Business Loan Program Temporary Changes; Paycheck Protection Program-SBA Loan Review Procedures and Related Borrower and Lender Responsibilities

Summary

A Small Business Administration interim final rule, "Paycheck Protection Program-SBA Loan Review Procedures and Related Borrower and Lender Responsibilities", published in the Federal Register, Vol. 85, No. 105, on Monday, June 1, 2020, under 13 CFR Part 120, RIN 3245–AH47, docket number SBA–2020–0033. It supplements the interim final rule on loan forgiveness posted contemporaneously with it, setting out SBA's procedures for reviewing PPP loan applications and loan forgiveness applications and the related responsibilities of borrowers and lenders. It refers to earlier PPP interim final rules, including those at 85 FR 23450, 85 FR 23917 and 85 FR 26321.

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33010 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations

Executive Order 13132 economic impact on a substantial of up to the full principal amount of
SBA has determined that this rule number of small entities.’’ 5 U.S.C. qualifying loans guaranteed under the
will not have substantial direct effects 605(b). The agency must, however, Paycheck Protection Program (PPP). The
on the States, on the relationship publish the certification in the Federal PPP is intended to provide economic
between the National Government and Register at the time of publication of the relief to small businesses nationwide
rule, ‘‘along with a statement providing adversely impacted by the Coronavirus
the States, or on the distribution of
the factual basis for such certification.’’ Disease 2019 (COVID–19). SBA posted
power and responsibilities among the
If the agency head has not waived the additional interim final rules on April 3,
various layers of government. Therefore,
requirements for a regulatory flexibility 2020, April 14, 2020, April 24, 2020,
SBA has determined that this rule has
analysis in accordance with the RFA’s April 28, 2020, April 30, 2020, May 5,
no federalism implications warranting
waiver provision, and no other RFA 2020, May 8, 2020, May 13, 2020, May
preparation of a federalism assessment.
exception applies, the agency must 14, 2020, May 18, 2020, and May 20,
Paperwork Reduction Act, 44 U.S.C. prepare the regulatory flexibility 2020, and the Department of the
Chapter 35 analysis and publish it in the Federal Treasury (Treasury) posted an
SBA has determined that this rule Register at the time of promulgation or, additional interim final rule on April
if the rule is promulgated in response to 27, 2020. SBA and Treasury posted an
will impose a new reporting
an emergency that makes timely interim final rule on Loan Forgiveness
requirement on borrowers who request
compliance impracticable, within 180 contemporaneously with this interim
forgiveness of their PPP loan. SBA has
days of publication of the final rule. 5 final rule on May 22, 2020. This interim
developed Form 3508, Paycheck
U.S.C. 604(a), 608(b). Rules that are final rule supplements the previously
Protection Program—Loan Forgiveness
exempt from notice and comment are posted interim final rules in order to
Application, for use in collecting the
also exempt from the RFA requirements, inform borrowers and lenders of SBA’s
information required to determine
including conducting a regulatory process for reviewing PPP loan
whether a borrower is eligible for loan
flexibility analysis, when among other applications and loan forgiveness
forgiveness. SBA obtained approval of
things the agency for good cause finds applications, and requests public
Form 3508 from the Office of
that notice and public procedure are comment.
Management and Budget (OMB) as a
impracticable, unnecessary, or contrary DATES:
modification to the existing PPP
to the public interest. SBA Office of Effective date: This rule is effective
collection of information (OMB Control
Advocacy guide: How to Comply with May 28, 2020.
Number (3245–0407). This collection of
the Regulatory Flexibility Act, Ch.1. p.9. Applicability date: This interim final
information was approved under
Accordingly, SBA is not required to rule applies to loan applications and
emergency procedures to facilitate
conduct a regulatory flexibility analysis. loan forgiveness applications submitted
immediate implementation of the PPP
and expires on October 31, 2020. Jovita Carranza, under the Paycheck Protection Program.
Comment date: Comments must be
Administrator Small Business
Regulatory Flexibility Act (RFA) Administration.
received on or before July 1, 2020.
The Regulatory Flexibility Act (RFA) ADDRESSES: You may submit comments,
Michael Faulkender,
generally requires that when an agency identified by number SBA–2020–0033
Assistant Secretary for Economic Policy, through the Federal eRulemaking Portal:
issues a proposed rule, or a final rule Department of the Treasury.
pursuant to section 553(b) of the APA or http://www.regulations.gov. Follow the
[FR Doc. 2020–11536 Filed 5–28–20; 8:45 am]
another law, the agency must prepare a instructions for submitting comments.
BILLING CODE 8026–03–P SBA will post all comments on
regulatory flexibility analysis that meets
the requirements of the RFA and www.regulations.gov. If you wish to
publish such analysis in the Federal submit confidential business
SMALL BUSINESS ADMINISTRATION
Register. 5 U.S.C. 603, 604. Specifically, information (CBI) as defined in the User
the RFA normally requires agencies to 13 CFR Part 120 Notice at www.regulations.gov, please
describe the impact of a rulemaking on send an email to ppp-ifr@sba.gov.
[Docket Number SBA–2020–0033] Highlight the information that you
small entities by providing a regulatory
impact analysis. Such analysis must RIN 3245–AH47 consider to be CBI and explain why you
address the consideration of regulatory believe SBA should hold this
options that would lessen the economic Business Loan Program Temporary information as confidential. SBA will
effect of the rule on small entities. The Changes; Paycheck Protection review the information and make the
RFA defines a ‘‘small entity’’ as (1) a Program—SBA Loan Review final determination whether it will
proprietary firm meeting the size Procedures and Related Borrower and publish the information.
standards of the Small Business Lender Responsibilities FOR FURTHER INFORMATION CONTACT: A
Administration (SBA); (2) a nonprofit AGENCY: U.S. Small Business Call Center Representative at 833–572–
organization that is not dominant in its Administration. 0502, or the local SBA Field Office; the
field; or (3) a small government list of offices can be found at https://
ACTION: Interim final rule.
jurisdiction with a population of less www.sba.gov/tools/local-assistance/
than 50,000. 5 U.S.C. 601(3)–(6). Except SUMMARY: On April 2, 2020, the U.S. districtoffices.
for such small government jurisdictions, Small Business Administration (SBA) SUPPLEMENTARY INFORMATION:
neither State nor local governments are posted an interim final rule announcing
‘‘small entities.’’ Similarly, for purposes the implementation of the Coronavirus I. Background Information

