Agents Who Prepared PPP Loan Applications Denied Payment by Lenders, Class Action Claims [UPDATE]
by Erin Shaak
Last Updated on August 25, 2020
Sport & Wheat CPA PA v. ServisFirst Bank Inc. et al.
Filed: April 26, 2020 ◆§ 3:20-cv-05425
A lawsuit claims banks have refused to comply with the terms of the CARES Act by failing to compensate agents who assisted small businesses with applying for PPP loans.
Florida
Case Updates
August 25, 2020 – Lawsuit Dismissed
The proposed class action detailed on this page has been dismissed without prejudice, with U.S. District Judge T. Kent Wetherell II finding the CARES Act creates no entitlement for agents who aided with Paycheck Protection Program (PPP) loan applications to receive a portion of lenders’ origination fees.
“The short answer is ‘no,’” the judge wrote in a 13-page dismissal order.
Judge Wetherell wrote that the crux of the case rested with the plaintiff’s fourth count, which sought a declaration that ServisFirst Bank and its co-defendants were required to pay “agent fees.” Court documents relay that while the plaintiff’s claim was premised on the assumption that the CARES Act and its implementing regulation require lenders to pay a borrower’s agent fees, the assumption “finds no support in the plain language of the statute or the regulation.”
“The CARES Act does not require lenders to pay the agent’s fees absent an agreement to do so (or create a private right of action for payment ) because the statutory language does not even speak to who pays the agent’s fees; it merely provides that the agent cannot collect a fee from anyone in excess of the amount established by the SBA Administrator,” the judge wrote. “Indeed, the different language used by Congress in mandating payment of lenders (“shall reimburse”) and limiting agent fees (‘may not collect’) is indicative of an intent not to require lenders to pay agent fees.”
At least 50 proposed class actions are pending nationwide over claims that agents who assisted borrowers in preparing and filing PPP loan applications have been deprived of compensation authorized by the CARES Act, according to a Law360 tally.
The plaintiff has until two weeks from August 17 to file an amended lawsuit.
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.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.
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