A Georgia CPA firm who assisted small businesses with applying for Paycheck Protection Program (PPP) loans has filed a proposed class action seeking payment from lenders.
The 40-page lawsuit alleges that despite clear regulations directing that PPP agents were to be paid from fees granted to lenders by the federal government, defendants Century Bank, Colony Bank, Farmers & Merchants Bank, First Chatham Bank, Optus Bank, South Atlantic Bank, Synovus Bank, Truist Bank, and United Community Bank have refused to pay agents such as the plaintiff.
“Instead, Defendants have kept the agent fees for themselves,” the complaint claims.
The case out of Georgia explains that the PPP was set up under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to grant relief to businesses experiencing economic hardship during the COVID-19 pandemic. As part of the program, small businesses could apply for partially forgivable loans backed by the federal government and administered by the U.S. Treasury and Small Business Administration (SBA), the suit says.
According to the case, the $349 billion loan program—which was increased in April 2020 to a total of $659 billion—temporarily added a new product to the SBA’s existing 7(a) Loan Program, with key differences.
Loans under the PPP program were to be funded by approved SBA lenders who, in a departure from the existing 7(a) program, would be “generously compensated” for processing PPP loans, the suit explains. Moreover, SBA regulations encouraged independent agents to assist borrowers with preparing and filing PPP applications, stating expressly that agents were to be paid “from a portion of the set fees provided to SBA Lenders for processing the PPP Loan,” the complaint says.
The lawsuit argues that when implementing the CARES Act, the Treasury determined that “the best and quickest way” to provide relief to small businesses under the PPP was to establish new regulations by which lenders and agents—who the case notes include attorneys, accountants, consultants, loan brokers, and any other individual who represents an applicant in its dealings with the SBA—work together to “quickly and effectively” process applications.
“To incentivize this relationship, the Lender and Agent were to split the Federal Government fees approximately 80% to be retained by the Lender and 20% to be forwarded to the Agent,” the complaint states, noting that lenders were to receive between one and five percent of the loan amount, depending on the size of the loan.
The case adds that nowhere in the CARES Act or SBA regulations does the federal government specify “or even suggest” that a PPP agent must be approved by a lender.
The plaintiff, who assisted clients with applying for PPP loans funded by the defendants, claims the banks have refused to pay the firm for its services and have instead “retained the Agent Fee portion of the Lender Fees for themselves.”
According to the lawsuit, the plaintiff, and likely other PPP agents, who helped clients file PPP applications with the defendants have “no other means of obtaining payment” given the SBA regulations specify that agents are to be paid by the lender, and not by the applicant.
The case goes on to cite a May 27 civil investigative demand received by United Community Bank in which the U.S. Department of Justice requested that the bank “produce certain documents and respond to written interrogatories relating to the PPP loans approved by the Bank, the Bank’s non-payment of fees to agents of borrowers and the Bank’s policies related to payment or non-payment of agent fees.”