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of the RFA, individual persons are not Aid, Relief, and Economic Security Act On March 13, 2020, President Trump
small entities. The requirement to (CARES Act). The CARES Act declared the ongoing Coronavirus
conduct a regulatory impact analysis temporarily adds a new program, titled Disease 2019 (COVID–19) pandemic of
does not apply if the head of the agency the ‘‘Paycheck Protection Program,’’ to sufficient severity and magnitude to
‘‘certifies that the rule will not, if the SBA’s 7(a) Loan Program. The warrant an emergency declaration for all
promulgated, have a significant CARES Act also provides for forgiveness States, territories, and the District of

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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33011

Columbia. With the COVID–19 applications. This interim final rule applications and loan forgiveness
emergency, many small businesses supplements the interim final rule on applications. By providing a high degree
nationwide are experiencing economic Loan Forgiveness posted of certainty to PPP borrowers through
hardship as a direct result of the contemporaneously with this interim this interim final rule, PPP borrowers
Federal, State, tribal, and local public final rule. will be able to take immediate steps to
health measures that are being taken to maximize their loan forgiveness
II. Comments and Immediate Effective
minimize the public’s exposure to the amounts. This rule is being issued to
Date
virus. These measures, some of which allow for immediate implementation of
are government-mandated, are being The intent of the CARES Act is that the forgiveness component of this
implemented nationwide and include SBA provide relief to America’s small program. Although this interim final
the closures of restaurants, bars, and businesses expeditiously. This intent, rule is effective immediately, comments
gyms. In addition, based on the advice along with the dramatic decrease in are solicited from interested members of
of public health officials, other economic activity nationwide, provides the public on all aspects of this interim
measures, such as keeping a safe good cause for SBA to dispense with the final rule, including section III below.
distance from others or even stay-at- 30-day delayed effective date provided These comments must be submitted on
home orders, are being implemented, in the Administrative Procedure Act. or before July 1, 2020. SBA will
resulting in a dramatic decrease in Specifically, it is critical to meet consider these comments and the need
economic activity as the public avoids lenders’ and borrowers’ need for clarity for making any revisions as a result of
malls, retail stores, and other concerning loan forgiveness these comments.
businesses. requirements as rapidly as possible
On March 27, 2020, the President because borrowers can seek loan III. Paycheck Protection Program
signed the Coronavirus Aid, Relief, and forgiveness as early as eight-weeks Requirements for SBA Loan Review
Economic Security Act (the CARES Act) following the date of disbursement of Procedures and Related Borrower and
(Pub. L. 116–136) to provide emergency their PPP loans. Because the first PPP Lender Responsibilities
assistance and health care response for loans were disbursed after April 3, Overview
individuals, families, and businesses providing borrowers with certainty on
affected by the coronavirus pandemic. SBA’s process for reviewing PPP loan The CARES Act was enacted to
The Small Business Administration applications and loan forgiveness provide immediate assistance to
(SBA) received funding and authority applications will enhance borrowers’ individuals, families, and organizations
through the CARES Act to modify ability to determine whether, and to affected by the COVID–19 emergency.
existing loan programs and establish a what extent, they should apply for PPP Among the provisions contained in the
new loan program to assist small loans and loan forgiveness, and thereby CARES Act are provisions authorizing
