{"id":790549,"date":"2022-09-07T10:00:27","date_gmt":"2022-09-07T10:00:27","guid":{"rendered":"https:\/\/theintercept.com\/?p=406451"},"modified":"2022-09-07T10:00:27","modified_gmt":"2022-09-07T10:00:27","slug":"after-refusing-loan-forgiveness-bank-of-america-hits-ppp-borrowers-with-inscrutable-finance-charges","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2022\/09\/07\/after-refusing-loan-forgiveness-bank-of-america-hits-ppp-borrowers-with-inscrutable-finance-charges\/","title":{"rendered":"After Refusing Loan Forgiveness, Bank of America Hits PPP Borrowers With Inscrutable “Finance Charges”"},"content":{"rendered":"

Bank of America<\/u>\u00a0has\u00a0refused to forgive<\/a>\u00a0some of the loans it made to small business owners through the Paycheck Protection Program. An early\u00a0Covid-era program that gave business owners money to cover payroll and other costs to help keep them afloat\u00a0during the pandemic, the loans were supposed to be forgiven if used correctly. But Bank of America forced borrowers to use its own opaque portal, rather than the Small Business Administration\u2019s, giving business owners limited recourse to appeal when their applications for forgiveness were rejected.<\/p>\n

Now those business owners are faced with paying back loans they thought would be converted to grants, and they\u2019ve been hit with another surprise: The bank is taking huge portions of their payments in the name of \u201cfinance charges.\u201d Bank of America told The Intercept the charges are for interest that began accruing when the loans were dispersed; unforgiven PPP loans, according to the SBA\u2019s rules, should accrue 1 percent annual interest.<\/p>\n

But business owners say the bank didn\u2019t explain the charges on statements or elsewhere, and they haven\u2019t been given information on how much interest they need to pay or the schedule for doing so \u2014 leaving borrowers confused, demoralized, and in the dark. One business owner\u2019s statement showed over $700 from a $2,000 payment taken by Bank of America for a line demarcated only as \u201cfinance charge,\u201d while another listed a finance charge higher than the amount of the payment that was put toward the loan principal: On a $569.79 payment, $423.13 was taken as a finance charge.<\/p>\n

<\/div>\n

The charges also aren’t acting like typical interest payments. According to several bank statements that\u00a0six small business owners shared with The Intercept, the finance charges vary widely from month to month, even for the same borrower: One business owner was charged $233.27 on a November statement and $10.36 the next month. On another statement, the entire $238.47 payment went to a finance\u00a0charge and nothing went to the principal, while the previous and following month\u2019s statements only put some of the payment to the finance charge. Another borrower\u2019s charges keep increasing each month, rather than shrinking as would be expected if she were paying off the interest.<\/p>\n

Bank of America spokesperson Bill Halldin said that the 1 percent interest began accruing as soon as borrowers received their funds, and for those whose loans haven\u2019t been forgiven and are making payments, \u201ctheir\u00a0initial payments were applied to accrued interest first and then principal,\u201d he said. \u201cThe finance charge is the amount of their payment that was applied to accrued interest.\u201d<\/p>\n\n

The SBA confirmed this. \u201cIf the borrower did not receive full forgiveness due to an excess loan amount, then the borrower must repay the remaining balance with the 1% accrued interest,\u201d said Christalyn Solomon, a spokesperson for the agency\u00a0in a statement.\u00a0\u201cThe bank is correct that interest began to accrue as of the date of disbursement.\u00a0 SBA generally requires that 7(a) loan payments be applied first to accrued interest and then to principal.\u201d<\/p>\n

Halldin did not explain why the charges are not listed as interest payments, why they are taken as lump sums rather than added to the amount owed, or why they are widely variable month by month.<\/p>\n

Because the bank has listed the sums as finance charges on statements, not interest payments, business owners have been assuming that Bank of America is taking extra fees, adding to their confusion and anger over the entire process. \u201cHow is Bank of America allowed to make a 3 percent fee off of this and now they\u2019re charging these ridiculous finance charges?\u201d said Amy Yassinger, owner of events entertainment\u00a0company Yazz Jazz in Illinois, who has a PPP loan with Bank of America that the bank has refused to forgive despite her assertion that the bank itself helped her apply for the loan and that she used the money solely to pay employees when her work dried up.<\/p>\n

The SBA has\u00a0made it clear<\/a>\u00a0that banks are not allowed to \u201ccharge small businesses any fees,\u201d especially since banks that issued PPP loans were already compensated for doing so. Together, PPP issuers\u00a0stood\u00a0to make $18 billion<\/a>\u00a0in processing fees from the government; in mid-2020, Bank of America in particular was\u00a0forecast<\/a>\u00a0to make $755 million, or 2 percent of its pre-pandemic revenue, based on the assumption that it would reap an average 3 percent fee from each loan from the government.<\/p>\n

<\/div>\n

Mark Cobb, owner of Premier Pressure Washing & Concrete Cleaning in Georgia, only applied for a PPP loan because he was assured so many times \u2014 by not just the government, but Bank of America itself \u2014 that it would be forgiven. But now that Bank of America has refused to forgive his $20,362 loan, he\u2019s had to start making payments. His was the statement in\u00a0which\u00a0Bank of America took $423.13 as a finance charge from a recent $569.79 payment, leaving just $146.66 to go toward the principal.<\/p>\n

