November 27, 2019
By Caity Witucki
Contributing Editor, Coleman’s SBA Compliance Report
Coleman’s SBA Compliance Report – Know the New Form 159 Rules
The new SBA Form 159, Fee Disclosure and Compensation Agreement – which was released on September 14, 2018 – changes the way lending institutions are required to document fees charged to an SBA borrower. Failure to comply with the new requirements within SBA Form 159 may result in denial of your institution’s SBA Preferred Lender status.
SBA Form 159 is used by the 7(a) and 504 loan programs to collect information about Agents, the services they provide, compensation rendered, and who paid the compensation. The form is a statutory requirement under 15 U.S.C. 642 and must be submitted if the following services have received compensation:
- Loan packaging services performed by an SBA Lender or any other third party;
- Financial statement preparation for the loan application; and/or
- Consulting, Broker, or Referral services paid by the Applicant, SBA Lender, or Third Party Lender (504 only).
In order to comply with all SBA rules and requirements, lending institutions should take note of the following changes made to Form 159:
- Added a statement that an Agent may not be compensated by the Applicant and the SBA Lender for the same service.
- If the bank employs the agent, they must pay the fee and cannot pass the fee along to the applicant.
- Clarified the Applicant Certification clearly stating that the applicant must not sign the form until all fees are disclosed.
- Revised the Lender Certification to state that if SBA deems the fee unreasonable, the SBA Lender agrees to refund the fee to the applicant.
- Revised the SBA Lender Certification to state that they are not charging a standardized fee.
- Revised the Agent Certification to state that if the SBA deems any fee unreasonable, they agree to refund the amount to the Applicant.
When completing the new Form 159, the SBA lending institution must ensure that the Agent performing services has not been declared ineligible or voluntarily excluded from participation by any Federal department or Agency (see www.sam.gov). A separate form is required for each Agent that has or will receive compensation as part of the transaction. However, all of the services provided by the same Agent may be listed on a single form. If the compensation paid exceeds $2,500, the Agent must provide supporting documents that include:
- A detailed explanation of the work performed; and
- Hourly rate(s) and the number of hours spent working on each activity.