businesses nationwide adversely carry out the purposes of the CARES Act SBA to temporarily guarantee loans
impacted by the COVID–19 emergency. in keeping their workers employed and under the Paycheck Protection Program
Section 1102 of the CARES Act paid, while at the same time taking (PPP). Loans under the PPP will be 100
temporarily permits SBA to guarantee necessary steps to maximize eligible percent guaranteed by SBA, and the full
100 percent of 7(a) loans under a new loan forgiveness amounts. An principal amount of the loans may
program titled the ‘‘Paycheck Protection immediate effective date also is qualify for loan forgiveness. Additional
Program.’’ Section 1106 of the CARES necessary for PPP lenders who generally information about the PPP is available
Act provides for forgiveness of up to the will make the loan forgiveness in interim final rules published by SBA
full principal amount of qualifying determinations, as provided in the and Treasury in the Federal Register (85
loans guaranteed under the Paycheck CARES Act. Specifically, an immediate FR 20811, 85 FR 20817, 85 FR 21747,
Protection Program, and requires SBA to effective date is necessary for lenders so 85 FR 23450, 85 FR 23917, 85 FR 26321,
issue guidance and regulations that they will have both a degree of 85 FR 26324, 85 FR 27287, 85 FR 29842,
implementing section 1106 within 30 certainty and sufficient time to develop 85 FR 29845, 85 FR 29847, 85 FR
days after the date of enactment of the their systems and policies and 30835), as well as an SBA interim final
CARES Act. On April 2, 2020, SBA procedures in order to timely process rule posted on May 20, 2020 and an
posted its first PPP interim final rule (85 loan forgiveness applications. SBA and Treasury interim final rule
FR 20811) (the First Interim Final Rule) This interim final rule supplements posted on May 22, 2020 (collectively,
covering in part loan forgiveness. On previous regulations and guidance on the PPP Interim Final Rules).
April 8, 2020 and on April 26, 2020, the discrete issues related to SBA’s Under the CARES Act, SBA is
SBA posted Frequently Asked process for review of PPP loan authorized to guarantee loans under the
Questions on loan forgiveness.1 On applications and loan forgiveness PPP, a new temporary 7(a) program,
April 14, 2020, SBA posted another PPP applications. This interim final rule is through June 30, 2020. The intent of the
interim final rule (85 FR 21747) effective without advance notice and Act is that SBA provide relief to
covering in part loan forgiveness. On public comment because section 1114 of America’s small businesses
April 24, 2020, the President signed the the CARES Act authorizes SBA to issue expeditiously, which is expressed in the
Paycheck Protection Program and regulations to implement Title I of the Act by giving all lenders delegated
Health Care Enhancement Act (Pub. L. CARES Act without regard to notice authority and streamlining the
116–139), which provided additional requirements. In addition, SBA has requirements of the regular 7(a) loan
funding and authority for the Paycheck determined that there is good cause for program.
Protection Program. dispensing with advance public notice The Small Business Act authorizes
As described below, this interim final and comment on the ground that it the Administrator to conduct

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rule informs borrowers and lenders of would be contrary to the public interest. investigations to determine whether a
SBA’s process for reviewing PPP loan Specifically, SBA has determined that recipient or participant in any
applications and loan forgiveness advance notice and public comment assistance under a 7(a) program,
would delay the ability of PPP including the PPP, is ineligible for a
1 https://www.sba.gov/document/support-faq- borrowers to understand with certainty loan, or has violated section 7(a), or any
lenders-borrowers. SBA’s process for reviewing PPP loan rule, regulation or order issued

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33012 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations

