Exhibit 15 — Marshall v. Prestamos CDFI, LLC (Dkt. 163-17, E.D. Pa. No. 5:21-cv-04337)

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U.S. District Court for the Eastern District of Pennsylvania · No. 5:21-cv-04337-JMG · Doc. 163-17 · 2025-05-21 · Docket on CourtListener

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EX. 15 -- THE REBUTTAL REPORT OF 
MANGER DATED AUG. 9, 2024 
Pla Appx 3346
Case 5:21-cv-04337-JMG     Document 163-17     Filed 05/21/25     Page 1 of 5

Rebuttal Response to the Report by Kenneth Swain
1. | have reviewed the report dated July 12, 2024, of Kenneth Swain in regard to the case of Alicia
Marshall et al. as Plaintiffs v. Prestamos as Defendant. While Mr. Swain has been a banker
familiar with Small Business Administration (SBA) lending from the lender side, Mr. Swain has
never worked at the SBA nor had authority to write Federal Regulations, Procedural Notices or
Agency Standard Operating Procedures as | have.
In total, |worked for almost eight years at the
SBA as myopening report dated July 12, 2024 summarizes (at paras. 1-3). Specifically, in my role
as Chief of Staff and Associate Administrator for Capital Access at the SBA from 2020 to 2021, |
was responsible with the US Treasury Department (Treasury) for promulgating the Interim Final
Rules (IFRs) that governed the Paycheck Protection Program (PPP). |worked closely with officials
at Treasury to promulgate and implement the IFRs and Frequently Asked Questions (FAQs) that
governed the PPP.
2. Mr. Swain spendsa great deal of time in his July 12, 2024 report trying to explain why PPP loans
were not disbursed. Itis correct that the Plaintiff Classes allege they failed to receive their
approved PPP loans, but the Plaintiffs’ Third Amended Complaint also alleges that Prestamos
reported to the SBA that the loans were disbursed. (Third Amended Complaint paras. 376-377).
According to the SBA Procedural Notice entitled “Updated Paycheck Protection Program Lender
Processing Fee Payment and 1502” that has an effective date of July 13, 2020, “A lender will not
receive a processing fee: Prior to full disbursement of the PPP loan....” Under 15 U.S.C.
636(a)(36)(P), “the fee is based on the balance of the PPP loan outstanding at the time of full
disbursement of the loan.” A mere attempt to fund a loan, or an attempt to do so that, for
instance, the borrower’s bank rejected, should have resulted in the loan being cancelled in
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Pla Appx 3347
Case 5:21-cv-04337-JMG     Document 163-17     Filed 05/21/25     Page 2 of 5

SBA’s electronic transmission (e-tran) system and no payment of the loan processing fee
being made by the SBA to the lender.
3. Mr. Swain surprisingly never mentions the important fact that Prestamos filed Form
1502s with the SBA that were used to inform the Agency when loans were allegedly fully
disbursed. Assuming as Plaintiffs also allege in this case, they submitted to Prestamos all
loan documentation (Third Amended Complaint paras. 376-377), full disbursement was
mandated by the SBA within ten days of receiving an SBA loan number.
“The lender must
make a one-time, full disbursement of the PPP loan within ten calendar days of loan
approval; forthe purposes of this rule, a loan is considered approved when the loan is
assigned a loan number bySBA.” (85 Fed. Reg. 26321 (May 4, 2020)). The rule goes on to
state that a lender must report disbursement of a PPP loan byfiling an SBA Form 1502
which triggers the payment bySBA of the processing fee to the lender. The pertinent
section reads, “In addition to providing the ACH credit information to direct payment of the
requested processing fee, lenders will be required to confirm that all PPP loans for which
the lender is requesting a processing fee have been fully disbursed on the disbursement
dates and in the loan amount reported. A lender must report through either Etran Servicing
orthe SBA Form 1502 report any PPP loans that have been cancelled before disbursement
orthat have been cancelled or voluntarily terminated and repaid after disbursement.” The
section concludes by stating the intention of the Administrator of the SBA and the
Secretary of theTreasury, “The Administrator, in consultation with the Secretary,
determined that requiring lenders to report on disbursement within 20 calendar days of
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Pla Appx 3348
Case 5:21-cv-04337-JMG     Document 163-17     Filed 05/21/25     Page 3 of 5

loan approval ensures that the disbursement of funds to eligible borrowers will occur
rapidly.”
4. The Form 1502s also were important because they were the critical mechanism bywhich
lenders informed the SBA of full disbursement and triggered payment of the processing fee
to the lender.
In my opinion, it was improper for Prestamos to file Form 1502s if the PPP
loans were not fully disbursed. Prestamos should not have collected a fee. Any processing
fees that were received by Prestamos for PPP loans that were not disbursed should have
been returned. The previously mentioned SBA Procedural Notice with an effective date of
July 13, 2020, provides the answer to the binary question, “How do Lenders report to SBA
on loans that are fully disbursed orcancelled? Lenders must report any PPP loans that
have been fully disbursed or cancelled....” The choice is oneor the other. IfthePPP loan
was not fully disbursed as the rules required, the loan should have been cancelled and any
loan processing fee returned. This is consistent with another question posed and
answered in the above referenced Procedural Notice: “Are Lender processing fees subject
to clawback if a Lender has not fulfilled its obligations under PPP regulations? Yes.”
5. Finally, Prestamos also should not have utilized Treasury’s capital advance program,
PPPLF, to access capital that was based upon the value of disbursed loans if the PPP loans
had not been disbursed. This is clearly not in accordance with the rules of the PPPLF
program. Thus, as with PPP loan processing fees paid on unfunded loans, Prestamos the
lender also should have returned to the PPPLF all advances it received on any PPP loan it
failed to fund.
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Pla Appx 3349
Case 5:21-cv-04337-JMG     Document 163-17     Filed 05/21/25     Page 4 of 5

6. The issue of forgiveness, a unique aspect of PPP loans, was another issue raised by Mr.
Swain in his July 12, 2024, report. He discusses at length the necessary requirements
needed to obtain forgiveness from the SBA. Again, he maintains that there are a “variety of
reasons” whythe Putative Class Members’ PPP loans may not have been forgiven. (p. 6,
para.16).
In my view, the PPP loans could not have been forgiven if the loans were not
funded in the first place. This is because to qualify or even properly apply for forgiveness as
the PPP was widely designed to do, the applicant had to certify in the PPP loan forgiveness
application that he, she or it used the PPP loan proceeds for payroll, mortgage payments,
rent or other purposes permitted under the PPP. See https://www.sba.gov/funding-
programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-loan-
forgiveness#id-how-to-apply-for-forgiveness. The two Plaintiff Classes by definition allege
they never received their PPP loan funds.
Third Amended Complaint paras. 376-377.
Thus, assuming as alleged the Plaintiff Class members did not receive their funds - and
they would not qualify to be class members if they did receive their loans - they all share in
common their inability to obtain forgiveness based on the threshold certification
requirement to obtain forgiveness.
-Dated this 9" day of August 2024
By:
William M. Manger, Jr.
Pla Appx 3350
Case 5:21-cv-04337-JMG     Document 163-17     Filed 05/21/25     Page 5 of 5

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