A proposed class action lawsuit claims banks have refused to comply with the terms of the Coronavirus Aid, Relief, and Economic Security (CARES) Act by failing to compensate agents who assisted small businesses with applying for Paycheck Protection Program (PPP) loans.
The 35-page case out of Florida says that although the CARES Act specifies that agents such as accountants, attorneys, consultants, and loan brokers who helped small businesses prepare and submit PPP applications are to be paid a fee by the lenders who then process the application, banks such as defendants ServisFirst Bank Inc. and Synovus Trust Company, National Association have refused to do so.
The plaintiff, a Florida-based CPA firm, claims it has assisted roughly 50 clients with preparing and filing PPP applications yet “has received nothing” as far as payment from PPP lenders.
On March 25, 2020, Congress passed the CARES Act in response to the economic fallout caused by the COVID-19 pandemic. Among other programs designed to boost the nation’s economy, the CARES Act established the PPP, a $349 billion loan program intended to provide forgivable, federally backed loans for small businesses struggling to pay their employees, the suit says. PPP loans were to be administered through private lenders who would be paid by the Small Business Administration (SBA), per the case.
The SBA similarly determined that any agent who assisted a small business with preparing, processing, and filing a PPP application—including attorneys, accountants, consultants, employees who prepared the applications on behalf of their employers, loan brokers, those who assisted the lender with administering the loan, or any other person who represented an applicant in its business with the SBA—would be paid by the lender who administered the loan and not by the borrower, according to the lawsuit.
The case goes on to explain that both lenders and agents had caps on the origination fees they would be paid for their services that varied based on the amount of a loan. Under the PPP’s terms, lenders were to pay agents out of these origination fees, which range from five percent on loans up to $350,000 and three percent on loans between $350,000 and $2 million to one percent on loans between $2 million and $10 million, the suit says.
The lawsuit alleges that although banks were well aware that their customers were utilizing agents’ services in preparing PPP applications, some banks “outright refused to process” loan applications that refer to an agent. Other banks, the suit claims, have referred their customers to online application portals “intentionally designed” to prevent the customer from designating an agent.
Regarding the plaintiff business, the lawsuit claims defendant ServisFirst falsely informed one of its customers assisted by the agent that the SBA’s guidance had “changed late in the game” and that the bank “has made a decision to not pay agents.” That suit argues that this representation was false and that the SBA’s mandate that agents be paid by the lenders has “not changed at all.”
Defendant Synovus, according to the suit, similarly advised the plaintiff that it had decided not to pay agents’ fees, stating that the bank understood agents were only being paid to collect and assemble financial information but not to prepare the two-page PPP loan application. Although the plaintiff’s client submitted its application using the financial information and documentation prepared by the plaintiff, Synovus has failed to pay the plaintiff for its services, the lawsuit alleges.
The plaintiff business looks to represent all PPP agents in Florida who assisted businesses in obtaining PPP loans but were refused payment of their fees by the applicable PPP lender.
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