\u201cThis is crazy,\u201d he said. \u201cIf I\u2019m going to pay the damn loan off, I want every bit of it to go to principal.\u201d<\/p>\n

But he knows that he has to keep making payments, even if so much of it isn\u2019t even going toward paying off the loan. \u201cI can\u2019t afford to get my credit ruined,\u201d he said. \u201cThey\u2019ve got you. If you don\u2019t pay it, they\u2019ll come get everything.\u201d<\/p>\n

Cobb\u2019s business has been pressure washing the outside of restaurants for 22 years. When the pandemic hit, the work \u201covernight stopped,\u201d he said. So when Bank of America, where he\u2019s banked since 1978, started sending him notifications urging him to apply for small business loans, he decided to apply for a PPP loan to be able to keep paying the people who do the work for him, whom he hires as 1099 contractors. \u201cThat\u2019s what I did with the money \u2014 I paid them,\u201d he said. Within eight weeks, the money was spent.<\/p>\n

Cobb said that when he applied for a PPP loan,\u00a0contract workers were still covered<\/a>\u00a0by the terms of the program \u2014 it was only a week after he received the money, he said, that the rules changed to exclude payments to 1099 workers. But his forgiveness application was denied because he had used the money to pay 1099 employees.<\/p>\n

\u201cThey\u2019ve got you. If you don\u2019t pay it, they\u2019ll come get everything.\u201d<\/blockquote>\n

\u201cIt doesn\u2019t sound like a lot to a lot of people, but it is to me,\u201d he said. \u201cI would never have taken a $20,000 loan \u2026 unless I was assured multiple times it was going to be forgiven.\u201d<\/p>\n

Cobb\u2019s business has rebounded since the start of the pandemic, but it\u2019s still depressed compared with\u00a0before the crisis. \u201cI\u2019m not making technically any more at all; I\u2019m just paying subcontractors right now,\u201d he said. If he doesn\u2019t, he knows that in the tight labor market they\u2019ll leave him and go work somewhere else.<\/p>\n

So the money taken from his payments as finance charges is coming right out of his empty pockets. \u201cSix hundred dollars a month could go toward paying a car off, for paying my mortgage down,\u201d he said. \u201cIt makes everything a lot tighter.\u201d It also depresses his business: If he weren\u2019t making PPP payments, he would have enough money to buy another rig and put another person to work, taking on more clients. \u201cI turn down business all the time because I don\u2019t have the money,\u201d he said.<\/p>\n

He\u2019d love to just sell his business and retire, but knows he can\u2019t with the loan hanging over him. \u201cIf I could declare bankruptcy and it wouldn\u2019t ruin my credit, I\u2019d have done it already,\u201d he said.<\/p>\n

Cobb got no explanation about the finance charges ahead of time, so he contacted the bank about them. \u201cI\u2019ve called so many times.\u00a0It drives me crazy,\u201d he said. One person told him that the charges were for accrued interest, but he claims that the math doesn\u2019t add up, and \u201cnone of them could really explain it.\u201d<\/p>\n

Yassinger, the Yazz Jazz owner, is still fighting to get her loan forgiven, but in January she made her first payment, and she\u2019s regularly made payments since. A finance charge has been taken out of every single one, including $769.78 from a $2,000 payment.<\/p>\n

\u201cNone of us want millions of dollars.\u00a0We just want to get this fixed.\u201d<\/blockquote>\n

She says she didn\u2019t actually get a statement showing her payment and the finance charges until May. \u201cI started freaking out,\u201d she said. Her monthly payment was $885.86, but she decided to pay $2,000 a month in the hopes of paying it down faster. \u201cI was thinking that in 18 months it\u2019ll be pretty much paid off,\u201d she said. When she saw that instead so much was going toward finance charges, \u201cit was just crushing,\u201d she said. \u201cI\u2019m suffocating with this debt.\u201d She received no explanation for why and when such charges would be taken out.<\/p>\n

Yassinger is\u00a0part of a group of small business owners who got their PPP loans through Bank of America and haven\u2019t had them forgiven. The solution they\u2019re pressing for, in any meeting they can get with members of Congress, is legislation saying that small business owners who were overfunded but used their loans properly should have them forgiven and converted into grants. \u201cNone of us want millions of dollars.\u00a0We just want to get this fixed,\u201d she said. \u201cWe just want these forgiven.\u201d<\/p>\n

In the meantime, she has to keep paying,\u00a0just like Cobb,\u00a0or\u00a0risk impacting her credit. \u201cI\u2019m trying to do what I think is right,\u201d she said. \u201cBut at the same time, I don\u2019t want to give them any more money right now, because what\u2019s the point?\u201d<\/p>\n

The post After Refusing Loan Forgiveness, Bank of America Hits PPP Borrowers With Inscrutable “Finance Charges”<\/a> appeared first on The Intercept<\/a>.<\/p>\n\n

This post was originally published on The Intercept<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

Bank of America says the charges are for accrued interest. Small business owners haven’t received any notice about how much they owe or the schedule for paying it back.<\/p>\n

The post After Refusing Loan Forgiveness, Bank of America Hits PPP Borrowers With Inscrutable \u201cFinance Charges\u201d<\/a> appeared first on The Intercept<\/a>.<\/p>\n","protected":false},"author":1603,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/790549"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/1603"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=790549"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/790549\/revisions"}],"predecessor-version":[{"id":790550,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/790549\/revisions\/790550"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=790549"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=790549"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=790549"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}