The New York Times - USA (2020-10-10)

B4 Y THE NEW YORK TIMES BUSINESSSATURDAY, OCTOBER 10, 2020 K

that some borrowers can still have

their loans forgiven even if they

cut head count or wages after tak-

ing the loan, but they will have to

submit payroll documents and

other records.

Lenders said the change was a

start but did not go far enough.

The Consumer Bankers Associa-

tion, an industry group, renewed

its call for all loans under $150,000

to be automatically discharged.

“It’s almost a nightmare to go

through the forgiveness process

as it is now written,” Richard

Hunt, the group’s chief executive,

said. “You have millions of small

businesses in crisis, some going

under, and Congress is not there in

their time of need.”

Lenders said they were also

wary of processing applications

without knowing how crucial as-

pects of loan forgiveness would

work, like how carefully they are

expected to vet borrower-pro-

vided documents like payroll

records. They are waiting for de-

tails on the Trump administra-

tion’s stated plan to audit all loans

over $2 million. And they are get-

ting nervous about whether the

government will pay them back

for loans they made to businesses

that have since closed or gone

bankrupt.

More than 5.2 million business

owners borrowed a total of $525

billion through the paycheck pro-

gram, which used banks and other

lenders as conduits to issue the

loans. From April to August, small

businesses were encouraged to

borrow cash to cover eight weeks

of payroll and a handful of other

expenses. Once the money is

spent, borrowers must apply

through their bank to have the

government pay off their loan.

But business owners looking to

start the loan forgiveness process

have found lenders mostly unwill-

ing to work on those applications

until there is clarity from Con-

gress, especially because of the

cost and complexity of handling

fairly small loans. Loan forgive-

ness proposals have been intro-

duced in both the House and Sen-

ate with bipartisan backing —

Treasury Secretary Steven

Mnuchin said he was a supporter

— and were likely to be included if

Congress passed an economic re-

lief bill, but the fate of such legisla-

tion is uncertain, with the presi-

dential election just weeks away.

Ed Sterling, the president of

Flagler Bank in West Palm Beach,

Fla., said lenders had been “wait-

ing on the edge of our seats” for

legislative action. The process for

reviewing a loan-forgiveness ap-

plication will take his bank about

three times as long as it took to

originate the loan, he said.

The Small Business Adminis-

tration has been slow to act on

loan forgiveness applications that

lenders have sent in. The agency

began accepting the forms on

Aug. 10. By late September, it had

received 96,000, but had not yet

approved or denied a single appli-

cation, its chief of staff, William

Manger, said at a House subcom-

mittee hearing. By law, the agency

has 90 days to respond after it re-

ceives an application. A repre-

sentative of the agency said it had

sent its first approvals and loan

payments to banks on Oct 2.

Lynn Ozer, a banker who spe-

cializes in small-business lending,

said borrowers she worked with at

Fulton Bank in Lancaster, Pa.,

were “panicked” at the prospect

that their forgivable loans would

become debts if they made mis-

takes on their paperwork.

“We can’t help our borrowers if

we ourselves don’t understand the

guidance,” Ms. Ozer said.

Trapped in the middle are busi-

ness owners like Léa Kujala, a co-

owner of Northwest Treatment, a

counseling center near Portland,

Ore. Ms. Kujala got a $34,000 loan

in April, which helped her and her

business partner retain their

three employees when their reve-

nue nose-dived.

Now, Ms. Kujala would like to

get the loan paid off, but her lend-

er, U.S. Bank, has not yet opened

its forgiveness portal to her. Ms.

Kujala — who estimates that she

has already spent five hours gath-

ering records and preparing her

application — is so concerned

about the loan’s many rules and

potential tripwires that she is

keeping all of the money she got in

a reserve account, just in case her

loan isn’t forgiven. (She drained

her business’s savings to make

payroll, and will pay that back if

her loan is discharged.)

