Important Update for Borrowers of Prestamos CDFI, LLC With Unfunded PPP Loans

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PPP loan borrowers of Prestamos CDFI, LLC with unfunded PPP loans should be aware that only borrowers residing or injured in the same states as the named plaintiffs in the pending class action lawsuits against Prestamos may be able to participate as class members.

In March of 2022, Nolan Heller Kauffman published an article titled, “Your PPP Lender Refused to Fund Your SBA-Approved PPP Loan – Now What?”  That article discussed some of the most common issues with PPP loan funding and alerted PPP loan borrowers that Nolan Heller Kauffman and co-counsel had filed two class action lawsuits against Prestamos and its parent company, Chicanos Por La Causa, Inc. (“CPLC”).  Those lawsuits are captioned  Marshall, et. al, v. Prestamos CDFI, LLC, Civil No. 5:21-cv-04337-JMG (E.D. Pa.)  (“Prestamos I”) and Drevnak, et al. v. Prestamos CDFI, LLC, Civil No. 5:23-cv-02777-JMG (E.D. Pa.) (“PrestamosII”).

In a decision on March 31, 2023 in Prestamos I, the Court denied Prestamos’s motion to dismiss the PPP borrowers’ breach of contract claim, holding that “Plaintiffs have standing to raise their breach of contract claim, for which they successfully state a claim, except to the extent Named Plaintiffs purport to bring state law claims under the laws of states in which they do not reside in or in which they were never injured.” In other words, the Court held that the plaintiffs cannot proceed for borrowers in all 50 states and U.S. territories. Instead, the plaintiffs can only maintain breach of contract claims based on the laws of the states or territories in which they reside or were injured by Prestamos’s alleged failure to fund their SBA-approved PPP loans.

The plaintiffs in Prestamos I include SBA-approved but unfunded Prestamos PPP borrowers in the following states: California, Pennsylvania, Connecticut, Missouri, Illinois, Washington, Michigan, Nevada, Ohio, and Arizona. The plaintiffs in Prestamos II include SBA-approved but unfunded Prestamos PPP borrowers in the following additional states: Colorado, Utah, Georgia, Texas, Indiana, and Mississippi.

PPP borrowers with unfunded SBA approved PPP loans from Prestamos in states or Territories not covered by either Prestamos I or Prestamos II will not be eligible to participate in any class action recoveries in these cases, unless their states are added to the list of represented states.  

Contact Us:

If you are a PPP borrower with an unfunded PPP loan from Prestamos and have questions or would like to learn more about this subject, please contact Matthew M. Zapala, Esq. by e-mail (mzapala@nhkllp.com) or phone (518-432-3133).

 

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My PPP Loan Forgiveness Application was Denied – Now what?

Last May, the Paycheck Protection Program (“PPP”) closed to new PPP loan applications, and the next phase of the PPP – loan forgiveness – began picking up steam. PPP loan borrowers have ten months from the end of their loans’ “covered period” (or period to use the loan proceeds for authorized purposes) to apply for loan forgiveness. After that, depending on whether a lender is participating in the United States Small Business Administration’s (“SBA”) direct loan forgiveness application, borrowers might be able to apply for forgiveness directly with the SBA.  According to the SBA, more than a million forgiveness applications had been submitted directly to the SBA through their loan forgiveness portal by the beginning of last fall. If borrowers cannot apply directly through the SBA, they will have to apply through their respective PPP lenders.  

If the SBA issues a written decision denying the borrower’s forgiveness application, the PPP borrower needs to understand the appeals process and be ready to act quickly. 

What kind of PPP loan forgiveness decision can you appeal?

A borrower may only appeal, to the SBA’s Office of Hearings and Appeals, an official written decision by the SBA, after SBA completes a review of a PPP loan that finds a borrower:

  1. Was ineligible for a PPP loan; 
  2. Was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses; 
  3. Is ineligible for PPP loan forgiveness in the amount determined by the lender in its full approval or partial approval decision issued to SBA (except for the deduction of any Economic Injury Disaster Loan advance in accordance with section 1110(e)(6) of the CARES Act); and/or
  4. Is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to SBA.

Additionally, a borrower cannot appeal a lender’s decision denying forgiveness; but the borrower has other possible remedies if presented with just a decision from the lender. 

How long do you have to appeal a decision?

A borrower must file an appeal petition within 30 calendar days after (i) the borrower’s receipt of the final SBA loan review decision or (ii) notification by the lender of the final SBA loan review decision, whichever is earlier. 

It is critical to timely file the appeal petition because the PPP rules require the dismissal of any appeal that is untimely.

Can my accountant, that helped me with my loan forgiveness application, submit my appeal?

