McWilliams: Banks Should Rely on Borrower Certifications When Making PPP Loans

FDIC Chairman Jelena McWilliams today confirmed that banks should rely on borrowers’ statements certifying that their economic need is legitimate when making Paycheck Protection Program loans, referencing a recent interim final rule issued by the Small Business Administration.

“Our instruction to banks has been to make sure, since these loans are not being traditionally underwritten, to take a look at the certification that the borrower is providing,” McWilliams told members of the Senate Banking Committee today. “To the extent that they are community banks, they will quite often know the borrowers in their communities. We are less concerned about whether or not community banks are able to figure out whether the borrower is legitimate or not.”

McWilliams added that for larger institutions, “our instructions have been to rely on the certification but be cognizant of who they’re lending to. They have to cross their t’s and dot their i’s.” She also emphasized that all banks must comply with existing fair lending laws when making PPP loans. “The fair lending laws, whether or not we issue specific guidance in connection with the PPP, they stand,” she said. “Banks know they have to abide by them.”