thereunder. 15 U.S.C. 634(b)(11). Act, the rules and guidance available at d. Will I have the opportunity to
Additionally, under section 7(a), the the time of the borrower’s PPP loan respond to SBA’s questions in a review?
Administrator is empowered to make application, and the terms of the Yes. If loan documentation submitted
loans in cooperation with lenders borrower’s loan application. See FAQ 17 to SBA by the lender or any other
through agreements to participate on a (posted April 6, 2020).3 These include, information indicates that the borrower
deferred (guaranteed) basis. 15 U.S.C. but are not limited to, SBA’s regulations may be ineligible for a PPP loan or may
636(a). Further, the Administrator may under 13 CFR 120.110 (as modified and be ineligible to receive the loan amount
make such rules and regulations as clarified by the PPP Interim Final Rules) or loan forgiveness amount claimed by
deemed necessary and take any and all and 13 CFR 121.301(f) and the the borrower, SBA will require the
actions determined to be necessary or
information, certifications, and lender to contact the borrower in
desirable with respect to 7(a) loans. 15
representations on the Borrower writing to request additional
U.S.C. 634(b)(6) and (b)(7). Pursuant to
Application Form (SBA Form 2483 or information. SBA may also request
these provisions of the Small Business
lender’s equivalent form) and Loan information directly from the borrower.
Act, SBA has issued regulations
Forgiveness Application Form (SBA The lender will provide any additional
establishing the standards by which it
Form 3508 or lender’s equivalent form). information provided to it by the
will investigate whether a loan met
borrower to SBA. SBA will consider all
program requirements and the Loan Amounts and Use of Proceeds:
information provided by the borrower in
circumstances under which SBA will be The Administrator may review whether
released from liability on a guarantee for response to such an inquiry.
a borrower calculated the loan amount Failure to respond to SBA’s inquiry
such a loan. 13 CFR 120.524. correctly and used loan proceeds for the
In light of the structure of the PPP may result in a determination that the
allowable uses specified in the CARES borrower was ineligible for a PPP loan
program established by the CARES Act Act.
and the PPP Interim Final Rules, in or ineligible to receive the loan amount
which loans and loan forgiveness are Loan Forgiveness Amounts: CThe or loan forgiveness amount claimed by
provided based on the borrower’s Administrator may review whether a the borrower.
certifications and documentation borrower is entitled to loan forgiveness e. If SBA determines that a borrower is
provided by the borrower, the in the amount claimed on the ineligible for a PPP loan, can the loan
Administrator, in consultation with the borrower’s Loan Forgiveness be forgiven?
Secretary of the Treasury (Secretary), Application (SBA Form 3508 or lender’s
has determined that it is appropriate to equivalent form). No. If SBA determines that a borrower
adopt additional procedures and criteria is ineligible for the PPP loan, SBA will
through which SBA will review whether c. When will SBA undertake a loan direct the lender to deny the loan
an action by the borrower has resulted review? forgiveness application. Further, if SBA
in its receipt of a PPP loan that did not determines that the borrower is
For a PPP loan of any size, SBA may ineligible for the loan amount or loan
meet program requirements.2 SBA’s undertake a review at any time in SBA’s
review of borrower certifications and forgiveness amount claimed by the
discretion. For example, SBA may borrower, SBA will direct the lender to
representations regarding the borrower’s
eligibility for a PPP loan and loan review a loan if the loan documentation deny the loan forgiveness application in
forgiveness, and the borrower’s use of submitted to SBA by the lender or any whole or in part, as appropriate. SBA
PPP loan proceeds, is essential to ensure other information indicates that the may also seek repayment of the
that PPP loans are directed to the borrower may be ineligible for a PPP outstanding PPP loan balance or pursue
entities Congress intended, and that PPP loan, or may be ineligible to receive the other available remedies.
loan proceeds are used for the purposes loan amount or loan forgiveness amount Section 1106(b) of the CARES Act
Congress required, including the CARES claimed by the borrower. 13 CFR provides for forgiveness of a PPP loan
Act’s central purpose of keeping 120.524(c). As noted on the Loan only if the borrower is an ‘‘eligible
workers paid and employed. Forgiveness Application Form, the recipient.’’ The Administrator has
borrower must retain PPP determined that to be an eligible
1. SBA Reviews of Individual PPP Loans recipient that is entitled to forgiveness
documentation in its files for six years
a. Will SBA review individual PPP after the date the loan is forgiven or under section 1106(b), the borrower
loans? repaid in full, and permit authorized must be an ‘‘eligible recipient’’ under 15
representatives of SBA, including U.S.C. 636(a)(36)(A)(iv) and rules and
Yes. SBA may review any PPP loan,
representatives of its Office of Inspector guidance available at the time of the
as the Administrator deems appropriate,
borrower’s loan application. This
as described below. General, to access such files upon
requirement promotes the public
request.
b. What borrower representations and interest, aligns SBA’s functions with
statements will SBA review? Lenders must comply with applicable other governmental policies, and
SBA requirements for records retention, appropriately carries out the CARES
The Administrator is authorized to
which for Federally regulated lenders Act’s PPP provisions, including by
review the following:
Borrower Eligibility: The means compliance with the preventing evasion of the requirements
Administrator may review whether a requirements of their federal financial for PPP loan eligibility and ensuring
borrower is eligible for the PPP loan institution regulator and for SBA program integrity with respect to this
based on the provisions of the CARES supervised lenders (as defined in 13 emergency financial assistance program.
CFR 120.10 and including PPP lenders It is also consistent with the CARES

