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SBA defers all disaster and EIDL loans until 2022
On March 12, the Small Business Administration (SBA) extended the deferment period for all disaster loans, including the Covid-19 Economic Injury Disaster Loan (EIDL) program, until 2022. Specifically, the first payment due date for SBA disaster loans made in calendar year 2020 is extended from 12-months to 24-months from the date of the note. SBA disaster loans made in calendar year 2021 will have their first payment due date extended from 12-months to 18-months from the date of the note. SBA notes that existing SBA disaster loans approved before 2020 that were in regular servicing status of March 1, 2020 (and that previously had received an extended initial deferment period through March 31), will automatically be granted an additional 12-month deferment of principal and interest payments. SBA stresses, however, that interest will continue to accrue on outstanding loan balances through the duration of the deferment.
Biden extends Covid-19 regulatory relief
On March 11, President Biden signed the American Rescue Plan Act of 2021 (the Act), which will, among other things, extend certain emergency authorities and temporary regulatory relief contained in the CARES Act to address the continued impact of the Covid-19 pandemic. Under a section titled, “Committee on Small Business and Entrepreneurship,” the Act will provide an additional $7.25 billion for the Paycheck Protection Program (PPP), extend the eligibility of certain nonprofit entities for covered loans under the PPP, and amend certain aspects of the program allowing for certain businesses to take second loans. However, the Act does not actually extend the PPP, which is currently set to expire on March 31 (covered by InfoBytes here). The Act also allocates nearly $10 billion through the Homeowner Assistance Fund to allow eligible entities to provide direct assistance for mortgage payments, property insurance, utilities, and other housing-related costs to help prevent delinquencies, defaults, and foreclosures. Moreover, a provision related to fair housing activities provides $20 million “to ensure fair housing organizations have additional resources to address fair housing inquiries, complaints, investigations, and education and outreach activities, and costs of delivering or adapting services, during or relating to the coronavirus pandemic.” Additionally, the Act provides $15 billion for Economic Injury Disaster Loan (EIDL) advance payments, including $5 billion for supplemental targeted EIDL advance payments for the hardest hit.
In addition to providing Covid-19 relief, the Act also includes, among other things, a section that modifies the treatment of student loan forgiveness. Specifically, Section 9675 will exclude from gross income any amount of student loan debt that is modified or discharged (in whole or in part) after December 31, 2020, and before January 1, 2026. The tax exemption will include federal, private, and institutional loans. According to a press release issued by Senators Bob Menendez (D-NJ) and Elizabeth Warren (D-MA), the provision is intended to “ensur[e] borrowers whose debt is fully or partially forgiven are not saddled with thousands of dollars in surprise taxes.”
Non-signatory may not arbitrate privacy claims
On March 9, the U.S. District Court for the Southern District of New York denied a global technology company’s motion to compel arbitration in a putative consumer privacy class action, ruling that the technology company is not party to a co-defendant telecommunications company’s terms and conditions, which require consumer disputes to be arbitrated. The proposed class alleged that the defendants “engaged in false, deceptive and materially misleading consumer-oriented conduct” in violation of state law “by ‘failing to disclose that its practice of recycling phone numbers linked to SIM cards, and selling those SIM cards to consumers without requiring prior users to manually disassociate their [] IDs from the phone numbers associated with the recycled SIM cards, did not protect the privacy of users’ data and confidential personal information.’” The defendants moved to compel arbitration based on arbitration provisions contained in the telecommunications company’s terms and conditions.
The court first reserved its decision on one of the plaintiff’s claims because there was an open question as to whether the plaintiff received a copy of the terms and conditions at the time the plaintiff purchased the SIM card. With respect to the other plaintiff’s sole claims against the technology company, the court ruled that the technology company cannot enforce an agreement to which it is not a party. “This general rule stems from the principle that arbitration is a matter of consent, since ‘no party may be forced to submit a dispute to arbitration that the party did not intend and agree to arbitrate,’” the court said. The court also ruled, among other things, that the plaintiff’s claims “do not allege any interdependent or concerted misconduct by” the defendants, and as such they are not so entangled that the plaintiff must arbitrate his claims against the non-signatory technology company.
Fed issues LIBOR transition examination guidance
On March 9, the Federal Reserve Board issued supervisory letter SR 21-7 as a follow-up to a November 2020 interagency statement issued by the Fed, FDIC, and OCC that encouraged supervised institutions to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable, but by December 31, 2021 at the latest. (Covered by InfoBytes here.) However, the Fed’s SR 21-7 letter notes that the “extension of certain LIBOR tenors until June 30, 2023, will allow some existing LIBOR exposures to mature naturally.” SR 21-7 provides supervisory guidance for examiners to consider when assessing an institution’s plan to transition away from LIBOR, including the following six key aspects of a firm’s transition efforts: “(1) transition planning; (2) financial exposure measurement and risk assessment; (3) operational preparedness and controls; (4) legal contract preparedness; (5) communication; and (6) oversight.” SR 21-7 also includes specific guidance for assessing LIBOR transition efforts at institutions with less than $100 billion in total consolidated assets (which the Fed assumes “generally have less material and less complex LIBOR exposures”), as well as institutions with $100 billion or more in total consolidated assets.