“We’re super nervous about the

fact that we don’t know what’s go-

ing to happen,” she said. And the

loan was only a temporary salve:

With her revenue still down at

least 30 percent, Ms. Kujala is pre-

paring to lay off one of her employ-

ees.

A U.S. Bank spokesman said the

bank was sending out invitations

in stages to its forgiveness portal.

After the bank was contacted for

this article, a representative told

Ms. Kujala that she would get an

invitation soon.

Most borrowers — and their

lenders — can afford to wait be-

fore seeking loan forgiveness. The

CARES Act, which created the

Paycheck Protection Program,

initially set repayments on any re-

maining debt to begin six months

after a loan was disbursed, but

Congress later revised the law to

give borrowers as long as 16

months to apply for forgiveness.

For most borrowers, that means

the issue won’t become urgent un-

til mid-2021.

But there, too, the law has a

gray area. More than four million

borrowers — a majority — have

loans that were made before the

rules changed. To scrupulously

follow the law, lenders would need

to formally modify those loans

and get each borrower’s signature

on the changes. That’s a “momen-

tous task,” said Brad Bolton, the

chief executive of Community

Spirit Bank in Red Bay, Ala.

The Small Business Adminis-

tration has not yet responded to

banks’ requests for clarification

on the matter — and payments for

the program’s earliest borrowers

are scheduled to come due this

month.

Most lenders, especially the

biggest ones, have decided to take

the risk and simply postpone all

payments, said Tony Wilkinson,

the chief executive of the National

Association of Government Guar-

anteed Lenders, a trade group.

“Because it’s a benefit to the

borrower, they’re doing it unilat-

erally, because who is going to ob-

ject?” he said.

Glenn Sandler, an accountant in

Melbourne, Fla., has around 200

clients with Paycheck Protection

Program loans, averaging around

$40,000. He’s advising all of them

to sit tight and wait for what he be-

lieves will be legislative fixes to

the forgiveness process.

“Hopefully, Congress will get off

their butts,” he said.

Mr. Sandler thinks automatic

forgiveness for small loans is

likely, in part because the alterna-

tive — trying to collect payments

from small businesses struggling

to stay afloat — is untenable.

“They’re broke,” he said of the

mom-and-pop ventures that he

works with. “There’s a lot of peo-

ple who won’t be able to pay it

back. So, what, they’re going to go

into collections with them?

There’s no sense in that.”

A Coming Nightmare for Small Businesses

FROM FIRST BUSINESS PAGE

Jessica Macklin, left, and Léa Kujala at their counseling center, Northwest Treatment, in Oregon. Ms. Kujala

got a $34,000 loan in April, which helped them retain their three employees when their revenue nose-dived.

PHOTOGRAPHS BY WILL MATSUDA FOR THE NEW YORK TIMES

The counseling center downsized from three locations to one, and the

remaining office, in Oregon City, Ore., is filled with unused furniture.

‘Hopefully, Congress

will get off their

butts.’

Glenn Sandler, an accountant in

Melbourne, Fla., who is advising

all of his clients to sit tight.

