The Office of Inspector General (OIG) is issuing this Inspection report to assess the Small Business Administration’s (SBA) guaranty purchase process for Paycheck Protection Program (PPP) loans. The Coronavirus Aid, Relief, and Economic Security (CARES) Act established the PPP to provide guaranteed SBA loans for eligible businesses, individuals, and nonprofits adversely impacted by the Coronavirus Disease 2019 pandemic. We assessed whether SBA reported and referred charged-off PPP loans to commercial credit reporting agencies and the U.S. Department of Treasury in accordance with applicable regulations, policies, and procedures; and effectively oversaw lender communication, servicing, and debt collection activities to ensure lenders met their responsibilities.SBA can forgive PPP loans if borrowers use loan proceeds as required. If the loan is not forgiven and the loan payment becomes more than 60 days past due, the lender should request a guaranty purchase, which is SBA’s purchase of the guaranteed portion of the loan. SBA simultaneously purchases and charges off delinquent loans when the borrower is 60 days or more past due on a loan payment, permanently closed, bankrupt or deceased. Charge-off status means SBA removes the outstanding balance of the loan from its accounting records.SBA did not always report and refer charged-off PPP loans to commercial credit reporting agencies and Treasury, as required. Specifically, SBA did not report 14,739 loans totaling $945.3 million to commercial credit reporting agencies and did not refer 7,550 loans totaling $2.2 billion to Treasury. Further, SBA did not effectively oversee lender communication, servicing, and debt collection activities to ensure lenders met their required responsibilities.We made seven recommendations to improve SBA’s reporting and referring of charged-off PPP loans to commercial credit reporting agencies and Treasury; and to ensure lenders comply with SBA’s requirements for their communication, servicing, and debt collection activities.
Open Recommendations
| Recommendation Number | Significant Recommendation | Recommended Questioned Costs | Recommended Funds for Better Use | Additional Details | |
|---|---|---|---|---|---|
| 1 | Yes | $0 | $0 | ||
| Review charged-off PPP loans to ensure all eligible loans are reported to commercial credit reporting agencies, as required. | |||||
| 2 | Yes | $0 | $0 | ||
| Require personnel to conduct periodic monitoring and reviews of SBA’s automated processes for PPP and future stimulus loan programs to ensure all eligible loans are reported to commercial credit reporting agencies, as required. | |||||
| 3 | Yes | $0 | $0 | ||
| Identify the credit reporting agencies to whom SBA must report current and delinquent loans for PPP and future stimulus loan programs. | |||||
| 4 | Yes | $0 | $0 | ||
| Review charged-off PPP loans to ensure that all eligible loans are referred to Treasury, as required. | |||||
| 5 | Yes | $0 | $0 | ||
| Require personnel to conduct periodic reviews of its automated Treasury referral process for PPP and future stimulus loan programs to ensure all eligible loans are referred to Treasury, as required. | |||||
| 6 | Yes | $0 | $0 | ||
| Conduct lender reviews to ensure lenders complied with their communication, servicing, and debt collection activity requirements. If not, require the lender to bring the loan into compliance or seek recovery of the guaranty paid by SBA as appropriate. | |||||
| 7 | Yes | $0 | $0 | ||
| Require lenders to submit evidence of communication, servicing, and debt collection activities with the borrower prior to guaranty purchase for PPP and future similar programs to foster and maintain program integrity. | |||||
