With More PPP Funds in Pipeline, Attorneys Must Mind Details

Paycheck Protection funds are tricky for banks and businesses

Monday, May 11, 2020

Rushed into law to prop up a national economy staggered by COVID-19, the Paycheck Protection Program hasn’t gone as smoothly as hoped.  

Last month, the U.S. Justice Department launched a probe into the recently expanded $670 billion initiative in which banks process and provide low-interest, conditional and sometimes forgivable Small Business Administration loans to distressed companies.  

Several major banks also are the subject of more than a dozen class-action lawsuits, alleging subjective PPP processing on behalf of big-ticket companies at the expense of modest, more-deserving operations. 

Then there are payback rules that many recipients of PPP funds are, at least anecdotally, struggling to understand—for instance, having their loans forgiven only if they spend 75 percent of the money on employees within two months after the check rolls in. Further muddying the waters, many business owners don’t have immediate reason to spend their money since their operations have been shuttered or restricted.  

So as variables add up—and with PPP money likely forthcomingat least one lawyer for a major bank is advising his colleagues to strictly adhere to the feds’ lending requirementsand then some. 

For quality control 

“Quality over quantity,” says Neil S. Rosolinsky, executive vice president and deputy general counsel for litigation and employment at Citizens Financial Group Inc., which so far hasn’t been targeted by class-action litigation.  

“Banks have been called upon to assist as many small businesses as possible under CARES [Coronavirus aid, Relief and Economic Security Act],” he says. But it’s still paramount to ensure quality in the application process. You can’t do this too quickly. Avoid errors on applications, process in the right manner, and verify.” 

The nation’s 13th largest retail bank and the 16th largest overall, Citizens—like other banks—accepts PPP applications. As for what Rosolinsky and others are advising bank personnel during these uncertain times, it includes ascertaining the applicant has: 

  • Been In business on or before Feb. 15, 2020. 
  • 500 or fewer employees or is SBA 7(a) loan eligible—less than $7.5 million in annual revenue during the past three years, net income under $5 million, tangible net worth under $15 million.  

Meet those standards, and a business owner might be eligible to borrow 250 percent of monthly payroll costs. Meanwhile a self-employed individual with no hired hands might be eligible to borrow 250 percent of monthly net profit. But come payback time, the following rules may apply: 

  • Loan forgiveness reduced if employer decreases full-time head count. 
  • Loan forgiveness reduced if salaries and wages decreased by over 25 percent for any employee earning less than $100,000 annualized in 2019. 
  • Full time employees and salary levels be restored by June 30 for any changes made between Feb. 15 and April 26. 

Though that’s not all as the coronavirus turns over business life as we all know it. 

New regs everywhere 

Citizens having a physical presence in 14 Eastern and Central states, with employees in more than 40, Rosolinsky notes that practically every jurisdiction—and that includes some cities—is creating some sort of regulation. 

Social distancing and mandatory masks might be among the easier regs. Among the more complex: New York State requiring all banking institutions to adopt and publicize a loan forbearance application process for residential mortgages, and eliminating ATM, overdraft and late credit fees incurred by any person or entity vexed by COVID-19. 

While Citizens entrusts that aspect of compliance to another team, such issues are still among the litigation risks that weigh on Rosolinsky’s mind. As do more basic issues. 

“We’re also advising how to respond to customer concerns,” he says. “With PPP, so many businesses don’t understand the qualifications, or they wonder why their loan application hasn’t been processed faster.” 


And when the coronavirus crisis has lifted or at least been significantly mitigated? 

Well that could present issues for the banking industry at large, warns Rosolinsky, whose historical outlook was forged when he headed employment law for Citizens’ former owner, The Royal Bank of Scotland, during and after the Great Recession. 

Rightly or wrongly, banks took much heat for that crisis of 10 or 12 years ago, having created and bought mortgage-backed securities and collateralized debt obligations. The aftermath saw the Dodd Frank Wall Street Reform and Consumer Protection Act that many smaller banks—of which Citizens is not—claimed excessive. But all banks faced some consequences, and Rosolinsky anticipates industry-wide repercussions this time too. 

Though it’s a different crisis; the class-action litigation notwithstanding, no reputable source perceives banks as the cause of COVID-19. Rosolinsky would even like to see banks given credit for lessening the economic impact—they’re processing volumes of PPP applications from understandably impatient and worried business owners. 

“And actually lending the money,” he reminds while expecting the dissatisfaction over PPP to increase even if the feds enhance the pot. 

By advising the rest of the Citizens operation to mind details, consumer complaints and courtroom proceedings involving other financial institutions, Rosolinsky strives to keep his bank out of court where justice can indeed by delayed by the pandemic. 

“My group engages in litigation and manages it, and I can tell you the courts are staggered in starts, stops and pauses,” he says. “Dockets haven’t moved in a typical fashion, and video proceedings aren’t the same as in person.”

For the latest stories on how the legal community is responding to COVID-19, please follow Vanguard’s dedicated LinkedIn page. The stories are hosted on Vanguard’s blog


It was a great honor to be featured in Vanguard Law. Working with every member of the team, from the initial interview with Erin Clark, through production with Victor Martins, writing the article with Taryn Plumb and creating the final content with Dave Gushee, was a true pleasure. Everyone was very professional, enthusiastic and supportive, and their creative approach and positive attitude clearly came through in the final product.
– Kevin C. Rakowski, Senior Vice President, Deputy General Counsel, Compliance with Radian Group Inc.
As promised in advance, my feature in Vanguard has increased my visibility within the profession and prompted more than a few people I have not communicated with recently to reconnect. One of the Italian law firms I have used in the past is now in the process of interviewing me for an article on their website and tweeting out the feature story. Activity and the number of people connecting with me on LinkedIn has soared, which is great. The Vanguard writers and editorial staff were great to work with—highly professional and made the effort to make the experience both fun and rewarding (they were also respectful of the time pressures and demands all lawyers face). I was very pleased with the experience and the final outcome. Needless to say, I have been very pleased. All in all working with Vanguard has been a very positive experience which generated good publicity for both Shawcor and myself. My sincere thanks.
– Tim Hutzul, General Counsel, ShawCor Ltd.
The piece highlighting my company, Bob Baker Enterprises, Inc., came out fabulous. Our company is in the new and used car sales and service industry. Everyone was great to work with and extremely professional. They produced a high-quality product and have provided expert assistance and guidance post-production of the article.
– Wade Poulson, General Counsel, Bob Baker Enterprises Inc.
I was honored to be the subject of an article. I enjoy reading Vanguard articles and seeing how other attorneys got to their positions and see their jobs. It's also interesting to see how different law firms partner with the subjects of the articles.
– Henry Marquard, in-house counsel, Stanley Consultants Inc.


Summer I 2024



  • * We’ll never share your email or info with anyone.
  • This field is for validation purposes and should be left unchanged.