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Coronavirus Information and Resources

In response to the ongoing COVID-19 Pandemic, CLLA wants to be sure you have the resources to stay current and informed during these unprecedented times. Please access the following information by clicking on the link.

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Important Coronavirus Legislative Update from Timothy Wan, CLLA President

The CLLA hopes you, your loved ones, and co-workers, are safe and healthy in these unprecedented times.

The CLLA has been monitoring and opposing all proposed legislation to make sure that small businesses, which include many of our members, are not financially ruined by legislation with unintended consequences.  We have charged our lobbyist to spread our message to Capitol Hill. We have also been in constant communication with the National Creditors Bar Association, the Commercial Collection Agencies of America, and the International Association of Commercial Collectors in order to coordinate our efforts to oppose the legislation.

The “CARES Act”, S.3548, is silent with regard to debt collection as a whole. It does create limitations on foreclosures, credit reporting, evictions, and governmental student loans. However, there are bills circulating in Congress, such as H.R. 6370, and S.3565, which attempt to put a total moratorium on debt collection, regardless of whether the customer has the ability to pay, or even has been impacted by any national emergency.

On March 20, 2020, the CLLA took action to protect our members and sent a letter to the President and Congressional leaders advocating for our members with regard to H.R. 6370. Currently, the Board of Governors is working on proposing common sense legislation with regard to S.3565 that is compassionate, but protects the credit industry.  We encourage you to also take action by writing to your legislators to help ensure that our members are able to continue their business operations, and reach out to your contacts, clients, and business relations to help spread this message.

We are here for you and we care.  A link to the Department of Labor’s March 24th Q&A can be found here: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions (Note that the DOL is announcing that the new law goes into effect April 1, not April 2.) We will also be trying to put some information together for those of you who need help obtaining a SBA loan.

You are not alone.  We’ve got your back and we’re going to see this through together.  Keep in touch with us, follow us on social media.

S.3565 IS OVERBROAD AND FRAUGHT WITH UNINTENDED AND DANGEROUS CONSEQUENCES 
In this time of economic confusion and uncertainty, S.3565 (the “Bill”) was crafted and introduced with intentions to ease pressure on those faced with economic hardship. While the CLLA supports this intent, the Bill would unfortunately cause more harm and uncertainty to the commerce of our nation than the relief it proposes to those in need. The following are just a few examples:

I. S.3565 WRONGLY AND UNNECESSARILY BROADENS THE FDCPA TO PROTECT COMMERCIAL DEBTORS
The Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et. seq. (“FDCPA”) protects unsophisticated consumers from violations by debt collectors. The Bill improperly expands the FDCPA to include debt collection restrictions against small businesses and imposes fines and penalties against debt collectors who pursue collection activities against small businesses. The FDCPA was not designed to govern inquiry and collection of business debt, as businesses are held to a higher standard than consumers, and business transactions are generally negotiated at arm’s length between merchants. The Bill would add another layer of regulation and uncertainty to private businesses dealings and open the flood gates to a sea of unintended litigation. Any regulation against small business should not be incorporated into the FDCPA.

II. S.3565 WILL FURTHER IMPAIR AND SUSPEND FUNDAMENTAL PRINCIPLES OF COMMERCE
The Bill will impair and effectively rewrite previously negotiated credit terms and contracts between businesses, by suspending legitimate accounts receivable and collection inquiries and eliminating existing federal and state laws that provide relief and certainty to businesses and business transactions. The commerce of our country is built upon credit. Industry and commerce thrive because banks and other businesses extend credit to enable transactions and business growth. When one business loses its normal operating capacity, the resulting loss of production, revenue and lag in receipt and payment of receivables, sets off a chain of events that affects the production, payment of receivables and receipt of revenue for other businesses. In such instances, businesses may attempt to manage and collect receivables on their own or hire attorneys or collection agencies to resolve issues associated with outstanding receivables. Such efforts are critical to the foundation and continuation of credit-based transactions and business relationships. Very simply, the Bill will disrupt the normal operations of businesses by halting all collection efforts, garnishments, evictions and foreclosures against individuals and small businesses during a state of emergency declaration. Any legislation that disrupts business operations at this time should not be considered by Congress because of the hardships that businesses all over the country are currently encountering.  Download PDF to read more

HERE WE GO AGAIN.

