AGC Files Suit Over PPP Questionnaire

AGC is requesting that the court declare the questionnaire arbitrary and capricious, and that the SBA cannot lawfully use the information the form generates to find a company ineligible for a PPP loan or deny a company’s application for forgiveness of its loan.

Businesses that have borrowed an original PPP loan of $2 million or greater are required to fill out and return the questionnaire, Form 3509, within 10 days of receipt from their lender. Failure to do so could result in a determination by SBA of ineligibility and a requirement to pay back the loan.

The nine-page questionnaire asks for details on a company’s financial status including revenue, liquidity, employee compensation, equity securities and foreign ownership status.

The complaint, filed in the U.S. District Court of the District of Columbia, also asserts that the agencies ignored a legally mandated process for developing the questionnaire, thus violating the Paperwork Reduction Act and the Administrative Procedures Act. AGC said the OMB authorized SBA to use the form in “compete secrecy” without releasing it for the usual 60-day public comment period. In order to bypass the normal review process, AGC charges that the agencies arbitrarily declared that the questionnaire required approval on an “emergency” basis and did not constitute a change in the scope of SBA’s prior information collection process.

“The CARES Act (which established the PPP program) only required loan applicants to make a ‘good faith certification that the uncertainty of current economic conditions makes necessary the loan request….’ Instead of asking borrowers how they concluded they faced such uncertainty when applying for their loans, the form attempts to set a means test, a revenue reduction test and a liquidity test that Congress never contemplated, and it focuses on later events that few companies could have predicted when applying,” said AGC.

“Resorting to a secret form that disregards Congressional intent and retroactively changes the criteria for a loan is not due diligence; it is unlawful and needs to stop before employers are irrevocably harmed,” said Sandherr.