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2 This interim final rule is an exercise of SBA’s with authority under SBA Form 3507) Act’s nonrecourse provision, 15 U.S.C.
rulemaking authority under 15 U.S.C. 634(b), 15 means compliance with 13 CFR 636(a)(36)(F)(v), which limits SBA’s
U.S.C. 633(d), and 5 U.S.C. App., Reorg. Plan No. 120.461. recourse against individual
4 of 1965, 11(b), 13(a) (abolishing Loan Policy
Board and transferring functions to the
shareholders, members, or partners of a
Administrator); and CARES Act sections 1106(k) 3 https://www.sba.gov/document/support—faq- PPP borrower for nonpayment of a PPP
and 1114. lenders-borrowers. loan only if the borrower is an eligible

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recipient of the loan. Accordingly, the are not documented with such is entitled to forgiveness of some or all
PPP Loan Forgiveness Application (SBA recognized sources, more extensive of the amount applied for under the
Form 3508 or lender’s equivalent form) review of calculations and data would statute and applicable regulations, the
notes that SBA may direct a lender to be appropriate. The borrower shall not lender must request payment from SBA
disapprove a borrower’s loan receive forgiveness without submitting at the time the lender issues its decision
forgiveness application if SBA all required documentation to the to SBA. SBA will, subject to any SBA
determines that the borrower does not lender. review of the loan or loan application,
qualify as an eligible recipient for the As the First Interim Final Rule 4 remit the appropriate forgiveness
PPP loan. indicates, lenders may rely on borrower amount to the lender, plus any interest
representations. If the lender identifies accrued through the date of payment,
f. May a borrower appeal SBA’s errors in the borrower’s calculation or
determination that the borrower is not later than 90 days after the lender
material lack of substantiation in the issues its decision to SBA. If applicable,
ineligible for a PPP loan or ineligible for borrower’s supporting documents, the
the loan amount or the loan forgiveness SBA will deduct EIDL Advance
lender should work with the borrower Amounts from the forgiveness amount
amount claimed by the borrower? to remedy the issue. As stated in remitted to the Lender as required by
Yes. SBA intends to issue a separate paragraph III.3.c of the First Interim section 1110(e)(6) of the CARES Act.
interim final rule addressing this Final Rule, the lender does not need to
process. independently verify the borrower’s When the lender issues its decision to
reported information if the borrower SBA determining that the borrower is
2. The Loan Forgiveness Process for submits documentation supporting its not entitled to forgiveness in any
Lenders request for loan forgiveness and attests amount, the lender must provide SBA
a. What should a lender review? that it accurately verified the payments with the reason for its denial, together
for eligible costs. with (1) the PPP Loan Forgiveness
For all PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A;
Applications, each lender shall: b. What is the timeline for the lender’s and (3) the (optional) PPP Borrower
i. Confirm receipt of the borrower decision on a loan forgiveness Demographic Information Form (if
certifications contained in the Loan application? submitted to the lender). The lender
Forgiveness Application Form. The lender must issue a decision to must confirm that the information
ii. Confirm receipt of the SBA on a loan forgiveness application provided by the lender to SBA
documentation borrowers must submit not later than 60 days after receipt of a accurately reflects lender’s records for
to aid in verifying payroll and complete loan forgiveness application the loan, and that the lender has made
nonpayroll costs, as specified in the from the borrower. That decision may its decision in accordance with the
instructions to the Loan Forgiveness take the form of an approval (in whole requirements set forth in 2.a. The lender
Application Form. or in part); denial; or (if directed by must also notify the borrower in writing
iii. Confirm the borrower’s SBA) a denial without prejudice due to that the lender has issued a decision to
calculations on the borrower’s Loan a pending SBA review of the loan for SBA denying the loan forgiveness
Forgiveness Application, including the which forgiveness is sought. In the case application. SBA reserves the right to
dollar amount of the (A) Cash of a denial without prejudice, the review the lender’s decision in its sole
Compensation, Non-Cash borrower may subsequently request that discretion. Within 30 days of notice
Compensation, and Compensation to the lender reconsider its application for from the lender, a borrower may request
Owners claimed on Lines 1, 4, 6, 7, 8, loan forgiveness, unless SBA has that SBA review the lender’s decision
and 9 on PPP Schedule A and (B) determined that the borrower is by reviewing the loan in accordance
Business Mortgage Interest Payments, ineligible for a PPP loan. The with 2.c. below.
Business Rent or Lease Payments, and Administrator has determined that this
Business Utility Payments claimed on Enabling SBA to use the statutory 90-
process appropriately balances the need
Lines 2, 3, and 4 on the PPP Loan day period to review the PPP loan and
for efficient processing of loan
Forgiveness Calculation Form, by forgiveness documentation is an
forgiveness applications with
reviewing the documentation submitted appropriate procedural protection to
considerations of program integrity,
with the Loan Forgiveness Application. prevent fraud or misuse of PPP funds,
including affording SBA the
iv. Confirm that the borrower made ensure that recipients of PPP loans are
opportunity to ensure that borrower
the calculation on Line 10 of the Loan within the scope of entities that the
representations and certifications
Forgiveness Calculation Form correctly, CARES Act is intended to assist, and
(including concerning eligibility for a
by dividing the borrower’s Eligible confirm compliance with the PPP
PPP loan) were accurate.
Payroll Costs claimed on Line 1 by 0.75. When the lender issues its decision to requirements set forth in the statute,
Providing an accurate calculation of SBA approving the application (in rules, and guidance. This protection is
the loan forgiveness amount is the whole or in part), it must include (1) the also important in light of the large
responsibility of the borrower, and the PPP Loan Forgiveness Calculation Form; number and diverse types of PPP
borrower attests to the accuracy of its (2) PPP Schedule A; and (3) the lenders, many of which were not
reported information and calculations (optional) PPP Borrower Demographic previously SBA participating lenders
on the Loan Forgiveness Application. Information Form (if submitted to the and which were approved rapidly in
Lenders are expected to perform a good- lender). The lender must confirm that order to enable financial assistance to be
faith review, in a reasonable time, of the the information provided by the lender provided as rapidly as feasible to
borrower’s calculations and supporting to SBA accurately reflects lender’s millions of small businesses. SBA will
use the 90-day period to help ensure

