{"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 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