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After Hearing From SBA Inspector General, Rep. Chu Condemns SBA Failure to Fully and Faithfully Implement CARES Act

May 15, 2020
Press Release

WASHINGTON, DC — Today, Rep. Judy Chu (CA-27), Chair of the House Small Business Subcommittee on Investigations, Oversight, and Regulations, held a virtual forum with the Small Business Administration’s (SBA) Inspector General (IG), Hannibal "Mike" Ware, about the report he prepared on the SBA’s implementation of the Paycheck Protection Program (PPP). According to the CARES Act, the SBA through PPP is supposed to prioritize underserved and rural markets. But the report showed that by failing to issue guidance to big banks and community lenders, and failing to collect demographic information on its applications, the SBA ignored that directive and allowed funds to be distributed in a manner that did not fully align with the act’s provisions. In addition to failing to prioritize underserved markets, the report found SBA also contradicted the CARES Act by setting onerous restrictions on loan forgiveness, failed to issue guidance on loan deferments, and did not register the millions of PPP loans it has already disbursed. Rep. Chu issued the following statement:


“Every business is being impacted by the social distancing requirements implemented to contain the coronavirus. And in order to rebuild our economy, we will need to make sure every business is included in the relief as well. That is why Congress passed the CARES Act with explicit direction to ensure that underserved markets – those who have the hardest time accessing credit during the best of times – are not left out now. But it is clear from the SBA’s own Inspector General that they failed to do that.


“I was shocked by how casual SBA was in fulfilling Congress’s intentions. For instance, IG Ware told us today that instead of issuing formal guidance to community lenders to encourage them to reach out to underserved communities, the SBA instead relied on informal e-mails to select community lenders, and did nothing to reach out to the big banks processing the majority of PPP loans. That is obviously not how the SBA is expected to implement the largest economic recovery bill in our history, and it shows how not seriously they treated this requirement to reach out to underserved businesses. Small businesses around this country are depending on this money to keep their workers paid. SBA must take this seriously and issue the guidance necessary to ensure our rural and underserved businesses are included in the relief efforts.”