April 16, 2020
Special Edition: State Paycheck Protection Program Guidance

The Paycheck Protection Program (PPP) is a loan program that originated from the Coronavirus Aid, Relief, and Economic Security (CARES) Act § 1102 .

Credit unions, both state and federally chartered, are among the PPP qualified lenders. As such, state supervisory agencies have been quick to issue guidance for state-chartered credit unions to issue loans. 

In this edition of StateFocus , NASCUS provides an overview of the various state PPP loan guidance.

In response to inquiries related to whether PPP loans are subject to the credit union legal lending limit, the Connecticut Department of Banking released guidance confirming that the loans are exempted from the calculation of the legal lending limit and are not considered member business loans. The agency noted that since PPP loans are fully guaranteed by the SBA, such loans fall within the scope of the member business loan definition exemption provided under Connecticut law.

The Illinois Department of Financial and Professional Regulation (IDFR) issued pilot program authorization regarding credit union participation in government programs, including the SBA PPP. The authorization permits state-chartered credit unions to participate in federal programs through September 30, 2020. IDFR is requiring credit unions to maintain documentation that members and businesses seeking assistance are members of an Illinois state-chartered credit union.

The Iowa Division of Credit Unions (IDCU) in asserting its role to regulate credit unions, ensure safe and sound operation of Iowa credit unions, and protect credit union members and Iowans, issued extensive guidance regarding SBA PPP loans. IDCU noted that it will consider the commercial lending experience and SBA lending experience of each institution when reviewing the policy and procedure requirements set out in its guidance. The agency will also examine an array of additional elements, including credit union liquidity, field of membership requirements and staff familiarity with commercial lending.

In Massachusetts, the Division of Banks (Division) issued guidance clarifying the supervisory approach the agency will follow in evaluating loans made under the Paycheck Protection Program, specifically relative to the legal lending limit for Massachusetts-chartered credit unions and banks. DOB asserted that loans made specifically under the PPP will not be considered as the basis for an adverse regulatory finding or enforcement action for exceeding the legal lending limit. The agency further encouraged institutions to consider collaborating in light of the overwhelming small business demand for PPP loans.

Citing the dire need of small businesses, the New York Department of Financial Services (NYDFS) issued a letter strongly encouraging all eligible financial institutions to issue PPP loans, subject to their safety and soundness requirements. NYDFS also encouraged those institutions that are not currently eligible for participation in PPP, to obtain eligibility so they can participate in the program.

StateFocus is typically published on a monthly basis, however, due to the increased volume of state credit union guidance related to the COVID-19 pandemic, NASCUS will publish special editions as required.

We are continuing to track COVID-19-related activity on dedicated   pages  on the NASCUS website.

Please submit any activity in your state to Shelton Roulhac for publication.
StateFocus | www.nascus.org