Only the borrower or the borrower’s attorney can submit a PPP loan appeal through the SBA’s PPP loan forgiveness appeal portal. If the borrower is a separate business entity, the following individuals (or the entity’s attorney) may submit appeals:

  • If the borrower is a corporation, trust, or association, officers of the borrower
  • If the borrower is a limited liability company, members of a borrower
  • If the borrower is a partnership, a partner of the borrower

How can you file a loan forgiveness appeal petition?

The SBA has set up a special PPP loan forgiveness appeals portal at Small Business Administration OHA Appeals Platform (sba.gov).  The appeal petition must comply with very specific requirements for its contents to ensure that it is not dismissed. Based on the timelines provided by the rules of practice for PPP appeals and guidance from the SBA, it may take approximately three months for OHA to complete its review and issue an initial decision on the appeal. A borrower can take additional appellate steps if the borrower receives a decision affirming the denial of loan forgiveness that may extend this process for months or even years.

What can you do?

If you believe you have a basis to appeal a final loan review decision issued by the SBA, you must act quickly. If you fail to timely file an appeal or if you file an appeal without all of the required contents, your appeal may be dismissed, and you will have to repay your loan in full. 

Take Action

If you have questions or concerns regarding filing a Paycheck Protection Program loan forgiveness appeal or other problems with PPP loan forgiveness, please contact Matthew M. Zapala, Esq., by e-mail (mzapala@nhkllp.com) or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

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My PPP Lender Denied my Forgiveness Application – Now What?

As was discussed in a separate article, a Paycheck Protection Program (“PPP”) lender’s decision denying loan forgiveness cannot be appealed to the United States Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”). However, that does not mean a borrower cannot contest the lender’s decision to deny the forgiveness application. First, a borrower can potentially turn a non-appealable lender decision into an appealable SBA decision by requesting that the SBA review the lender’s decision. Second, the borrower may be able to commence a lawsuit against the lender that requests a declaratory judgment that the borrower was eligible for forgiveness and/or seeks damages for improperly denying loan forgiveness.

Request Review by the SBA

Suppose a Lender issues a decision to the SBA that denies the borrower’s loan forgiveness application. In that case, the lender must provide the borrower with written notice of that decision within five business days. This notice to the borrower must also include the basis for the lender’s decision to deny the borrower’s loan forgiveness application.

Within thirty days from receipt of this notice, the borrower may request that the SBA review the lender’s decision.  This is the only way borrowers can get the SBA to review the lender’s decision, and the request must be made within this period. This request for review must be made through the lender, and the lender must then submit those requests to the SBA within five business days of receiving the borrower’s request. 

While requesting an SBA review creates the possibility of getting a final forgiveness decision from the SBA, the SBA has also made clear that it is within its sole discretion whether it will accept or decline a borrower’s request for review. If the SBA agrees to review the lender’s decision, it will issue a final determination that the borrower can appeal to the OHA.

Suing Your Lender

Suppose the borrower either does not request an SBA review or the SBA declines to review the lender’s loan forgiveness decision. In that case, the borrower is left without any “administrative” remedies and will not be able to appeal the decision to the OHA. 

Although there is no guidance on the topic, a borrower may be able to contest a lender’s decision to deny forgiveness by commencing a lawsuit in state or federal court against the lender and seeking a declaratory judgment from the court that the borrower is entitled to loan forgiveness and/or damages for breach of contract or a different claim. 

While some lenders will undoubtedly argue that the PPP rules preclude such a lawsuit, the PPP does not specifically deprive borrowers of other rights under state or federal law. Boiling it down, a PPP loan is just an ordinary contract between a borrower and lender, albeit one that is supplemented by certain PPP rules and regulations.  Parties to contracts routinely rely on courts’ powers to issue declaratory relief to resolve disputes arising from the parties’ contractual relationship. Additionally, to the extent the borrower is wrongfully precluded from receiving forgiveness from the SBA because the lender decides to deny forgiveness, the borrower might be able to seek damages from the lender under a breach of contract or other cause of action. 

Contact Us

If you have questions or concerns regarding a lender’s decision to deny a PPP loan forgiveness application or other problems with PPP loan forgiveness, please contact Matthew M. Zapala, Esq., by e-mail (mzapala@nhkllp.com) or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

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SBA Issues New Guidance for PPP Lender Decisions Partially Denying Forgiveness

On January 27, 2022, the United States Small Business Administration (“SBA”) published new guidance regarding lender decisions partially denying forgiveness applications and created a process by which the borrower can request that the SBA review the lender’s decision. 

The Old Rule

This is a significant development because, before this new guidance, a borrower could only request an SBA review of a decision denying loan forgiveness in full.  As a result, borrowers who received lender decisions partially denying forgiveness had no administrative remedies available to contest these decisions because lender decisions are not appealing to the SBA’s Office of Hearing and Appeals (“OHA”). 