ADDITIONAL GUIDANCE FROM THE SBA REGARDING THE PPP PROGRAM CLARIFIES THE CERTIFICATION REQUIREMENT FOR LOANS UNDER TWO MILLION AND CLARIFIES WHAT IS INCLUDED IN PAYROLL

After the last guidance from the SBA, several questions remained regarding the length to which the SBA would review the certifications made by borrowers obtaining a PPP loan. New guidance states that as long as the loan is under two million dollars, it will not be questioned as meeting the certification requirement that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” See question 46 https://www.sba.gov/sites/default/files/2020-05/Paycheck-Protection-Program-Frequently-Asked-Questions_05%2013%2020.pdf.

Further Guidance provided by the SBA states that the amount of forgiveness results from the 8 week period beginning from the date the lender makes the first disbursement of the PPP loan to the borrower. Q.20. The amount of forgiveness includes payroll costs. Question 16 in the new guidance states that payroll costs are calculated on a gross basis without regard to federal taxes imposed or withheld such as the employee’s share of FICA and income taxes required to be withheld from salary. Payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax. Q 16.

In addition, the new guidance clarifies what can be added to the $100,000 limit on annual salaries. Under the PPP programs, salary amounts over $100,000 should not be included in the loan. The new guidance states that this exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:

  • Employer contributions to defined benefit or defined contribution retirement plans;
  • Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
  • Payment of state and local taxes assessed on compensation of employees.  Q.7.

The guidance has many other provisions that may be applicable to your firm. Each firm should review the attached guidance carefully to ensure compliance and documenting the loans to ultimately receive forgiveness.

Download PDF

Theodore J. Hamilton
Attorney at Law

Wetherington Hamilton
813-225-1918 ext 114.
813-225-2531 fax.
www.whhlaw.com

A Message from Tim Wan

It is time to act! Congress is about to pass this, so please reach out to your local Congresspeople, RIGHT NOW!
The CARES ACT 2.0, on page 1037, Section 110402, includes a blanket moratorium on debt collection that will DESTROY small businesses!
See the link below on how you can act!

Commercial Law League of America – CLLA

April 6 

Dear CLLA Member,

Americans are facing this time of crisis with solidarity, resolve, and an effort of togetherness.

While we wholeheartedly agree and support recent legislative consumer relief actions, there is legislation, such as Senate Bill S.3565, which provides for a blanket prohibition of debt collections, fraught with unintended consequences. For a breakdown of the reasoning, please visit this link to CLLA’s letter to the White House: https://lnkd.in/d8W-PpX

Here’s how you can help!

  1. You can download either of these form letters: one for CLLA members and their employees (https://lnkd.in/d7UxW6z), and another for credit grantors and small business owners (https://lnkd.in/dZJDt5G).
  2. Place your letterhead on top, and then send it to your local congress people.
  3. You can use this easy link: 
  4. https://lnkd.in/eudKQfXShare this post or email this to anyone you know that you think would be willing to help!

Link to CARES Act 2.0

Be smart out there, and I hope to see you soon.

Timothy Wan
CLLA President

ACA International v. Massachusetts Attorney General

On May 6, 2020, the federal court in Massachusetts enjoined the enforcement of an emergency regulation issued by the Massachusetts Attorney General that banned consumer debt collectors from initiating calls to debtors and from initiating lawsuits to collect a debt. After the emergency regulation was issued, ACA International sued the Attorney General in federal court arguing that the regulation was overly broad and unconstitutional. The court agreed finding that the regulation violated the First Amendment right of commercial speech and the right to petition the courts for redress. The Court found that the interest in protecting a debtor did not outweigh the “threat of extinction faced by smaller collection agencies who have been effectively put out of business.” The Court’s greater concern was the harm the ban will cause essential businesses that are operating during the Covid-19 pandemic, recognizing that a “capitalist society has a vested interest in the efficient functioning of the credit market which depends in no small degree on the ability to collect debts.” The full order is available for download below.

