Multiple class action lawsuits have been filed against two of the United States’ biggest banks alleging unfair business practices toward some small businesses that applied for coronavirus-related loans under the government’s Paycheck Protection Program. These lawsuits have been filed by small businesses against JP Morgan Chase Bank and Wells Fargo.
In one of the lawsuits, a cybersecurity firm and event planning company accused Chase Bank of prioritizing small business borrowers who were seeking larger loan amounts rather than processing the government-sponsored loan applications on a first-come, first-serve basis as advertised. This, the lawsuit alleges, meant that Chase would collect larger processing fees – nearly $6 billion in total – by frontloading the queue with businesses seeking higher loans. The plaintiffs allege that the businesses seeking lower loans were deprioritized, and as a result, many didn’t get the aid they were entitled to.
The loans under the Paycheck Protection Program are a part of a $349 billion emergency small business lending program meant to keep businesses afloat and staffers employed in the wake of the coronavirus pandemic.
The lawsuit 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.”
Chase claims that eighty percent of PPP loans processed through Chase went to businesses with less than $5 million in revenue and about fifty percent went to small businesses with less than $100,000.
Similarly, a California-based company filed a class-action lawsuit against Wells Fargo with the same legal theory. That lawsuit filed on behalf of small business owners also alleges that Wells Fargo unfairly prioritized businesses seeking large loan amounts, while the government’s small business agency has said that PPP loan applications would be processed on a first-come, first-served basis.
This lawsuit claims that, “Wells Fargo 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.”
Wells Fargo has stated that fees generated through the program will be distributed as charitable grants to nonprofits that support small businesses.
Both plaintiffs allege that evidence of the banks’ wrongful conduct is demonstrated by data released by the U.S. Small Business Association. The SBA report outlines the PPP loans that were processed and indicates when the transactions occurred.
The plaintiffs maintain that in the last three days of the PPP, banks processed loan applications for $150,000 and under at twice the rate of larger loans. They suggest that this shows that the banks front-loaded applications for the largest loans.