Via USA Today: (https://www.usatoday.com/story/money/2020/04/19/wells-fargo-lawsuit-small-business-ppp-loans/5162801002/)
A California-based company filed a class-action lawsuit against Wells Fargo citing unfair actions against some small businesses seeking government-sponsored coronavirus relief under the Paycheck Protection Program.
In March, the Treasury Department announced the $349 billion forgivable loan plan for small businesses that helps them pay employees during the ongoing COVID-19 crisis. The fund ran out of money on Friday.
The lawsuit filed on behalf of small business owners on Sunday 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.
The move by Wells Fargo meant that the bank would receive millions more dollars in processing fees, according to the lawsuit.
“Making matters worse, 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,” the lawsuit filed in California alleged.
Wells Fargo has said that fees generated through the program will be distributed as charitable grants to nonprofits that support small businesses.
The filing against Wells Fargo is one in a series of lawsuits lodged against big banks on behalf of small businesses late Sunday. Wells Fargo denied USA TODAY’s request for comment on the lawsuit.
The big bank said on April 5 that it was committed to serving small businesses with fewer than 50 employees under the PPP, which is intended to incentivize American small businesses to avoid laying off workers by offering up to $10 million in forgivable loans.
“While all businesses have been impacted by this crisis, small businesses with fewer than 50 employees and nonprofits often have fewer resources,” Wells Fargo CEO Charlie Scharf said in a press release earlier this month. “Therefore, we are focusing our efforts under the Paycheck Protection Program on these groups.”
The plaintiff alleges that evidence of Wells Fargo’s foul play lies in 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 call into question a comparison between loans processed at the start of the program – April 3 to April 13 – versus loans processed just before the program ran out of money between April 13 and April 16.
“In the last three days of the PPP—banks processed loan applications for $150,000 and under at twice the rate of larger loans,” the lawsuit said.
This would allegedly suggest that banks front-loaded applications for the largest loans, otherwise “the percentage change of applications submitted in the last three days of the program would be consistent among all application types,” the plaintiffs said.
The lawsuit comes just days after the sweeping business rescue program ran out of money on Friday, less than two weeks after launching, as businesses raced toward a lifeline to avoid collapsing under the financial issues caused by the pandemic.
Before running dry, the program approved more than 1.6 million applications for employers.