These are unprecedented times and the entire credit industry, both commercial and consumer, has been impacted not only by the shelter in place orders and the inability of debtors to pay their debts, but by the actions of overzealous regulators at the state and federal level. While the Commercial Law League of America recognizes the financial impact this pandemic has caused, it stands opposed to any effort to issue new laws and regulations that impact the efficient functioning of the credit market, including the ability to collect debts. CLLA members are in the best position to work with debtors to get through this crisis and can do so without the need for legislation that unreasonably impacts the ability of its members to run their businesses.

Download PDF

New SBA Guidance Makes a Paycheck Protection Program Loan Risky for Many Businesses

April 29, 2020

When President Trump signed the Paycheck Protection Program into law as part of the CARES Act on March 27, 2020, many businesses felt relief that their cash flow might not be affected by the Coronavirus shutdown. The program allowed for 2.5 times monthly expenses to be borrowed to cover things like payroll and rent. Further, an important part of the Legislation was a section that did not require a review of other sources of funds. The other sources of funds review is usually standard in most SBA loan applications. However, enter the regulators. Since the passage of the first CARES Act, the SBA regulators have provided “guidance” as to many questions posted by Lenders and Borrowers. These pronouncements, although not law, are used to interpret the provisions of the Act. Some of these guidance responses almost seem to contradict the original language of the Act.

However, this guidance will likely be used to obtain loan forgiveness. More importantly, the new “guidance” also may give many pause in taking the funds since a false statement on the application can subject the owner to criminal charges under Federal Law.

The April 23 revision to the FAQ at Question 31, creates risk for all those applying for PPP loans. A PPP borrower must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Borrower.” Thus, although the Act states that other sources of funds shall not be considered, the regulators have interpreted this statement to mean that a review of a “borrowers ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business” shall occur. The response from the SBA specifically states as follows: “Although the CARES act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary.”  The guidance states specifically that “Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”

This guidance creates so much ambiguity that many should reconsider whether applying for a PPP loan is worth it. A review of other sources of liquidity definitely includes review of available cash in the business. It will also include other sources of funds available for borrowing at a reasonable rate. The note also cites to Section 3(h) of the Small Business Act – This section specifically requires a review of other sources of funds. It includes a review of other lending sources available from other sources, the industry in which the applicant operates, and whether the business has been in operation under 2 years 15 U.S.C. 531 et Seq Section 3(h).

As a result, PPP applicants may want to reconsider taking funds if they have the following in place:

  1. Sufficient cash reserves
  2. Continuing receipts during Covid 19.
  3. Access to conventional financing
  4. All other sources of funds.

The risks of taking these funds may well exceed the benefits. If the presidency changes or even if it does not, you will see many in Congress on a witch hunt to enforce these rules after all of the dust has settled.  If you have taken funds from the PPP you have until May 7, 2020 to return the funds without penalty if you are concerned.  In the end, just make sure that you can support your belief that you will run out of funds from all sources due to COVID 19 before your cash flow starts again. This certification is much different than the original intent of the Bill, but it is the present guidance. The Moral of the story: be careful when taking money from the government. You do not want to be part of a congressional investigation.

Theodore J. Hamilton
Attorney at Law

 

 

 

812 W. Dr. MLK Jr. Blvd., Suite 101
Tampa, FL 33603

813-225-1918 ext 114.
813-225-2531 fax.

www.whhlaw.com

Urgent Call to Action: CLLA Needs Your Voice!

Dear CLLA Member,

I hope this missive reaches you in health and safety in these unprecedented times. We, like all other Americans, are facing this time of crisis with solidarity, resolve, and an effort of togetherness.