In recent weeks, Twitter has
added warning labels to lies
posted by elected officials — flag-
ging several of Mr. Trump’s tweets
— and has cracked down on im-
ages and videos that had been ma-
nipulated to deceive viewers. The
company has not accepted politi-
cal advertising for nearly a year.
Most of the latest changes will
happen on Oct. 20 and will be tem-
porary, Twitter said. Labels warn-
ing users against sharing false in-
formation will begin to appear
next week. The company plans to
wait until the result of the presi-
dential election is clear before
turning the features back on.
The Twitter executives said the
“extra friction” on retweets will
prompt users to add their own
thoughts before they hit the but-
ton. If users decide they don’t
have anything to add, they will be
able to retweet after the prompt.
The change is likely to have a di-
rect effect on Mr. Trump’s online
activity. Since returning to the
White House on Monday after a
hospital stay to treat the coronavi-
rus, he has been on a Twitter tear.
On Tuesday night, for example, he
tweeted or retweeted posts from
other accounts about 40 times.
The Trump campaign reacted
angrily on Friday afternoon to
Twitter's changes, labeling them
“extremely dangerous for our de-
mocracy.”
“After months of Big Tech cen-
sorship against President Trump,
the unelected liberal coastal elites
of Silicon Valley are once again at-
tempting to influence this election
in favor of their preferred ticket by
silencing the President and his
supporters,” Samantha Zager,
deputy national press secretary
for the Trump campaign, said in a
statement.
The campaign of Joseph R. Bi-
den Jr., the Democratic candidate,
declined to comment.
Twitter’s changes ahead of the
election are far more aggressive
than those of its peers, and it could
be sacrificing some of the ways it
drives traffic to its service. Twitter
will also disable the system that
suggests posts on the basis of
someone’s interests and the activ-
ity of accounts they follow. In their
timelines, users will see only con-
tent from accounts they follow
and ads.
“I believe the platforms are try-
ing to throw everything at the wall
to see what sticks here. It’s not
clear what the right answer is, but
they are trying almost anything,”
said Nate Persily, a director of the
Stanford Cyber Policy Center.
Vanita Gupta, president and
chief executive of the Leadership
Conference on Civil and Human
Rights, said Twitter should con-
sider making some of the changes
permanent, given that elections
are continually occurring around
the globe and that Twitter has a
duty to protect those elections as
well.
“These are important steps, but
we’re going to be vigilant about
how these play out in real time,”

she said.

Twitter stopped short of shut-

ting down its Trending Topics fea-

ture, a change that many critics

say would do the most to fight mis-

information because people can

game the feature to promote false

or misleading information. In-

stead, Twitter will expand its ef-

fort to fact-check and provide con-

text to items that trend in the

United States.

Over the last year, Twitter has

slowly been stripping away parts

of its service that have been used

to spread false and misleading in-

formation, including misleading

posts from Mr. Trump.

That has led to a backlash from

the Trump administration. Mr.

Trump, who has 87 million follow-

ers on Twitter, has called for a re-

peal of legal protections Twitter

and other social media companies

rely on.

But Twitter’s fact-checking has

continued. It recently began add-

ing context to its trending topics,

giving viewers more information

about why a topic has become a

subject of widespread conversa-

tion on Twitter. This month, Twit-

ter plans to add context to all

trending topics presented on the

For You page for users in the

United States.

“This will help people more

quickly gain an informed under-

standing of the high-volume pub-

lic conversation in the U.S. and

also help reduce the potential for

misleading information to

spread,” Ms. Gadde and Mr.

Beykpour said.

Twitter’s trends illustrate which

topics are most popular on the

service by highlighting content

that is widely discussed. The

trends often serve as an on-ramp

for new users who are discovering

how to find information on Twitter,

but internet trolls and bots have

often exploited the system to

spread false, hateful or mislead-

ing information.

As recently as July, trending

topics have been hijacked by

white nationalists who pushed the

anti-Semitic hashtag #Jewish-

Privilege and by QAnon, a con-

spiracy group that made the furni-

ture company Wayfair trend on

Twitter with false claims that the

company engaged in child traf-

ficking. The embarrassing

episodes led critics to call on Twit-

ter to shut down trends altogether.

Mr. Persily said the feature

should have already been turned

off. “What good does it really do?”

he said.

Twitter Will Change

Some of Its Basics

With Election in Mind

FROM FIRST BUSINESS PAGE

Twitter stopped short of shutting down its Trending Topics feature, which
many critics say would have done the most to fight misinformation.

JIM WILSON/THE NEW YORK TIMES

‘These are important

steps, but we’re going

to be vigilant about

how these play out

in real time.’

Vanita Gupta, head of the

Leadership Conference on

Civil and Human Rights.

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