Federal Judge in the US District Court for the District of Columbia (the “Court”) ordered The Small Business Administration (“SBA”) to release names, addresses and loan amounts to all Paycheck Protection Program (“PPP”) loan recipients by November 19, 2020.
As described in the statement, the SBA has processed an “unprecedented” $ 717 billion in loans and loan guarantees under the PPP and Pandemic-Related Economic Injury Disaster Loan (“EIDL”) program since Congress earlier this year for the emergency funding Has provided programs. The SBA initially refrained from disclosing the identity of the millions of loan recipients under these programs and the specific loan amounts they had received. Even after various news organizations released the information about the Freedom of Information Act (“FOIA”), the SBA refused, both Borrower names and dollar numbers, among others Credit level data. The SBA invoked FOIA exceptions 4th and 6th to help withhold data from the FOIA requesters.
The SBA argued that it needs to withhold certain data at the credit level (e.g., Names of borrowers, or loan amounts), as a release would reveal sensitive information – specifically, a borrower’s payroll information and / or personal finances. The court found the SBA’s arguments inconclusive. The court rejected the SBA’s “fundamentally flawed” argument in relation to Exception 4 that credit data necessarily reveals a company’s payroll information. With regard to Exception 6, the court found that “a substantial public interest in the disclosure of the SBA’s management of the PPP and EIDL programs dramatically outweighs any limited private interest in secrecy.”
The court ruled in favor of the FOIA applicants and ordered the SBA to collect the names, addresses and loan amounts of all PPP and pandemic-related EIDL loan recipients by Aug.
As the Wall Street Journal reported this weekend, evidence of widespread PPP fraud has been mounting for months, even as the SBA refused to release detailed credit-level data. In September alone, FinCEN received 2,495 reports of suspicious activity related to corporate lending – more than ten times the number submitted by lenders when the PPP opened in April. The SBA Office of Inspector General also recently reported that it received an unprecedented 35,000 hotline complaints in September. The court’s order that the SBA release all borrower names and loan amounts this month will inexorably fuel these dramatic trends and encourage greater public scrutiny of both individual PPP loans and the lenders who have granted them.