While we wholeheartedly agree and support recent legislative consumer relief actions, there is legislation, such as Senate Bill S.3565, which provides for a blanket prohibition of debt collections, fraught with unintended consequences. For a breakdown of the reasoning, please visit this link to CLLA’s letter to the White House.

Here’s how you can help!

  1. You can download either of these form letters: one for CLLA members and their employees (link to CLLA Member and Employee Letter), and another for credit grantors and small business owners (Business Owner and Employee Letter).
  2. Place your letterhead on top, and then send it to your local congress people.
  3. You can use this easy link: https://www.govtrack.us/congress/members
  4. Share this post or email this to anyone you know that you think would be willing to help!

Be smart out there, and I hope to see you soon.

Timothy Wan
CLLA President

Brief Summary of the Small Business Sections of the Coronavirus Aid, Relief, and Economic Security Act or the (“CARES Act”) enacted on March 27, 2020.

By: Theodore J. Hamilton, Esq. , CLLA Attorney Board Member
This is a brief summary of the Small Business Sections of the third COVID-19 Act (H.R. 748) signed into law by President Trump on March 27, 2020 (herein “The Act” or “Act”). This Act distributes over $2 trillion of federal support to the U.S. Economy. The Act provides specific benefits to Businesses under 500 employees. These benefits include loans with low interest and with forgiveness provisions, tax credits for those that keep their employees working, and unemployment benefits for those laid off. In addition, tax credits are available to individuals.
Section 1, starting at Section 1101 of the Act, deals with keeping workers paid and employed. The Act allocates $349 Billion of the total Act funding to this part of the Act. The first section of the Act deals with loans to those companies that keep employees working during the COVID-19 outbreak.
Loans are available from the SBA to cover salaries and other expenses of Small Businesses for the period February 15, 2020 through June 30, 2020 (It is titled the Paycheck Protection Plan). Under the Act, employers can get a loan for 2.5 times the average of their payroll from February 15, 2019 to February 15, 2020. The Employer can use this money for salaries, commissions or similar compensation, mortgage obligations, rent, utilities and interest on debt incurred before the covered period. The Small Business Administration (herein “SBA”) will administer this Emergency Loan Program. This loan money also applies to non-profits with fewer than 500 employees. This program will be moved out by the SBA to qualified SBA lenders. These loans shall not require personal guarantees as the employer uses for the above purposes. The loans shall have a four percent interest rate with a ten year payback. These COVID-19 Loans will have an immediate 6 month complete payment deferral and up to 1 year of such deferral at the Lender’s discretion for COVID-19 related reasons including all amounts. The loans shall have a 0 risk weight for the lenders. The loans are not included in reporting for TARP purposes for the banks. Loan fees are paid by the SBA as a reimbursement and no agent can charge a fee. No loan commitment fees can be charged. These loans can be up to $1 million.  READ MORE

Federal Government Resources
If your state has received the necessary disaster designation, SBA’s Economic Injury Disaster Loan Program can provide low interest loans in this difficult time. A streamlined application process is now available at https://covid19relief.sba.gov/#

Information on administration and processing for the expanded SBA 7(a) loan program which is part of the CARES Act, which passed on Friday, March 27, 2020, is not yet available. Those loans are to be processed by approved SBA lenders. Your current bank or lender is the best current source for this information, as it becomes available. CLLA Board of Governors member Ted Hamilton, Esq. has published a summary of the CARES Act which may be of assistance in digesting the voluminous law.
Linked below, state specific programs may be available, including state disaster assistance available in:

Collection Agency Guidance in Response to Coronavirus | Cornerstone Support

Updated: Everyday new information helps to shape the ARM industry response to the Cornovirus outbreak. The graph below contains REAL-TIME updates on the impact to debt collections due to the Covid-19 jurisdiction response. Look below to keep track of jurisdictions suspending collections, state offices that are closed and any adjusted license renewal deadlines.

https://cornerstonesupport.com/collectors-coronavirus-guidance/