Class Actions Say Wells Fargo, JPMorgan Chase Held Back Small Businesses’ Paycheck Protection Program Funds [DISMISSED]
Last Updated on April 27, 2023
Outlet Tile Center v. JPMorgan Chase & Co. et al.
Filed: April 20, 2020 ◆§ 2:20-cv-03603
A class action alleges JPMorgan Chase prioritized its "best clients" over small businesses applying for billions in CARES Act Paycheck Protection Program funding.
California
Case Updates
April 27, 2023 – JPMorgan Chase Paycheck Protection Program Class Action Voluntarily Dismissed
The proposed class action lawsuit detailed on this page was voluntarily dismissed with prejudice by the plaintiff business on August 17, 2020.
On June 25 of that year, United States District Judge George H. Wu established in an order a deadline of July 6, 2020 for Outlet Tile Center to file an amended complaint, which the company was ordered to do to establish the court’s jurisdiction over the dispute, if the parties were “unable to resolve this matter.” Instead, the plaintiff’s counsel submitted a two-page notice of dismissal with the court in August.
The notice of dismissal does not include a reason as to why the plaintiff dropped the case.
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May 29, 2020 – Wells Fargo Put Up “Roadblocks” For Small Business PPP Relief, Suit Says
A California pet groomer alleges several “roadblocks” put up by Wells Fargo unlawfully prevented or delayed many small businesses from applying for loans under the CARES Act’s Paycheck Protection Program (PPP).
The 55-page suit says the bank required PPP loan applicants to have a Wells Fargo business checking account as of February 15, 2020, a stipulation not required by the CARES Act. Further, though Wells Fargo announced in early April that it would “focus” on helping businesses with under 50 employees or nonprofits in obtaining PPP loans, these were not the only intended recipients of the program, the plaintiff argues. Thus, the self-created limitation on who would receive the bank’s attention was similarly inconsistent with the terms set by the CARES Act, according to the suit.
Overarching these claims is the charge that Wells Fargo, rather than process applications on a first-come, first-served basis, prioritized applications from customers seeking higher loan amounts or those from “preferred customers.” Further still, though Wells Fargo publicly claimed it would give to charity any fees linked to PPP loan originations, the bank in reality used its role as a PPP gatekeeper as a chance to “curry favor” with larger or preferred business banking customers, the lawsuit alleges.
“In short, Wells Fargo historically has faced many allegations of mistreating its customers,” the complaint reads. “The PPP program provided Wells Fargo with another means by which to engage in misconduct.”
May 11, 2020 – Wells Fargo Sued Again Over Alleged PPP Application Misconduct
Wells Fargo faces another proposed class action from a small business claiming the bank failed to handle PPP loan applications on a first-come, first-served basis as stipulated by the federal CARES Act.
ClassAction.org’s write-up on the lawsuit can be found here.
Update – April 23, 2020 – Additional Case Claims JPMorgan Chase Mishandled Small Business PPP Funds
A San Diego salon and spa has filed at least the second proposed class action alleging JPMorgan Chase lied about its handling of Paycheck Protection Program (PPP) funds made available to small businesses through the federal CARES Act.
The 21-page lawsuit filed in the Southern District of California alleges JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A. falsely, deceptively and misleadingly ignored critical “first-come, first-served” guidance and instead prioritized processing PPP applications in search of larger loan amounts. The defendants, in order to protect their bottom line, also prioritized based on risk exposure, the suit alleges.
For instance, the lawsuit says, JPMorgan Chase gave priority to larger entities like Ruth’s Chris Steakhouse, Shake Shack (who has since given back their $10 million loan) and other well-known restaurant operators over smaller businesses.
“Defendants not only decided to line their own pockets at the expense of Plaintiff and the Class members, they affirmatively chose to not disclose to any small business owner that they were prioritizing larger business loans and not following the PPP’s official guidelines of ‘first come, first served,” the complaint alleges.
The lawsuit can be found here.
Proposed class action lawsuits filed a day apart in California allege JPMorgan Chase and Wells Fargo unlawfully wavered on the requirement to process $349 billion in small business Paycheck Protection Program (PPP) applications on a first-come, first-served basis as mandated by the COVID-19 relief package’s rules.