Find continuing InfoBytes coverage on LIBOR here.
CFPB rescinds abusiveness policy statement
On March 11, the CFPB announced it has rescinded its January 2020 policy statement, which addressed prohibitions on abusive acts or practices. As previously covered by InfoBytes, the Bureau issued the policy statement to provide a “common-sense framework” for how it planned to apply the “abusiveness” standard in supervision and enforcement matters as authorized under Dodd-Frank. Under the 2020 policy statement, the Bureau stated it would only cite or challenge conduct as abusive if the agency “concludes that the harms to consumers from the conduct outweigh its benefits to consumers.” The Bureau also stated it would generally avoid challenging conduct as abusive if it relies on all, or nearly all, of the same facts alleged to be unfair or deceptive, and that it would decline to seek civil money penalties and disgorgement for certain abusive acts or practices, absent unusual circumstances.
The Bureau now states that it is rescinding the 2020 policy statement after reaching the conclusion that the principles set forth do not actually provide clarity to regulated entities. Among other things, the Bureau notes that the 2020 policy statement is counterproductive, “afford[s] the Bureau considerable discretion in its application,” and adds uncertainty to market participants. Moreover, the Bureau claims that after reviewing and applying the 2020 policy statement, it has had “the opposite effect on preventing harm.” Going forward, the Bureau states it intends to “exercise the full scope of its supervisory and enforcement authority to identify and remediate abusive acts and practices” as established by Congress.
OFAC sanctions additional individuals and entities connected to designated Burmese military coup leader
On March 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14014 against two individuals along with six of their companies. The individuals are the adult children of a previously designated Commander-in-Chief of the Burmese military forces (covered by InfoBytes here)—an individual OFAC claims is “the leading actor in the overthrow of Burma’s democratically elected government.” Under E.O. 14014, foreign persons may be sanctioned who are the spouses or adult children of a person whose property and interests in property are blocked. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities, and “any entities that are owned, directly or indirectly, 50 percent or more by them,” subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific license.
SBA changes income calculations for self-employed PPP applicants
On March 12, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) frequently asked questions to reflect recent changes allowing self-employed, Schedule C filers to use gross income to calculate PPP loan amounts. As previously covered by InfoBytes, SBA issued an interim final rule earlier this month implementing the calculation change for loans approved after March 4, 2021. The new FAQ includes options for lenders assisting filers who already applied for a PPP loan but who now want to use gross income to calculate their loan amount. Although some filers may update their calculation, SBA’s guidance states that if a lender “has disbursed the loan and filed the related Form 1502 Report reporting disbursement of the loan, no changes can be made to the loan amount calculation.” Additionally, SBA issued updated guidance on maximum loan amount calculations for First Draw PPP loans, as well as revenue reduction and maximum loan amount calculations for Second Draw PPP loans.
HUD approves settlement resolving Fair Housing Act violation
On March 8, HUD released a Conciliation Agreement between an African-American consumer and a mortgage lender to resolve allegations that the consumer’s home was appraised at an amount lower than its actual worth due to her race. Under the Fair Housing Act, a homeowner’s race may not influence the valuation of a home, HUD stated. While the lender denied having engaged in any discriminatory behavior, it agreed to pay $50,000 to the consumer and will provide mandatory training to all of its home lending advisors and client care specialists nationwide on the reconsideration of value (ROV) process and fair lending issues related to appraisals. Training will include information on how to handle complaints of discrimination in the appraisal process and the process for consumers to submit ROV requests.
UK FCA announces LIBOR cessation dates
On March 5, the United Kingdom’s Financial Conduct Authority (FCA) announced the dates that all LIBOR settings will cease to be provided by any administrator and will no longer be representative. All sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month U.S. dollar settings will cease immediately after December 31, 2021, while all remaining U.S. dollar settings will cease immediately after June 30, 2023. Following these dates, representative LIBOR rates will be unavailable and publication of most LIBOR settings will immediately end. The FCA stated it does not expect that any LIBOR settings will become unrepresentative prior to the aforementioned dates, noting that the announcement is intended to “provide certainty on when the LIBOR panels will end. Publication of most of the LIBOR benchmarks will cease at the same time as the panels end. Market participants must now complete their transition plans.”
Find continuing InfoBytes coverage on LIBOR here.
FinCEN issues antiquities and art warning
On March 9, the Financial Crimes Enforcement Network (FinCEN) issued an advisory notice alerting financial institutions with existing Bank Secrecy Act (BSA) obligations about illicit activity associated with trade in antiquities and art. As previously covered by InfoBytes, the Anti-Money Laundering Act of 2020 (AML Act) was enacted in January as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, and made significant changes to BSA and AML laws, including amending the definition of “financial institution” under the BSA to include persons “engaged in the trade of antiquities.” Among other things, FinCEN’s advisory notice updates financial institutions on AML Act measures related to the regulation of antiquities, noting in particular that the Department of Treasury, in coordination with the FBI, the U.S. Attorney General, and Homeland Security, “will perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.” The notice further warns financial institutions that crimes related to the trade of antiquities “may involve their institution” and could include the “sale of stolen or counterfeit objects,” as well as money laundering and sanctions violations. The advisory notice also provides suspicious activity report filing instructions related to trade in antiquities and art.