Federal and state officials are investigating Wells Fargo regarding the bank’s management of Paycheck Protection Program (PPP) loans.
A regulatory filing on Tuesday (May 5) indicated that the country’s fourth-largest bank received “formal and informal inquiries from federal and state governmental agencies regarding its offering of PPP loans.”
The San Francisco-based bank started processing applications for PPP loans on April 4, a day after the program opened.
Over 100,000 loan applications were processed as of April 27, Wells Fargo spokesperson Manuel Venegas told Reuters per a Tuesday (May 5) report. He said that small businesses with fewer than 25 employees accounted for 90 percent of the applications and the median loan requests were under $110,000.
Venegas also added that 80 percent of loans processed will generate annual revenue of under $2 million.
The lender is also being sued as part of a class-action lawsuit filed in New York and California. Separate suits also named Frost Bank, JPMorgan Chase, US Bancorp and Bank of America. The banks are accused of playing favorites with PPP applications. Wells Fargo also faces a second class-action suit, initiated by BSJA, Inc. and Alexhd, LLC in California.
The PPP loans were part of the government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act. The forgivable loans were intended to help struggling small businesses stay afloat during the global coronavirus pandemic.
Wells Fargo has faced numerous federal probes since 2016. In February, the bank was ordered to pay $3 billion to settle a fake account scandal initiated by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC). The settlement gives the DOJ a chance to pursue future criminal charges in the case. The settlement also mandates that Wells Fargo fully cooperate with officials.
On Tuesday (May 5) analysts at UBS Securities dropped Wells Fargo’s rating and earnings forecast. The analysts said the bank will have a tougher time bouncing bank from the coronavirus pandemic — more so than other financial institutions (FIs).