The plaintiffs—a Glendale, California auto repair shop, a Montrose frozen yogurt seller and a tile retailer—allege in their respective suits that the banks, as evidenced in a Small Business Administration report, “overwhelmingly” prioritized distribution of the Coronavirus Aid, Relief, and Economic Security Act (CARES) funds to larger businesses seeking higher loan amounts while raking in billions in commissions and origination fees.
According to the lawsuits, many smaller businesses—those with 50 or fewer employees—were left with nothing once the entirety of the $349 billion PPP funds, intended for loans that originated between February 15 and June 30, 2020, dried up less than two weeks after they were made available.
On March 27, President Trump signed into law the CARES Act to provide relief to the stock market, banks and small businesses. As the cases tell it, however, the mechanism by which the government doles out money to bail out capital markets and large institutions did not work as fluidly when it came to providing assistance to small businesses at the mercy of banks such as Wells Fargo and Chase.
According to the lawsuits, distribution of the $349 billion allotted for small businesses through the PPP, funds designed to provide payroll, rent, mortgage, interest and utilities relief, was disrupted due in part to a “lack of clear procedures for application,” as well as the absence of any legal duty on the part of banks to verify the financial numbers submitted by those who made claims for the money.
“In other words, the banks had no obligation to verify whether or not the financial information they received from their clients was true or false,” one lawsuit scathes, alleging what the plaintiff calls a “clear incentive” for banks to solicit and submit loans for larger businesses over small companies in need of relief.
The case—Outlet Tile Center v. JPMorgan Chase & Co. et al.—succinctly pins the apparent lack of federal COVID-19 relief for many small businesses on the “clear advantage” allegedly provided by the government to “larger and more sophisticated” companies that already had relationships with banks via loans. The lawsuit more specifically charges that fair administration of PPP funds through the Small Business Administration was “questionable from the outset” given that participation in the agency’s loan program requires submission through a bank.
In addition to the sheer volume of funds the understaffed SBA had to administer over a mere two weeks—with the case noting the agency typically administers only roughly $21 billion in loans per year—the bank submission requirement “made access to PPP all but impossible for smaller businesses,” the lawsuit alleges. According to the complaint, though the SBA relayed that 1,035,086 small businesses obtained loans totaling more than $247 million, there exist in the U.S. more than 30.2 million small businesses.
“Thus, PPP has served only 3.2% of small businesses in the United States as of April 13,” the lawsuit says, adding the claim that banks have capitalized on the government’s compensation structure by reaping commissions on loans submitted to the SBA that range from $350,000 to $2 million.
The proposed class action against Wells Fargo—BSJA, Inc. et al. v. Wells Fargo & Co. et al.—alleges the bank concealed from the public that it was prioritizing PPP loan applications in a way aimed at making the bank the most money. The plaintiffs in the suit argue that had Wells Fargo been upfront about how it planned to handled PPP loan applications, small businesses would have submitted their claims to other financial institutions processing the forms on a first-come, first-served basis.
“As a result of Wells Fargo’s dishonest and deplorable behavior, however, thousands of small businesses that were entitled to loans under the PPP were left with nothing because Wells Fargo chose to maximize its loan origination fees rather than comply with the rules of the program and serve the needs of its small business customers,” the case says.
The other case claims JPMorgan Chase “strung small business owners along” in relaying that their applications had been received within minutes of their submission. In truth, Chase “never handed the paperwork to the SBA,” the suit says, claiming the bank “callously ignored or openly lied to hundreds of thousands of their small business customers” from April 7 to 16 on the status of their “doomed applications.” Further, the lawsuit claims Chase solicited PPP applications “personally from its best clients” before making such available to small businesses.
The lawsuit against Wells Fargo alleges the bank similarly mishandled PPP applications. According to the complaint, despite receiving hundreds of thousands of applications from small businesses, Wells Fargo prioritized those submitted by bigger companies, thereby allowing the bank and others in its industry to pull in billions in commissions while small businesses “got nothing.” From the complaint:
“Upon information and belief, Wells Fargo prioritized those PPP loans that earned them the highest origination fees rather than processing PPP loan applications on a “first come, first served” basis as required. In doing so, Wells Fargo enriched itself at the expense of American taxpayers, undercut the intent of Congress and the Senate, undercut the dollar-per-dollar effectiveness of the CARES Act itself, and caused irreparable harm to countless small businesses and workers who actually needed the temporary funding of the PPP loans to make payroll, retain their employees, and stay afloat.”
Both lawsuits can be found below.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.
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