILL: WHAT APPLICANTS NEED TO KNOW
After hearing the concerns, Treasury officials are considering withdrawing guidance that instructed lenders to verify borrowers had the specified number of employees on their books, and that their other costs are legitimate, according to two sources.
Reuters could not learn which specific banks are thinking about boycotting the program. The Bank Policy Institute (BPI), which hosted the call on Wednesday, counts lenders including JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co and Citigroup Inc as members.
A spokesman for BPI declined to comment. The U.S. Treasury Department and the Small Business Administration, which are jointly administering the loans program, did not immediately respond to requests for comment.
CLICK HERE TO READ MORE ON FOX BUSINESS
Banks want a document customers can sign attesting to their eligibility and other requirements, thereby relieving the industry of responsibility for potential misconduct.
One source said banks are also seeking a written assurance from the government regarding their legal liabilities and obligations before they agree to participate in the program.
(Writing by Michelle Price; Editing by Lauren LaCapra and Muralikumar Anantharaman)