WASHINGTON -- Lenders are asking for a chance to provide some input into what they view as a burdensome new Small Business Administration policy designed to combat loan-application fraud.

In a Nov. 1 letter, the Independent Bankers Association of America asked the federal loan guarantor to suspend its policy of requiring SBA lenders to verify an applicant's income by checking transcripts provided by the Internal Revenue Service.

The SBA, which guarantees loans for up to 90% of their value, issued the new policy notice in early October without a comment period or notice to the banks it will affect. That's legal, but it still drew fire from Kenneth A. Guenther, the IBAA's executive vice president.

"The IBAA strongly objects to the implementation of this notice," Mr. Guenther wrote. "In IBAA's view, a far-reaching change in the relationship between borrowers, lenders, and the Agency, should have the benefit of circulation to the parties involved, so that these parties can comment upon the many and consequential questions raised."

However, SBA spokesman Michael Stamler stressed that comment or notice is not required for a mere policy change, especially one that "will not be a burden to lenders."

"Even if a policy change required comment, this change doesn't warrant it," Mr. Stamler said. "This will cause minimal expense and minimal inconvenience to both borrowers and lenders.

"A bank that can't afford to ask a loan officer to spend 10 minutes on this is probably one that should not be making SBA loans."

Yet some SBA lenders think the new changes will require too much time, too much tax expertise, and, consequently, too much money.

"It's almost like we've become an audit surrogate for the IRS," said R. Michael S. Menzies, president of the $65 million-asset First Bank of Frederick, Md. He said he had not known about the policy until an SBA employee mentioned it in the course of processing an SBA loan last week.

Under the new guidelines, the lender must ask loan applicants to sign an IRS form requesting a transcript of three years' worth of federal income tax forms. This will harm many lenders' relationships with small business borrowers, Mr. Menzies said.

"What message does it send to our customers? 'You're de facto suspected of tax fraud?'" Mr. Menzies said. He said he will hire an accountant to compare the tax documents for his bank.

"How can I expose my board and stockholders to a liability with the IRS that I don't understand?" he asked.

The policy change comes in response to a rising tide of fraudulent loan applications showing exaggerated incomes in order to make the loan appear less risky to the lender and the SBA.

"Since the SBA doesn't guarantee 100% of every loan, lenders have exposure as well," Mr. Stamler said. "This protects them from making decisions based on the wrong information. We have to use this system."

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