For anyone familiar with the widespread recent effort to promote the reintegration of those with a criminal record or conviction, it is a little shocking to see one federal agency pulling in the opposite direction.
But that is exactly what seems to be happening amid the country’s health emergency.
In response to COVID-19, Congress launched the Paycheck Protection Program (PPP) and expanded the Economic Injury Disaster Loan (EIDL) program, allocating hundreds of billions of dollars to help small businesses affected by the pandemic and the Economic crisis are affected.
But the Small Business Administration (SBA), which manages both programs, has severely restricted access to aid based on arrests or convictions, restrictions that Congress neither requested nor considered.
So far, attention has focused on small business owners who have been wrongly denied PPP facilitation based on their records. Have members of Congress and major advocacy and faith organizations written in opposition to PPP regulations and guidelines that Barriers based on a data set. Dozens of Media channels have covered the topic.
But the EIDL disaster relief program has largely disappeared under the radar, in part because of the SBA has not published any instructions about how she treats EIDL applicants with a data set.
In a recent development, documents were posted anonymously to Reddit last week, and published by Law360 on May 3rd, pretending to be an internal SBA guideline for reviewing EIDL applications.
The documents instruct agency staff to refuse discharge to applicants if they ever was arrested unless the arrest was for an offense and occurred more than 10 years ago. These leaked documents would suggest that the SBA is putting even stronger record-breaking restrictions on COVID-19-related disaster relief than it is on PPP loans, and doing it behind the scenes.
We believe this new information about the record related standards applied by the SBA to EIDL loans is likely to be accurate. We have heard from readers denied EIDL discharge after SBA staff emailed them questions about their arrest history, questions exactly the same as those in the leaked documents.
An SBA spokesman Given the opportunity to correct the data set– if correction was required – declined to confirm or reject the information.
We have never seen a government program in the United States that had such sweeping and arbitrary restrictions on criminal records.
The alleged EIDL guideline has no nuances: it instructs SBA staff to withhold discharge based on the history of the arrest, regardless of the offense and regardless of whether the arrest resulted in criminal prosecution, let alone conviction. The review period is unlimited in the case of arrests of criminal offenses and a whole decade in the case of arrests of administrative offenses.
The guidelines inevitably lead to unjustified differences: a person with a decade-long arrest of a crime who has never been charged or whose arrest resulted in an acquittal will be treated more severely than someone recently convicted of a misdemeanor.
Finally, the guidance is inconsistent with existing published SBA guidelines, as discussed below.
In normal times, a blanket and discreet restriction of disaster aid would be problematic. In this global public health and economic crisis, that is inexcusable.
The standards in the leaked SBA guidelines are inconsistent with applicable laws, regulations, and agency guidelines. Existing Statutes and Regulations for the 7 (b) disaster loan program, of which EIDL is a part, only require the SBA to refuse disaster loans if an otherwise eligible applicant has been convicted of a riot, riot, or other disaster-related crime in the past year.
A closer look at the SBAs Disaster Loan Policy Statement advises that the leaked documents could represent a shortcut through an existing review process during the current emergency.
The published EIDL Policy statement which precedes the pandemic (Section 3.6) requires exclusion if the “applicant or main owner is currently on probation or probation after being convicted of a serious criminal offense”.
‘Not a good character’
This is further explained because “[i]It is not in the public interest of the SBA to provide financial aid to people of poor character “, the agency will make a” character assessment “if” adverse information about the character or background of an applicant for a catastrophe loan emerges “.”
This “unwanted information” could result from a three-part question on the criminal record in the SBA disaster loan Application forms, including for COVID-19-related EIDL relief, a question that requires a single “yes” or “no” answer to all three parts:
- Are you currently the subject of any indictment, criminal information, indictment or other means of formal indictment in a jurisdiction?
- Have you been arrested for a crime in the past six months?
- Have you ever been convicted, pleaded guilty, pleaded nolo contendere, distracted in court, or placed on probation or probation (including probation before judgment) for any crime other than minor vehicle injury?
the Policy statement stipulates that if an applicant answers this far-reaching question of criminal history with “yes”, they must disclose the details of their files Form 912: Declaration of Personal History.
Based on this information, the SBA determines whether a fingerprint sample is required. The directive only requires fingerprinting if the person was convicted in connection with a riot, riot or disaster more than a year ago, but allows it in other cases.
If the disclosed record is “both minor and committed more than 10 years ago, fingerprints may not be required to continue processing.” However, an applicant with a different record may be asked to provide fingerprints.
After all required information has been gathered, the SBA “completes its character assessment” and finds the eligible or ineligible individual. The criteria used for this final decision will not be disclosed.
Presumably this policy statement still applies legally to EIDL, but the SBA appears to be omitting steps in the process to withhold relief to anyone who might be fingerprinted during normal times, rather than providing an appropriate settlement for these exceptional circumstances.
As a result, thousands of high earning small business owners and their employees are being excluded from the same chance to recover from the economic disaster offered to their American compatriots. Who will benefit from it?
Additional reading: https://www.entrepreneur.com/article/350232
Margaret Love is the Executive Director of the Collateral Consequences Resource Center (CCRC) and a former US Pardon Attorney. David Schlüssel is the deputy director of the CCRC. They welcome comments from readers.
 The only legal file-related restriction for these programs is the half-century exclusion from the EIDL of people convicted of a crime “during and in connection with a riot or riot” in the past year. See Ministry of Housing and Urban Development (HUD) law of 1968, PL 90-448 § 1106 (e).