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documents concerning amounts eligible records for the loan, and that the lender
for loan forgiveness. For example, has made its decision in accordance that applicable legal requirements have
minimal review of calculations based on with the requirements set forth in 2.a. If been satisfied.
a payroll report by a recognized third- the lender determines that the borrower SBA will issue additional procedures
party payroll processor would be on the process for advance purchase of
reasonable. By contrast, if payroll costs 4 85 FR 20811, 20815–20816 (April 15, 2020). PPP loans.

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33014 Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations

c. What should a lender do if it receives loan application, or the terms of the Executive Order 13132
notice that SBA is reviewing a loan? loan application, SBA will seek SBA has determined that this rule
SBA may begin a review of any PPP repayment of the lender processing fee will not have substantial direct effects
loan of any size at any time in SBA’s from the lender. However, SBA’s on the States, on the relationship
discretion. If SBA undertakes such a determination of borrower eligibility between the National Government and
review, SBA will notify the lender in will have no effect on SBA’s guaranty of the States, or on the distribution of
writing and the lender must notify the the loan if the lender has complied with
power and responsibilities among the
borrower in writing within five business its obligations under section III.3.b of
various layers of government. Therefore,
days of receipt. the First Interim Final Rule and the
SBA has determined that this rule has
Within five business days of receipt of document collection and retention
no federalism implications warranting
such notice, the lender shall transmit to requirements described in the lender
preparation of a federalism assessment.
SBA electronic copies of the following: application form (SBA Form 2484).
i. The Borrower Application Form Paperwork Reduction Act, 44 U.S.C.
c. Are lender processing fees subject to
(SBA Form 2483 or lender’s equivalent Chapter 35
clawback if a lender has not fulfilled its
form) and all supporting documentation obligations under PPP regulations? SBA has determined that this rule
provided by the borrower. Yes. If a lender fails to satisfy the will impose a new reporting
ii. The Loan Forgiveness Application requirements applicable to lenders that requirement on the lenders that are
(SBA Form 3508 or lender’s equivalent are set forth in section III.3.b of the First participating in the PPP. As discussed
form), and all supporting Interim Final Rule or the document above, when a lender approves or
documentation provided by the collection and retention requirements denies a request for loan forgiveness, the
borrower (if the lender has received described in the lender application form lender must submit to SBA limited
such application). If the lender receives (SBA Form 2484), SBA will seek information from the borrower’s Loan
such application after it receives notice repayment of the lender processing fee Forgiveness Application (SBA Form
that SBA has commenced a loan review, from the lender and may determine that 3508 or lender’s equivalent form),
the lender shall transmit electronic the loan is not eligible for a guaranty. including the portion of the form used
copies of the application and all to calculate the total amount to be
supporting documentation provided by 4. Additional Information forgiven, as well as the schedule used to
the borrower to SBA within five SBA may provide further guidance, if determine the borrower’s payroll
business days of receipt. The lender needed, through SBA notices that will expenses. In addition, for those loans
must also request that the borrower be posted on SBA’s website at that SBA selects for review, the
provide the lender with a copy of the www.sba.gov. Questions on the applicable lenders will be required to
Schedule A Worksheet to the Loan Paycheck Protection Program may be submit information to allow SBA to
Forgiveness Application, and the lender directed to the Lender Relations review the loans for borrower eligibility,
must submit the worksheet to SBA Specialist in the local SBA Field Office. loan amount eligibility, and loan
within 5 business days of receipt from The local SBA Field Office may be forgiveness eligibility. SBA will submit
the borrower. found at https://www.sba.gov/tools/ the new reporting requirements to OMB
iii. A signed and certified transcript of local-assistance/districtoffices. for approval as a modification to the
account. existing PPP information collection.
iv. A copy of the executed note Compliance With Executive Orders
This information collection is currently
evidencing the PPP loan. 12866, 12988, 13132, 13563, and 13771,
approved as an emergency request
v. Any other documents related to the the Paperwork Reduction Act (44
U.S.C. Ch. 35), and the Regulatory under OMB Control Number 3245–0407
loan requested by SBA. until October 31, 2020.
If SBA has notified the lender that Flexibility Act (5 U.S.C. 601–612)
SBA has commenced a loan review, the Executive Orders 12866, 13563, and Regulatory Flexibility Act (RFA)
lender shall not approve any application 13771 The Regulatory Flexibility Act (RFA)
for loan forgiveness for such loan until This interim final rule is generally requires that when an agency
SBA notifies the lender in writing that economically significant for the issues a proposed rule, or a final rule
SBA has completed its review. purposes of Executive Orders 12866 and pursuant to section 553(b) of the APA or
3. Lender Fees 13563, and is considered a major rule another law, the agency must prepare a
under the Congressional Review Act. regulatory flexibility analysis that meets
a. Is the lender eligible for a processing the requirements of the RFA and
SBA, however, is proceeding under the
fee if SBA determines that a borrower is publish such analysis in the Federal
emergency provision at Executive Order
ineligible? Register. 5 U.S.C. 603, 604. Specifically,
12866 Section 6(a)(3)(D) based on the
No. If SBA conducts a loan review need to move expeditiously to mitigate the RFA normally requires agencies to
and determines that the borrower was the current economic conditions arising describe the impact of a rulemaking on
ineligible for a PPP loan, the lender is from the COVID–19 emergency. This small entities by providing a regulatory
not eligible for a processing fee. rule’s designation under Executive impact analysis. Such analysis must
Order 13771 will be informed by public address the consideration of regulatory
b. Are lender processing fees subject to options that would lessen the economic
clawback if SBA determines that a comment.
effect of the rule on small entities. The
borrower is ineligible? Executive Order 12988 RFA defines a ‘‘small entity’’ as (1) a
Yes. For any SBA-reviewed PPP loan, SBA has drafted this rule, to the proprietary firm meeting the size

