American Share Insurance Issues Public Comment on SBA Rule

WASHINGTON, May 13 -- Dennis R. Adams, president and CEO of American Share Insurance, Dublin, Ohio, has issued a public comment on the Small Business Administration's rule entitled "Business Loan Program Temporary Changes: Paycheck Protection Program". The comment was written and posted on May 11, 2020:

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On March 27, 2020 President Trump signed into law the C.A.R.E.S. Act (Pub. L. 115-136) which established the Paycheck Protection Program (PPP) providing for $349 billion in SBA-administered loans to small businesses in response to the hardships being experienced as a result of the COVID-19 pandemic. The C.A.R.E.S. Act gave the SBA and the Treasury Secretary the authority to determine the rules for PPP loans.

Unfortunately, in the rush to draft the C.A.R.E.S. Act, over 112 state-chartered, privately insured credit unions were inadvertently excluded from the list of financial institutions automatically determined to be approved lenders of this important stimulus for America, and were instead classified as "other lenders" subject to much higher standards under the subject Interim Rule, in turn, making it impossible - given regulatory commercial lending caps - for their otherwise qualified members to access the PPP.

Stimulus 3.5 Legislation Corrects the Oversight

Subsequently, on April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116-139) which Congress passed to provide an additional $310 billion in funding for the PPP, and to make other important changes such as recognizing that not all credit unions were federally insured and earmarking $30 billion in funds for smaller lenders, like the 112 state-chartered, privately insured credit unions and other specified community lenders. Unfortunately, there is no process in place to allow these privately insured state credit unions access to the $30 billion in funding as envisioned by this legislation.

We would request that SBA's final rule governing the PPP reflect the changes that were made in Public Law 116-139, which added a new class of lender called "credit union" which is defined at Section 101 (D) of the Pub. L. 116-139 as follows:

"(xii) the term 'credit union' means a State credit union or a Federal credit union, as those terms are defined, respectively, in section 101 of the Federal Credit Union Act (12 U.S.C. 1752)."

The Federal Credit Union Act (12 U.S.C. 1752 (6)) further defines a "state credit union" and a "state chartered credit union" as "...a credit union that is organized and operated according to the laws of any State," absent any reference to such duly state-chartered credit union's source of deposit insurance. Today, 10 state laws allow their state-chartered credit unions a choice of being federally insured or being privately insured by American Mutual Share Insurance Corporation (ASI), who has been providing such state-approved deposit insurance since 1974. The choice in insurance in no way affects the credit union's responsibility to operate under its State's governing statutes and regulations as established by its primary state regulator.

Request for Changes to Interim Rule SBA-2020-0015 and PPP Lender Forms

To be consistent with Pub. L. 116-139, we do hereby request that the SBA change its final rule to include any "credit union" - federally or privately insured - as an automatically designated approved lender under Section 3.a. of the Interim Rule, entitled: "WHO IS ELIGIBLE TO MAKE PPP LOANS," by amending Subsection 3.a.iii.I to state as follows:

"Any federally insured depository institution or any credit union, federally insured or privately insured."

Additionally, we would ask that you immediately revise the SBA's "CARES Act Section 1102 Lender Agreement (Form 3506)" to include privately insured credit unions. In the first attestation box on Page 1 of Form 3506 we request it read: "A federally or privately insured credit union, OR." Further, we would request that the second and third attestation boxes on Page 1 of Form 3506 be amended to include the phrase "primary state regulator" wherever the phrase ""primary federal regulator" is noted. Given that one-half of America's credit unions are state-chartered and 4% of all state-chartered credit unions are privately insured depository institutions, we argue that these smaller lenders deserve inclusion and the rule, and Form 3506, need amended to recognize these otherwise duly chartered and state regulated depository institutions. This would, again, be consistent with Pub. L. 116-139.

The Federal Credit Union Act very specifically provides that state-chartered credit unions are not required to be federally insured but can have other state-approved deposit insurance; and, further, that federally insured credit unions may by a vote of their membership, convert from federal to state-approved private deposit insurance under the Federal Credit Union Act. Today, there are 112 state-chartered credit unions serving 1.5 million U.S. citizens in 10 states across the nation that are permitted under federal and state law to insure their individual and business members' deposits with American Mutual Share Insurance Corporation - a licensed, regulated and state-approved share guaranty corporation. These credit unions want to implement the C.A.R.E.S. Act; aid their small business members in their time of need; and, help our country get back on sound economic footing.

Thank you for your consideration of this request. If you have additional questions, please contact me at [email protected].

Respectfully submitted,

DENNIS R. ADAMS

President/CEO

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The rule can be viewed at: https://www.regulations.gov/document?D=SBA-2020-0015-0001

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