Categories: Legal

Lawsuits Allege Banks Played Favorites With PPP Loans

Separate class-action lawsuits were filed against Wells Fargo, Frost Bank, JPMorgan Chase, US Bancorp and Bank of America, alleging that the financial institutions (FIs) unlawfully prioritized their own business customers when processing coronavirus stimulus loans from the government’s Paycheck Protection Program (PPP).

The Frost complaint charges that “[n]othing in the CARES Act authorizes or permits the Defendant to pick and choose who would gain access to, or benefit from, the federally backed lending program. And the priority of access to these limited funds is material – the demand is overwhelming as America responds to the economic tsunami of COVID-19 upon small businesses.”

The Wells Fargo complaint alleges that “at an unprecedented time of severe national need, Wells Fargo chooses privileged discriminatory policies driven by corporate greed over the recognized and urgent needs of America’s small businesses.”

Both complaints were filed on April 11 in the Southern District of Texas by Houston business owner Edward L. Scherer. The lawsuits contend that nothing in the CARES Act allows banks to differentiate between eligible applicants on the basis of preexisting business with the bank. The CARES Act also does not allow lenders to follow their own criteria for eligibility.

The California complaints were filed in the Southern District Court on Sunday (April 19) with different plaintiffs. The complaint against Bank of America was brought about by four businesses: the Law Office of Sabrina Damast, Eye Land Optometry, BNG Restaurant Group and Umezu Enterprises. It alleges that “BofA has, once again, prioritized corporate greed at the expense of its small business customers.”

The suit against JPMorgan Chase was brought by Cyber Defense Group and In the Mix Promotions, and alleges that “Chase concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money.”

The complaint against U.S. Bancorp was initiated by the Law Office of Irina Sarkisyan and Simovich & Sons, and alleges that “U.S. Bank prioritized loan applications seeking higher loan amounts because processing those applications first generated larger loan origination fees for the banks.”

Wells Fargo also faces a second class-action suit, initiated by BSJA, Inc. and Alexhd, LLC in California.

Evidence of the banks’ “foul play” is evident in a Small Business Association (SBA) report outlining details about the PPP loans processed April 3-13 compared to April 13-16, the plaintiffs allege.

The SBA said that nearly 5,000 lenders have approved 1.6 million loans totaling $342.2 billion under the PPP. The program ran out of funds in just days, long before many could even apply.

Get our hottest stories delivered to your inbox.

Sign up for the PYMNTS.com Newsletter to get updates on top stories and viral hits.

——————————

New PYMNTS Study: Subscription Commerce Conversion Index – July 2020

Staying home 24/7 has consumers turning to subscription services for both entertainment and their day-to-day needs. While that’s a great opportunity for providers, it also presents a challenge — 27.4 million consumers are looking to cancel their subscriptions because of friction and cost concerns. In the latest Subscription Commerce Conversion Index, PYMNTS reveals the five key features that can help companies keep subscribers loyal despite today’s challenging economic times.

Recent Posts

Booking.com To Trim Employee Roster By 25 Pct Globally

Booking Holding Inc., the Connecticut-based company that owns travel website Booking.com, plans to reduce its workforce by as many as…

9 mins ago

Grab Launches Microinvestment Solution, Consumer Loans, BNPL Plans

Grab Financial Group (GFG), a Southeast Asia financial technology (FinTech) and ridesharing company, is expanding its reach with the announcement on…

21 mins ago

The State Of Main Street In 2020’s Second Half

The first half of 2020 was a tough time to run a small business on Main Street as stay-at-home orders…

1 hour ago

Today In Payments: Amex Grows BNPL Options; Facebook Unveils Commerce Accelerator Plans

In today’s top news, American Express has unveiled a new payment option, and Facebook has revealed plans for a Commerce…

1 hour ago

Sweden Is Next On Amazon’s Expansion List

As eCommerce surges around the world amid the coronavirus, Amazon is looking to further expand its presence in the European…

2 hours ago

EU Launches Antitrust Review Of Google’s Fitbit Deal

Google’s push into the fitness tracker and smart watch market has hit a major snag. The European Commission on Tuesday…

2 hours ago