Bank Of America Sba Loan - People are reflected in the window of a Bank of America branch on July 18, 2022 in New York City. Photo: John Smith/Corbis via Getty Images People are reflected in the window of a Bank of America branch on July 18, 2022 in New York. Photo: John Smith/Corbis via Getty Images
After Bank of America Loan Forgiveness Denied, PPP Borrowers Hit Unexpected "Finance Fees" Bank of America says the fees are for accrued interest. Small business owners have not been told how much they owe or a repayment schedule.
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Bank of America refused to forgive some loans made to small business owners through the Payday Protection Program. An early-Covid program that gave business owners money to cover payroll and other expenses to help sustain them during the pandemic, the loans were to be forgiven if they were used properly. But Bank of America forced borrowers to use its own opaque portal, rather than the Small Business Administration's, giving business owners limited recourse when their forgiveness requests were denied.
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Now, those business owners are faced with repaying loans they thought would turn into grants, and they've had another surprise: the bank is taking large chunks of the payments in the name of "finance fees." Bank of America told The Intercept that the charges are for interest that began accruing when the loans were distributed; Unsecured PPP loans should accrue 1 percent annual interest under SBA rules.
But business owners say the bank didn't explain the charges on their statements or elsewhere, and didn't tell them how much interest they had to pay or a schedule for it, leaving borrowers confused, demoralized and in the dark. . One statement from the business owner showed more than $700 of the $2,000 payment received by Bank of America for a line item designated only as a "finance charge," while another reported a finance charge higher than the payment amount. loan: USD 423.13 was taken as a finance charge when paying USD 569.79.
Fees also don't work like regular interest payments. According to multiple bank statements six small business owners shared with The Intercept, finance charges vary widely from month to month, even for the same borrower: One business owner was charged $233.27 for a November statement and 10, $36 next month. On another statement, the entire payment of $238.47 was transferred to the finance charge and nothing was transferred to principal, the previous and next month's statements only included part of the payment in the finance charge. The installments of the next loan increase each month, instead of decreasing as expected if the interest is paid.
Bank of America spokesman Bill Halldin said the 1 percent interest began to accrue when borrowers received the funds, and for those who had not had their loans forgiven and were making payments, "their initial payments were applied first to the accrued interest and then to the principal," he said. The finance charge is the amount of their payment that has been applied to the accrued interest."
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The SBA confirmed this. "If the borrower has not received full forgiveness due to the excess loan amount, the borrower must repay the remaining balance with 1% interest," agency spokeswoman Christalyn Solomon said in a statement. "The bank is right that interest started to accrue on the day of payment. The SBA generally requires that 7(a) loan repayments be applied to accrued interest first and then principal."
Halldin didn't explain why the fees don't show up in the interest payments, why they're considered lump sums and don't add to the amount owed, or why they vary so much from month to month.
Because the bank listed the amounts on the statements as finance charges, not interest payments, business owners assumed Bank of America was charging additional fees, adding to the confusion and anger throughout the process. "How can Bank of America get away with this 3% fee and now charge these ridiculous finance fees?" said Amy Yassinger, owner of the Yazz Jazz entertainment company in Illinois, who has a PPP loan with Bank of America, which the bank refused to forgive, even though the bank itself helped her apply for the loan and said she was only using the money. paying workers when his work dried up.
The SBA has made it clear that banks cannot "charge small businesses any fees," especially since banks that made PPP loans have already been compensated for doing so. Collectively, PPP issuers earned $18 trillion in government processing fees; In mid-2020, Bank of America in particular was projected to earn $755 million, or 2 percent of its pre-pandemic revenue, based on the expectation that it would earn an average 3 percent fee on each government loan.
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Mark Cobb, owner of Georgia's Premier Pressure Washing & Concrete Cleaning, applied for a PPP loan several times because he was assured that it would be forgiven not only by the government, but also by Bank of America itself. But now that Bank of America refused to forgive his $20,362 loan, he had to start paying it off. Bank of America took $423.13 from the final payment of $569.79 as a finance charge, leaving only $146.66 outstanding.
"That's crazy," he said. — If I'm going to pay the damned loan, I want every bit of it to go to the principal.
But he knows he has to keep making the payments, even if it won't help pay off that much of the loan. "I can't ruin my credit," he said. "They've got you. If you don't pay, they'll come for anything."
Cobb's company has been pressure cleaning outdoor restaurants for 22 years. When the pandemic hit, work "stopped overnight," he said. So when Bank of America, which has been in the bank since 1978, started sending it notices asking for small business loans, it decided to apply for a PPP loan so it could keep paying the people who do the work. him and who hires him as a 1099 contractor. "That's what I did with the money, I paid them," he said. After eight weeks the money was spent.
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Cobb said when he applied for the PPP loan, contract workers were still subject to the terms of the program — a week after receiving the money, he said, the rules were changed to exclude payments to 1099 workers. However, the apology was denied because he used the money to pay 1099 employees.
"It doesn't seem like a lot to a lot of people, but it does to me," he said. "I would never have taken out a $20,000 loan unless I had been assured multiple times that it would be forgiven.
Cobb's business has recovered since the start of the pandemic, but is still depressed compared to pre-crisis times. “Technically I don't produce at all anymore; Right now I'm paying subcontractors,” he said. If not, he knows they will leave him and go to work elsewhere in a tight job market.
So, as a financial burden, the money for his payments comes directly from his empty pockets. "Six hundred dollars a month can go toward a mortgage payment and a car payment," he said. "It tightens everything up a lot. It also depresses his business: if he didn't make the PPP payments, he would have enough money to buy more equipment and hire another person and take on more clients. "I keep giving up the business because I don't have money," he said.
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He'd like to sell his business and retire, but he knows he can't afford the loan. "If I could file for bankruptcy and it wouldn't ruin my credit, I would," he said.
Cobb received no explanation about the finance charges, so he contacted the bank about them. "I've called so many times. It's driving me crazy," she said. One person told her the charges were for accrued interest, but the math just didn't add up and "none of them could really explain it."
Yassinger, the owner of Yazz Jazz, is still struggling to pay off the loan, but he made his first payment in January and has been making regular payments since then. Each was charged a finance charge, including $769.78 from the $2,000 down payment.
He says he didn't receive the payment and financial charges until May. "I started going crazy," he said. His monthly payment was $885.86, but he decided to pay $2,000 a month in hopes of paying it off faster. "I thought it would be pretty worth it in 18 months," he said. When he saw instead
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