Topic: Pandemic Preparedness and Response
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The chairman of our board of directors owns 10% of one business and 12% of another. Would these businesses be eligible for a Paycheck Protection Program (PPP) loan from our bank? We believe this would be permissible under Regulation O, but we are unsure if it would be permissible under the SBA’s recent interim final rule. Would the chairman be considered a “key employee” of the bank if they are not employed by the bank?
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No, the chairman of your board would not be considered a “key employee” if they are not employed by your bank, and businesses in which they have an interest would be eligible for a PPP loan from your bank — provided all other eligibility criteria are met. The SBA’s interim final rule addressing PPP eligibility…
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We are seeing joint economic impact payments (sent via ACH) being rejected because one spouse died after December 31, 2019. The check is for $2,400, and the surviving spouse still has an account at our bank and has not yet updated the ownership. Should we post this ACH payment?
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We recommend following your existing policy for ACH tax refund payments made to deceased accountholders (as explained below, the economic stimulus payments are treated as tax refunds). For a joint account for which one accountholder died in 2020, we do not believe that the economic stimulus payment should be returned. The economic impact payments authorized…
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Has the government issued guidance on stimulus checks payable to deceased customers? Is a deceased recipient’s spouse required to return the funds?
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Yes, the IRS has issued guidance confirming that deceased individuals are not eligible for economic impact payments (EIPs) and explaining how to return EIPs. According to the guidance, an EIP made to someone who died before receiving it should be returned to the IRS. In the case of a joint EIP made to a deceased…
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We have an officer subject to Regulation O whose spouse owns a business that would like to apply for a Paycheck Protection Program (PPP) loan under the new CARES Act. The officer is a joint owner of the business. Would we be required to count this loan against the officer’s general $100,000 lending limit since the loan is 100% guaranteed by the Small Business Administration (SBA)? Is there any guidance on Regulation O lending limits with respect to government-guaranteed loans?
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Irrespective of Regulation O’s lending limits for executive officers, a lender may not extend a PPP loan to an entity in which one of the lender’s officers or their spouse has an interest. The SBA regulations generally provide that neither lenders nor their associates can own an equity interest in a business that has received…
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We are setting up a manual E-Sign compliance process to assist with COVID-19 modifications and SBA Paycheck Protection Program (PPP) applications and loans. We would like to send a PDF file with a secure email that will facilitate obtaining consent and signing other necessary documentation. Does Illinois law create any additional requirements beyond the federal Electronic Signatures in Global and National Commerce Act (E-Sign Act)?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. No, we do not believe Illinois law creates any additional requirements beyond those in the…
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Are we correct that large agricultural producers are not eligible for the Small Business Administration’s (SBA) Paycheck Protection Program (PPP)?
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An agricultural producer with more than 500 employees likely would not be eligible for a PPP loan. However, we believe that an agricultural producer that has 500 or fewer employees and meets certain other criteria would eligible for a PPP loan. The SBA’s interim final rule on PPP loans provides that an entity is eligible…
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Are we allowed to ask customers COVID-19-related health questions? For example: Have you experienced any respiratory symptoms? Have you worked in a facility with others who have tested positive for COVID-19? Have you been in contact with anyone displaying COVID-19 symptoms? Have you traveled to any of the following locations in the last thirty days — China, Iran, South Korea, Italy, Japan? If we are permitted to ask these questions, can we restrict lobby entrance based on the answers, or is that practice prohibited under the Americans with Disabilities Act (ADA)?
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Keeping in mind that neither the industry nor our regulators (nor your customers) have ever experienced the current environment, we believe that asking COVID-19 screening questions to all customers who arrive at your open facilities could pose reputational risks to your bank, particularly because the Illinois governor’s Executive Order has designated financial institutions to be essential businesses during…
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In the event of default, does a commercial borrower have a defense of impossibility or frustration of purpose as a result of a government order to close or suspend nonessential business operations that results in a loss of revenue and the borrower’s inability to make loan payments? Assume there is no force majeure provision in the loan documents.
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Illinois courts have recognized both impossibility and commercial frustration as defenses to a breach of contract. Whether a court would find either defense viable in a case where a commercial borrower was required to temporarily suspend its business due to a government order depends on the unique facts and circumstances of the case, and the…
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Can you confirm whether the Paycheck Protection Program (PPP) loans we extend under the new CARES Act will be exempt from our national bank lending limits since they are 100% guaranteed by the Small Business Administration (SBA)?
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Yes, we believe that PPP loans will be exempt from the national bank lending limits since they will be 100% guaranteed by the SBA. The national bank lending limit regulations provide that loans guaranteed by federal agencies are exempt from the national bank lending limits to the extent of the guarantee, and the OCC confirmed…
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The new Families First Coronavirus Response Act (FFCRA) requires employers to post a Department of Labor notice regarding employee rights related to the COVID-19 pandemic with our other labor law posters. Where can we find this notice?
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The FFCRA Employee Rights poster is available on the Department of Labor’s website, as are related frequently asked questions (FAQs). Links to the poster and FAQs are included in the resources below. According to the FAQs, employers may satisfy the FFCRA’s requirement to “post and keep posted” the notice “in conspicuous places on the premises…