Dive Brief:
- Regions Bank will pay about $4.9 million as part of a Justice Department settlement related to allegations the bank received government payments, related to a Paycheck Protection Program loan, that it shouldn’t have.
- The Birmingham, Alabama-based bank approved forgiveness of a customer’s PPP loan even though the loan wasn’t eligible for forgiveness, the DOJ said in a Friday news release.
- Although $161 billion-asset Regions disagrees with the claims, “we have settled with the goal of closing this chapter and moving on,” the regional lender said in a statement Tuesday.
Dive Insight:
The PPP, created in March 2020 and administered by the Small Business Administration, was geared toward saving jobs during widespread lockdowns amid the COVID-19 pandemic.
Private lenders could extend PPP loans for eligible borrowers who could then pursue loan forgiveness, provided funds were used for expenses such as employee payroll. When a loan was forgiven, the SBA paid lenders the principal loan balance and any interest that accrued, as well as a percentage of the loan amount, the DOJ said.
In August 2021, Regions approved forgiveness of a PPP loan that was not eligible for forgiveness, and the bank was “unjustly enriched” by the SBA payment it received upon forgiveness of the PPP loan, the DOJ alleged.
The loan in question had been for Missouri resident Gregory A. DeLine, who owns and operates residential mortgage loan origination firm Midwest Mortgage Associates Corp., manufactured home seller Amega Sales. Inc. and GKD Management, L.P., a commercial trucking business that transports manufactured homes across the U.S., according to the DOJ complaint.
“The PPP was intended to provide critical assistance to eligible businesses during the economic uncertainty caused by the Covid-19 pandemic,” Assistant Attorney General Brett A. Shumate, of the DOJ’s civil division, said in the news release. “The department is committed to ensuring that PPP lenders are held accountable for failing to comply with applicable program requirements, including approving forgiveness of PPP loans that were not eligible under program rules.”
Regions said it facilitated about 75,000 PPP loans. “We are proud of our record supporting small businesses and have resolved this one individual matter regarding one specific loan from that 75,000 total,” the bank said in its statement.