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if within one year after the loan was extent practicable, in accordance with standards of the Small Business
disbursed SBA determines that a the standards set forth in section 3(a) Administration (SBA); (2) a nonprofit
borrower was ineligible for a PPP loan and 3(b)(2) of Executive Order 12988, to organization that is not dominant in its
based on the provisions of the CARES minimize litigation, eliminate field; or (3) a small government
Act or applicable rules or guidance ambiguity, and reduce burden. The rule jurisdiction with a population of less
available at the time of the borrower’s has no preemptive or retroactive effect. than 50,000. 5 U.S.C. 601(3)–(6). Except

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Federal Register / Vol. 85, No. 105 / Monday, June 1, 2020 / Rules and Regulations 33015

for such small government jurisdictions, forth under the CPSC’s statutes and modacrylic, would comply with CPSC’s
neither State nor local governments are regulations for children’s toys and child requirements for ASTM F963 elements
‘‘small entities.’’ Similarly, for purposes care articles. Based on these or phthalates. The Commission
of the RFA, individual persons are not determinations, the specified unfinished determines that such materials will
small entities. The requirement to manufactured fibers would not be comply with CPSC’s requirements with
conduct a regulatory impact analysis required to have third party testing for a high degree of assurance. Therefore,
does not apply if the head of the agency compliance with the requirements of the manufacturers do not need to have those
‘‘certifies that the rule will not, if ASTM F963 elements or phthalates for materials tested by a third party testing
promulgated, have a significant children’s toys and child care articles. laboratory in order to issue a Children’s
economic impact on a substantial DATES: The rule is effective on July 1, Product Certificate (CPC).
number of small entities.’’ 5 U.S.C. 2020.
605(b). The agency must, however, 2. ASTM F963 Elements
FOR FURTHER INFORMATION CONTACT:
publish the certification in the Federal
Stephen W. Lee, Compliance Officer, Section 106 of the CPSIA provides
Register at the time of publication of the
Office of Compliance and Field that the provisions of ASTM
rule, ‘‘along with a statement providing
Operations, U.S. Consumer Product International, Consumer Safety
the factual basis for such certification.’’
Safety Commission, 4330 East West Specifications for Toy Safety (ASTM
If the agency head has not waived the
Highway, Bethesda, MD 20814–4408: F963), shall be considered to be
requirements for a regulatory flexibility
telephone 301–504–7814; email: slee@ consumer product safety standards
analysis in accordance with the RFA’s
cpsc.gov. issued by the Commission.1 15 U.S.C.
waiver provision, and no other RFA
exception applies, the agency must SUPPLEMENTARY INFORMATION: 2056b. The Commission has issued a
prepare the regulatory flexibility A. Background rule that incorporates by reference the
analysis and publish it in the Federal relevant provisions of ASTM F963 at 16
Register at the time of promulgation or, 1. Third Party Testing and Burden CFR part 1250.2 Thus, children’s toys
if the rule is promulgated in response to Reduction subject to ASTM F963 must be tested by
an emergency that makes timely Section 14(a) of the Consumer a CPSC-accepted third party laboratory
compliance impracticable, within 180 Product Safety Act (CPSA), as amended and demonstrate compliance with all
days of publication of the final rule. 5 by the Consumer Product Safety applicable CPSC requirements for the
U.S.C. 604(a), 608(b). Rules that are Improvement Act of 2008 (CPSIA), manufacturer to issue a CPC before the
exempt from notice and comment are requires that manufacturers of products children’s toys can be entered into
