Hawaii Attorney General opposes rule aimed at helping small businesses

Coronavirus

HONOLULU (KHON2) — Hawaii Attorney General Clare Connors joined a coalition of 18 Attorney Generals on Tuesday, Sept. 29, to oppose a proposed rule by the Small Business Administration (SBA) that would allow businesses to apply for Paycheck Protection Program (PPP) loans.

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Created as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, the PPP establishes loans made to provide a direct incentive for small businesses to keep their workers on the payroll during the COVID-19 pandemic.

The proposal also gives the SBA authority to guarantee up to 100 percent of qualifying loans and to forgive up to the full principal amount.

But, the coalition argues that the proposed rule is not all its cut out to be. Connors says the appeals procedure is confusing and unfair, putting borrowers at a serious disadvantage and violating due process altogether.

“The PPP loans are a lifeline for Hawaii’s small businesses,” said Connors. “As such, they need to be fair, easy to understand and most importantly, conform to existing laws.”

The coalition sent in comments urging the SBA to afford borrowers a fair opportunity to maintain a PPP loan by amending the proposed rule with the following changes:

  • Include procedures for final PPP loan review decisions by the SBA. Although the rule provides some procedures for appeals of final PPP loan review decisions, the coalitions says the SBA fails to provide any guidance on how it evaluates PPP loan in its investigations. This means that while filing an appeal, the borrower may not know what facts or law the SBA considered in its loan review decision. Additionally, the lack of procedures leaves borrowers’ confidential information unprotected from disclosure.
  • Hold loan forgiveness applications in abeyance to ensure the deferral period continues during an administrative appeal. The coalition argues that the proposed rule raises due process concerns because it forces borrowers to make payments on a loan while their appeal of denial of forgiveness of that loan is still pending.
  • Ensure independent and neutral decision-makers conduct appeals of PPP loan decisions. Without independent and neutral decision-makers, the proposed rule denies borrowers due process and violates the Administrative Procedures Act. The coalition claims that the proposed rule authorizes the same individual who made the initial decision regarding the loan to review an appeal of their own decision.
  • Provide borrowers with fair procedures on appeal. The rule currently allows borrowers to file only one brief in their appeal, denying them the opportunity to file a reply brief to respond to the SBA’s arguments.

The coalition’s full commentary on the proposed rule can be found here.

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