[COVID-19\Small Business]
Attorney General James: “Hardworking families and small businesses across the country are struggling more than ever because of this pandemic.”
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New York Attorney General Letitia James today took action to protect and support small businesses that have been impacted by coronavirus disease 2019 (COVID-19) and are in need of financial aid.
Attorney General James issued guidance to help small businesses obtain loans through the federal government’s Paycheck Protection Program (PPP) and also provided warnings and tips to protect small businesses from lenders and agents fraudulently and deceptively marketing these loans. The Attorney General’s Office also announced the issuance of a cease and desist order to one such company, “SBA.com” for deceptive marketing and business practices related to the issuance of PPP loans.
“Hardworking families and small businesses across the country are struggling more than ever because of this pandemic,” said Attorney General James. “These businesses are the backbone of our economy and our households and we must ensure they have the resources they need to stay afloat and support their employees. It’s imperative that small businesses know about the financial aid that is available and aren’t duped in the process of applying for these lifelines.”
PPP loans are forgivable, low-interest, no-collateral loans guaranteed by the U.S. Government as a response to the COVID-19 pandemic. PPP lenders and agents are not permitted to charge borrowers fees, and the interest rates for all PPP loans are set at 1%. PPP loans are available to small businesses and non-profit and religious organizations with 500 or fewer employees (with some exceptions) and to sole proprietorships, independent contractors, and self-employed persons. The loans are administered by eligible lenders under the authority of the U.S. Small Business Administration (SBA).
Attorney General James’ guidance for small businesses includes helpful information to apply for PPP loans and warnings about how to avoid fraud and protect themselves from abuse. The guidance includes numerous tips for small businesses, including the following:
- Deal only with known, trusted lenders that are eligible to issue PPP loans. Visit the Small Businesses Administration’s website to find a full list of eligible vendors.
- Make sure that the information in your loan application is correct. Unscrupulous agents or lenders may encourage borrowers to put false information in their loan applications to get the biggest loan possible, which would maximize lender fees. Incorrect information in an application can result in criminal liability for the borrower.
- Borrowers should not pay fees to get a PPP loan. Lenders are paid fees for PPP loans only by the SBA, not by borrowers. If the borrower is working with an agent, the agent’s fees are paid by the lender.
- Borrowers should not pay more than 1% annual interest for a PPP loan.
Attorney General James also issued a cease and desist order to a company deceptively calling itself “SBA.com.” The “SBA.com” website has the potential to mislead small businesses that are looking to obtain loans through the PPP. The website creates the misleading impression that “SBA.com” is the same as or is affiliated with the U.S. Small Business Administration (SBA) and its website “SBA.gov.”
Even U.S. Treasury Secretary Steven Mnuchin incorrectly urged small businesses to visit “SBA.com” to learn more about PPP loans at a press conference on April 2, 2020. The White House later corrected his error.
The “SBA.com” home page only contributes to these misleading impressions by prominently advertising links to find “COVID-19 Relief,” and stating that “Your Paycheck Protection Program Loan starts here” despite the fact that SBA.com is not a lender or certified participant in PPP. The Attorney General’s Office ordered “SBA.com” to immediately cease and desist the deceptive marketing of PPP loans and related services.
The Attorney General’s Office will continue to carefully monitor claims by companies regarding the PPP program and will take action to stop companies from making fraudulent or deceptive claims and from victimizing small businesses.
If a small business borrower believes it has been defrauded by someone offering, issuing, or servicing a PPP loan, or if it has been offered a PPP loan by a lender that does not appear on the SBA’s website as an eligible lender, it may file a complaint with the Attorney General’s Office of Consumer Frauds and Protection or call 1-800-771-7755.
Please visit our website to read this press release in Spanish https://ag.ny.gov/press-release/2020/attorney-general-james-takes-action-protect-small-businesses-impacted-coronavirus?lang=es.
