Bankrupt dioceses sue SBA for access to payday loan

Two Catholic dioceses have filed a lawsuit against the Small Business Administration (SBA), claiming they were wrongly denied access to emergency loans during the pandemic due to their bankruptcy status.

The New York Dioceses of Rochester and Buffalo said they would “suffer immediate and irreparable harm” if they were disqualified from emergency loans under the Paycheck Protection Program (PPP), in a trial filed in Federal Court on April 15.

The $ 349 billion in emergency loans were part of the Coronavirus Help, Relief and Economic Security Act (CARES), promulgated by President Trump on March 27.

The bill provided, among other things, short-term relief for small businesses and some nonprofits affected by the disruption related to the coronavirus pandemic (COVID-19). The $ 349 billion relief under the CARES Act included loans that become grants if recipient employers retain their current workforce and 75% or more of the loan is used for payroll.

An ASB rule, however, stipulated that funds would not go to bankrupt debtors. The dioceses of Rochester and Buffalo have both filed for bankruptcy in recent months, after being named in hundreds of clergy sexual abuse lawsuits filed under New York’s Child Victims Protection Act.

The two dioceses filed a lawsuit in federal court, claiming that funding for the PPP loan was running out as they were deemed ineligible for critical emergency loans. On April 16, the SBA said it would no longer accept PPP loan applications.

Reached by email on Wednesday, the Diocese of Rochester told CNA it declined to comment on the trial “Out of respect for the judicial process.” A spokeswoman for the Small Business Administration said, “We do not comment on pending litigation.”

Other dioceses and archdioceses, including St. Cloud and Winona-Rochester in Minnesota, Harrisburg in Pennsylvania and Santa Fe in New Mexico, have either announced that they will declare bankruptcy or have started the process of bankruptcy.

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