also exempt from the RFA requirements, subject to a consumer product safety commerce.
including conducting a regulatory rule or similar rule, ban, standard, or
flexibility analysis, when among other Section 4.3.5 of ASTM F963 requires
regulation enforced by the CPSC, must
things the agency for good cause finds that surface coating materials and
certify that the product complies with
that notice and public procedure are accessible substrates of children’s toys
all applicable CPSC-enforced
impracticable, unnecessary, or contrary that can be sucked, mouthed, or
requirements. 15 U.S.C. 2063(a). For
to the public interest. SBA Office of children’s products, certification must ingested 3 must comply with the
Advocacy guide: How to Comply with be based on testing conducted by a solubility limits of eight elements given
the Regulatory Flexibility Act, Ch.1. p.9. CPSC-accepted third party conformity in Table 1 of the toy standard. The
Accordingly, SBA is not required to assessment body. Id. Public Law 112–28 materials and their solubility limits are
conduct a regulatory flexibility analysis. (August 12, 2011) directed the CPSC to shown in Table 1. We refer to these
seek comment on ‘‘opportunities to eight elements as ‘‘ASTM F963
Jovita Carranza,
reduce the cost of third party testing elements.’’
Administrator.
[FR Doc. 2020–11533 Filed 5–28–20; 8:45 am]
requirements consistent with assuring
compliance with any applicable
BILLING CODE 8026–03–P
consumer product safety rule, ban,
standard, or regulation.’’ Public Law
112–28 also authorized the Commission
CONSUMER PRODUCT SAFETY to issue new or revised third party 1 ASTM F963 is a consumer product safety
COMMISSION testing regulations if the Commission standard, except for section 4.2 and Annex 4, or any
16 CFR Part 1253 determines ‘‘that such regulations will provision that restates or incorporates an existing
reduce third party testing costs mandatory standard or ban promulgated by the
[Docket No. CPSC–2019–0023] consistent with assuring compliance Commission or by statute.
2 The Commission is not incorporating ASTM
with the applicable consumer product
Children’s Toys and Child Care safety rules, bans, standards, and F963 by reference into part 1253.
Articles: Determinations Regarding regulations.’’ Id. 2063(d)(3)(B).
3 ASTM F963 contains the following note

ASTM F963 Elements and Phthalates regarding the scope of the solubility requirement:
To provide opportunities to reduce NOTE 4—For the purposes of this requirement, the
for Unfinished Manufactured Fibers the cost of third party testing following criteria are considered reasonably
AGENCY: U.S. Consumer Product Safety requirements consistent with assuring appropriate for the classification of children’s toys
Commission. compliance with any applicable or parts likely to be sucked, mouthed or ingested:
ACTION: Final rule. consumer product safety rule, ban, (1) All toy parts intended to be mouthed or contact
standard, or regulations, the CPSC food or drink, components of children’s toys which
are cosmetics, and components of writing

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SUMMARY: The Consumer Product Safety assessed whether children’s toys and
instruments categorized as children’s toys; (2)
Commission (CPSC) is issuing a final child care articles manufactured with
Children’s toys intended for children less than 6
rule determining that certain unfinished seven manufactured fibers: polyester years of age, that is, all accessible parts and
manufactured fibers do not contain the (polyethylene terephthalate (PET)), components where there is a probability that those
ASTM F963 elements or specified nylon, polyurethane (spandex), viscose parts and components may come into contact with
phthalates that exceed the limits set rayon, natural rubber latex, acrylic, and the mouth.

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