The New Rule

The SBA has changed course and is now permitting borrowers to request SBA review of a lender decision partially denying forgiveness in a similar fashion as the process for requesting SBA review of a lender decision denying forgiveness in full. Now, a borrower has the same opportunity to potentially turn a non-appealable lender forgiveness decision into an appealable SBA decision if the SBA agrees to review the lender’s decision. To preserve this possibility, the borrower must request SBA review through its lender within thirty days of receiving the lender’s notice that the lender received a partial loan forgiveness payment from the SBA. If the borrower misses this deadline, they will be precluded from requesting an SBA review of the lender’s decision. It is also essential to understand that the SBA decides, in its sole discretion, whether to review a lender’s decision. 

Borrowers can request an SBA review of lender decisions issued under the old rules.

Importantly, this SBA notice has the effect of resurrecting old forgiveness applications denied in part by lenders. This notice requires lenders to notify, by February 26, 2022, borrowers for which lenders had previously issued forgiveness decisions denying applications in part that they have 30 calendar days from receipt of the notice to request SBA review of those decisions. These borrowers will now have a shot at a remedy that did not exist when they received decisions on their forgiveness applications. 

Borrowers must make payments after requesting SBA Review. 

Although this is all good news for borrowers, it should be noted that requesting an SBA review of a lender decision does not stay the obligation of the borrower to continue to make regular payments on the amount of the loan currently not forgiven. This differs from filing an appeal petition with the SBA OHA, which does stay payments while the appeal is pending.

What can you do?

Suppose you believe your lender wrongfully partially denied your forgiveness application. In that case, you need to act quickly to request an SBA review and preserve the possibility of getting an appealable final SBA decision. If you fail to timely request SBA review, then you will lose the opportunity to contest the lender’s decision through the SBA appeals process.  

Contact Us

If you have questions or concerns regarding requesting SBA loan review or other problems with PPP loan forgiveness, please contact Matthew M. Zapala, Esq., by e-mail (mzapala@nhkllp.com) or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

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Your PPP Lender Refused to Fund Your SBA-Approved PPP Loan – Now What?

Challenges with the Paycheck Protection Program

It does not take much effort online to see there is a massive, lingering problem with the Paycheck Protection Program – PPP lenders across the country refused to fund thousands of borrowers’ PPP loans even though the loans were SBA approved and the borrowers had signed and submitted all required PPP loan documents.

It seems the group of PPP borrowers most impacted by unfunded loans were sole proprietors and the smallest of small businesses seeking loans smaller than $50,000.

In early 2021, the loan processing fees for small PPP loans were increased substantially such that lenders could receive $2,500 flat fees for each loan compared with their having only received a few hundred dollars for previous similar loans. The result was a predictable disaster – PPP lenders and loan servicers were overwhelmed by PPP loan applications. In the chaos of the last few months of the Program, it appears likely that lenders violated many PPP rules and breached their contracts with PPP borrowers.

Lenders most commonly:

  1. Failed to timely process PPP loan applications;
  2. Prevented PPP loan applicants from applying with other PPP lenders;
  3. Was unable to communicate and work with borrowers to resolve issues;
  4. Refused to fund SBA approved PPP loans;
  5. Requested the same or additional documents from borrowers long after they had already signed their loan documents;
  6. “Denied” PPP loans after approving them, and after borrowers had already signed and submitted their PPP loan documents, including their promissory notes; and
  7. Reported unfunded loans as fully disbursed, resulting in payment of the loan processing fees.

In many instances, it appears the lenders looked for or even created excuses or reasons to get out of funding PPP loans because the lenders did not have the means to timely process and fund the loans.

Nolan Heller Kauffman files class-action cases

While it is undeniable that PPP loan demand was high in 2021, that does not excuse PPP lenders’ conduct or relieve lenders of their contractual obligations to their PPP borrowers. It was solely the responsibility of PPP lenders to process and fund PPP loans within the time frames set by the PPP and SBA rules.

We have filed two class-action cases on behalf of putative classes of individuals and small businesses whose loans were never funded despite SBA records showing that they were. If you find yourself in a similar situation, you can contact us at the number below.

What can you do?

If you believe your PPP lender did not properly process your PPP loan or loan application for any of the above reasons, you may have a right to sue your PPP lender for the damage caused to you and your business as a result. This is particularly true if you timely applied for a PPP loan, it was SBA approved, you signed the loan documents, and you never received your PPP loan funds for one reason or another.

Contact Us

If you have questions or concerns regarding an unfunded Paycheck Protection Program loan or how to navigate a dispute with your PPP lender regarding your PPP loan, please get in touch with Matthew M. Zapala, Esq., by e-mail (mzapala@nhkllp.com) or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

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