JPMorgan Chase is looking into customers' misuse of PPP loans — and the role the bank's own employees played
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JPMorgan Chase is looking into instances of its customers misusing loans received earlier this year through the federal government's Paycheck Protection Program — as well as the role the bank's own employees may have played. It's behavior that "may even be illegal,"JPMorgan's Operating Committee said in a company-wide memo it sent out on Tuesday, which has since been reviewed by Business Insider. "We are doing all we can to identify those instances, and cooperate with law enforcement where appropriate," the note read. JPMorgan Chase declined a request for further comment.Bloomberg first reported the memo on Tuesday.The note touted some of the good that the firm's customers have done with their PPP loans, but said that "unfortunately, we've also seen conduct that does not live up to our business and ethical principles — and may even be illegal.""This includes instances of customers misusing Paycheck Protection Program loans, unemployment benefits and other government programs. Some employees have fallen short, too," the memo added. The memo did not specify in greater detail what employees may have done that has drawn the firm's scrutiny, or add further context to the kinds of activities that JPMorgan is said to be investigating. In May, Reuters reported the US Justice Department subpoenaed the big banks regarding potential misuse of PPP loans. PPP loans have been accused of enabling bad actors to engage in fraud and impropriety Earlier this year, as small businesses hemorrhaged funds and the economy faced the shock of the coronavirus outbreak, the federal government sought to stop the bleeding by making roughly $670 billion in emergency funds available. Early on, the disbursement of those small business loans drew sharp criticism, as large corporate entities came under fire for taking funds that could have benefited smaller players in much more precarious positions. As much as $30 billion in approved PPP funds had been returned to the federal government or canceled as of July, CNBC reported. Democrats in the House of Representatives recently warned that PPP loans are at high risk of misuse. Members of the House Select Subcommittee on the Coronavirus Crisis wrote a memo sounding the alarm bells, explaining that tens of thousands of PPP loans "could be subject to fraud, waste, or abuse."Read more: Tens of thousands of PPP loans at high risk for 'fraud, waste, and abuse' House Democrats sayAmong the memo's chief points of concern: Some companies received multiple loans, when the original program was intended to grant recipients just one loan. As much as $1 billion in PPP funding was carved up by firms that received more than a single loan. What's more, as much as $96 million in PPP loans was pocketed by companies which are excluded from doing business with the federal government. And, government contractors with "significant performance and integrity issues" received another $195 million in funds, the memo said.For its part, the Small Business Administration has tried to put into place parameters to prevent the abuse of funds, and guide how they're used when companies receive them. For instance, to encourage companies to avoid layoffs, lenders are to forgive loans to firms which can demonstrate that they didn't lay off staff or cut wages. What's more, the SBA has said, public companies "with substantial market value and access to capital markets" would be a tougher sell for lenders to appropriate funds to. JPMorgan encouraged employees to speak up if they detect customers abusing PPP funds In Tuesday's memo, JPMorgan called upon employees to serve as the vanguard in weeding out customers' abusive or unethical behavior surrounding PPP loans. Read more: Experts explain the complexities around getting PPP loans forgiven, and why so many small businesses are turning to fintechs like PayPal and Plaid "If you see conduct that doesn't live up to our high standards and strong values, say something," the note said. "We take each report seriously and will take action, including disciplinary, when warranted" — though it's unclear how the firm would respond to such claims of abuse. "While we know that we are working through a period of unprecedented turmoil," the memo concluded, "it is precisely during difficult times like these that it is most important to continue to hold ourselves to the highest standards of conduct." Read more: How big banks decided the futures of America's small businesses: The inside story of how $349 billion in government cash was doled out in just 12 days, leaving thousands of entrepreneurs without relief Inside the legal industry's reaction as it deals with the messy optics of white-shoe law firms taking PPP moneySEE ALSO: Fintechs working with lenders and small businesses explain the pain points still plaguing the latest $320 billion round of PPP loans Join the conversation about this story » NOW WATCH: How the Navy's largest hospital ship can help with the coronavirus
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The federal government extended the Paycheck Protection Program after $130 billion out of $660 billion went uncollected. Here's what new applicants need to know.
