Regions Bank settles dispute over pandemic loan forgiveness for $4.9 million.
Regions Bank has agreed to pay almost $5 million to settle claims around its Paycheck Protection Program (PPP) loan that federal officials said should never have been forgiven. The agreement was announced by the United States Department of Justice (DOJ) on May 22, effectively ending a civil case connected to the bank’s handling of a pandemic-era business loan.
The bank, based in Birmingham, Alabama, will pay $4.9 million to resolve allegations involving a loan approved during the COVID-19 pandemic. Federal officials claimed Regions Bank approved forgiveness for a customer’s Paycheck Protection Program loan even though the loan did not meet the rules required for forgiveness under the federal program.
The PPP was created in March 2020 after Congress passed the CARES Act during the height of the pandemic. The program was designed to help small businesses survive lockdowns, reduced business, and major financial losses. The Small Business Administration (SBA) managed the program while private banks and lenders handled loan applications and approvals.
Businesses that received PPP loans could later ask for the loans to be forgiven if the money was spent on approved costs such as employee paychecks, rent, and some business expenses. Once a loan was forgiven, the federal government repaid the lender for the remaining balance and interest connected to that loan. Banks that issued the loans also received fees based on the loan amounts.
According to the Justice Department, Regions Bank approved forgiveness for a PPP loan around August 2021 even though the borrower was allegedly not eligible to receive forgiveness under program rules. Officials also claimed the bank received money from the government connected to the forgiveness approval and should not have been paid those funds. The settlement indicated there has been no official finding of liability in the case and the bank did not admit to any wrongdoing.
The PPP program moved billions of dollars through the banking system in a short amount of time during the height of the pandemic. While the program helped many businesses stay open and keep workers employed, it also faced large amounts of fraud, false applications, and questions about how some loans were handled by lenders and borrowers.
Federal agencies have spent the past several years reviewing pandemic loan records and investigating cases involving possible abuse of the program. Some cases have involved fake businesses or stolen identities, while others focused on whether lenders properly checked borrower information before approving loans or forgiveness requests.
Banks across the country faced heavy pressure during the pandemic as businesses rushed to apply for emergency funding. Many lenders processed large numbers of applications in only weeks while federal rules and guidance continued to change. Even so, government officials have continued to stress that lenders were still expected to follow the standards required under the program.
The case adds to a growing list of settlements and investigations connected to relief programs offered to banks and other businesses during the pandemic. As federal agencies continue reviewing how COVID-19 relief money was handled, more lenders and borrowers may still face questions about loans previously approved by the government.
Join the conversation!