Regions Bank Pays $4.9M as It Settles Federal Claims in Birmingham Over Alleged Improper PPP Loan Forgiveness That Sparked Government Backlash

Birmingham-based Regions Bank has agreed to pay $4,919,631 to the United States government following allegations that it improperly received federal payments tied to a Paycheck Protection Program (PPP) loan forgiveness approval that did not meet eligibility requirements.

The settlement resolves claims that the bank benefited financially after approving forgiveness for a PPP loan that, according to federal authorities, should not have qualified under program rules.

Allegations Center on Pandemic Relief Oversight Failures

The dispute traces back to the COVID-19 relief efforts launched under the CARES Act in March 2020, when Congress created the Paycheck Protection Program to help struggling small businesses maintain payroll and cover essential expenses during the economic downturn.

Under the program, private lenders such as Regions Bank were responsible for issuing loans and later approving forgiveness requests, provided borrowers met strict federal criteria.

Once a loan was forgiven, the U.S. Small Business Administration reimbursed lenders for the forgiven amount, including interest, and paid processing fees.

Federal officials allege that on or around August 3, 2021, Regions Bank approved forgiveness for a PPP loan obtained by an individual borrower even though the loan did not qualify for forgiveness under program rules. As a result, the SBA allegedly issued a payment to the bank that it should not have received.

Government Claims of Financial Benefit and Compliance Breakdown

According to the United States, Regions Bank was “unjustly enriched” by the funds it received after approving the disputed loan forgiveness. The government’s position is that the bank’s approval triggered an improper reimbursement from federal funds.

Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division emphasized the importance of strict compliance in administering pandemic relief programs, stating that lenders must be held accountable when they fail to follow PPP requirements.

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While the settlement resolves the matter financially, it does not include a finding of liability against the bank.

Multi-Agency Federal Investigation and Coordination

The resolution was reached through coordinated efforts involving several federal agencies and enforcement divisions.

These include the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Western District of Missouri.

Additional support came from oversight bodies including the Small Business Administration’s Office of General Counsel, the SBA Office of Inspector General, and the Federal Deposit Insurance Corporation’s Office of Inspector General.

The case was handled legally by Trial Attorney Gavin Thole and Assistant U.S. Attorney Matthew Sparks.

Impact and Consequences

The settlement highlights ongoing federal scrutiny of how pandemic-era relief funds were distributed and monitored. PPP lenders were given significant authority during the crisis, but also bore responsibility for ensuring strict compliance with eligibility rules.

This case reinforces that even post-pandemic, financial institutions may face enforcement actions if government funds are disbursed improperly, especially when oversight systems fail or documentation is not adequately verified.

It also signals continued federal interest in recovering funds linked to questionable or improperly approved loan forgiveness decisions.

What’s Next?

While Regions Bank has resolved the financial aspect of the case, broader oversight efforts related to PPP loans remain active across multiple federal agencies.

Investigators are expected to continue reviewing lender practices and individual loan files to identify additional instances of improper forgiveness approvals or reimbursement errors.

For financial institutions, the case serves as a reminder that PPP-related decisions may still carry legal and financial consequences years after the program ended.

Summary

Regions Bank has agreed to pay nearly $5 million to settle allegations that it improperly benefited from a PPP loan forgiveness approval that did not meet federal requirements.

The case stems from COVID-19 relief programs under the CARES Act and involves claims that the bank received SBA payments it was not entitled to after approving an ineligible loan forgiveness request.

Bulleted Takeaways

• Regions Bank agreed to pay $4,919,631 to the United States
• Case involves alleged improper PPP loan forgiveness approval
• Alleged event occurred around August 3, 2021
• SBA reimbursed the bank for a loan that was not eligible for forgiveness, according to allegations
• Government claims Regions Bank was unjustly enriched
• PPP created under CARES Act in March 2020 to support small businesses during COVID-19
• Multiple federal agencies participated in the investigation and settlement
• No admission or determination of liability was made in the settlement