The application deadline for the Paycheck Protection Program was extended on Saturday after President Donald Trump...The application deadline for the Paycheck Protection Program was extended on Saturday after President Donald Trump signed the extension bill that Congress passed into law. Potential applicants now have until August 8 to request federal relief funds under the program intended to help businesses affected by the coronavirus pandemic. Around $130 billion in funds were left over when the original deadline came on June 30, with some businesses not knowing they are eligible for the program. Visit Business Insider's homepage for more stories. President Donald Trump on Saturday signed into law an amendment to the Paycheck Protection Program that gives businesses affected by the coronavirus pandemic more time to apply for federal funds. The law extends the deadline to apply for the federal government's loan-based relief program to August 8. The original deadline to apply for the loans was June 30, but Congress moved quickly to extend the deadline after around $130 billion was left over from the initial $660 billion pot, NPR reported. The Senate initially approved the extension on Tuesday with unanimous consent, and the House of Representatives followed suit the next day. Trump signed the bill on July 4, giving potential recipients just over a month to apply for the remaining funds. As of June 30, more than 4.8 million loans have been approved totaling $520 billion, with the average loan amount around $107,000, according to the Small Business Administration. Here's what potential applicants should know before applying. What are Paycheck Protection Program funds Paycheck Program Funds are federally backed loans that businesses can apply for to help cover expenses and maintain worker levels. Though they start as loans, businesses that meet specific criteria from the SBA can apply to have their loans forgiven so that they don't need to be paid back. Part of the program is that no fees will be attached to the loans for small businesses, no collateral is required, and repayment starts after six months. Interest rates are also set at 1%, according to the SBA. Who can apply for Paycheck Protection Program Funds While the program is intended for small businesses, that title covers more than just family-owned hardware stores and ice cream shops. As Business Insider's Dominick Reuter reported, freelancers and self-employed workers including gig-workers can also apply for funds. Businesses with more than 500 employees can also access funds if they meet the SBA's size standards. Business owners who are unsure of whether their enterprise counts as a small business can use the SBA's size standards tool, located on its website. What July and August applicants need to know Loan applicants completing the process after June 5 are subject to new loan maturity guidelines. The SBA said recipients who applied before June 5 will be subject to a two-year maturity timeline while those applying after June 5 will have a five-year maturity timeline. Loans are also processed through local banks and lenders to streamline the process as opposed to having the federal government do it. The SBA provides a list of which lenders can process applications for and issue PPP loans on its website. How to get loans forgiven by the federal government The SBA's website says loan forgiveness will be based on "employee retention criteria" and only be given if the funds are spent on "eligible expenses." The Payroll Protection Flexibility Act recently amended the program's rules so that only 60% of funds received have to go to payroll expenses in order for loans to be forgiven, as Business Insider's Joseph Zeballos-Roig reported. Even if borrowers don't use 60% on payroll, they can still apply for partial forgiveness. Businesses seeking this option need to fill out a five-page form that can be found on the SBA's website to apply for forgiveness after reviewing the rules for forgiveness. For more info, Business Insider translated the 3 most confusing guidelines so you can apply for emergency funds »SEE ALSO: A US senator wants to propose legislation blocking middle seats on planes after he flew on a crowded American Airlines flight DON'T MISS: I flew on the 4 biggest US airlines during the pandemic to see which is handling it best, and found one blew the rest out of the water Join the conversation about this story » NOW WATCH: Inside London during COVID-19 lockdown
US banks made a quick $10 billion in 2 weeks by processing small businesses loans from the government, says report
US banks earned $10 billion in two weeks processing the loans from the government scheme to...US banks earned $10 billion in two weeks processing the loans from the government scheme to protect small businesses from financial ruin during the coronavirus crisis, according to an NPR report. The rescue plan worth $349 billion offered businesses loans of up to $10 million to thousands of US companies and were guaranteed by the federal Small Business Administration. The banks charged a transaction fee of 5% on loans worth less than $350,000, while on loans worth between $2 million - $10 million, the cost was 1%. The banks defended the massive windfall of loan transaction fees, saying that processing the loans involved complicated vetting procedures. Treasury Department guidelines are less rigorous than for regular loans, and the taxpayer provides the funding, so there is little risk for the banks. Visit Business Insider's homepage for more stories. Banks have earned a quick $10 billion processing US government loans to small businesses affected by the coronavirus crisis, according to a new report. The $350 billion rescue program aims to funnel cash to small businesses distressed by the economic blows of the COVID-19 crisis. In two weeks, banks including JP Morgan, Bank of America, and PNC Bank vetted thousands of applications for federal loans of up to $10 million. Transaction charges start at 5% for loans under $350,000, reducing to 1% for loans between $2 and $10 million, according to NPR. The loans are guaranteed by the government, and the guidelines issued by the Treasury Department indicate that they require less vetting than regular loans. There is no risk to the banks which are merely the middlemen. The banks have defended the costs, arguing the vetting process for each loan can still be complex. In an email statement seen by NPR, Bank of America said the program included "collecting, personally examining, and storing data" that is required for each application. One example highlighted by NPR was on April 7, when the parent company of Ruth's Chris Steak House, RCSH Operations LLC, received a loan of $10 million. JPMorgan Chase & Co., took a $100,000 fee on the one-time transaction for which it assumed no risk. The scheme, known as the Payment Protection Program (PPP), exhausted its funds last week. Aimed at small businesses with less than 500 employees, it was hit with controversy as larger companies exploited loopholes to tap into it. Some large, well-funded companies were granted millions of dollars from the $350 billion pool of funding, while many small, mom-and-pop shops were unable to access any funding at all, sparking public outrage. The initial PPP funding was snapped up in less than two weeks. Congress has now approved an additional $310 billion and new loans will be issued again starting next week.Join the conversation about this story » NOW WATCH: Why electric planes haven't taken off yet