A proposed class action claims First Community Bank, United Community Bank, First Citizens Bank, TD Bank and their respective directors have failed to pay those who assisted small businesses applying for Paycheck Protection Program (PPP) loans during the COVID-19 pandemic.
The lawsuit out of South Carolina alleges that although the Coronavirus Aid, Relief, and Economic Security (CARES) Act expressly specified that agents who assisted borrowers with PPP applications were to be paid by lenders, the defendant banks have, as a matter of policy, refused to issue such payments.
According to the case, the CARES Act offered over $349 billion in initial relief—and later an additional $310 billion—to small businesses experiencing financial hardship amid the COVID-19 pandemic. Under the CARES Act’s Paycheck Protection Program, businesses could apply for forgivable loans from the Small Business Administration through private lenders such as the defendants, who, in exchange for facilitating the loans, were to receive “a substantial processing fee” equal to a certain percentage of the loan amount, the suit says. Per the case, lenders were to receive five percent for loans not more than $350,000; three percent for loans between $350,000 and $2,000,000; and one percent for loans of at least $2,000,000.
Under the clear terms of the PPP, any agent who assisted a borrower with preparing or filing a loan application was to be compensated through a portion of a lender’s processing fee, the complaint states. The lawsuit says each approved loan would result in a processing fee and thus called for payment for any agent—including attorneys, accountants, consultants, borrowers’ employees, loan brokers, and anyone else representing an applicant in its business with the SBA—who participated in the process.
“Each successful application processed by a Lender constituted good and valuable consideration, in that a processing fee would be paid to the Lender upon disbursement of the funds to the applicant,” the complaint reads. “Accordingly, every successfully disbursed loan and resultant processing fee where an agent assisted in the application should have resulted in compensation to the agent by the Lender.”
The plaintiff, a South Carolina CPA firm, alleges that the defendant banks have, with the knowledge and approval of the individual director defendants, uniformly refused to pay any fees to agents who assisted with borrowers’ PPP applications.
According to the case, United Community Bank posted on its website that the bank “will not pay fees to or otherwise compensate anyone acting as an agent of the business or advising or assisting in the preparation of the Paycheck Protection Program application or otherwise.”
Likewise, First Citizens Bank purportedly insisted that it was “not required to pay a borrower’s agent unless the agent is disclosed to the lender bank prior to the borrower submitting its PPP application and the lender bank affirmatively agrees at the time to pay the agent.”
The plaintiff alleges that after inquiring about agent fees, TD Bank informed the firm that the bank had “elected against the payment of agent fees.”
The lawsuit goes on to allege that the defendants have created online portals for the submission of PPP applications that expressly prevent applicants from disclosing the existence of agents.
“Upon information and belief,” the complaint says, “Defendant Lenders created these systems for the purpose of denying agent fees, despite knowledge that applicants would use professional agents to help expedite the application process.”
The lawsuit, which has been removed from state to federal court, echoes allegations in similar lawsuits filed against the likes of Bank of America, Chase Bank, Citibank, and PNC over their apparent blanket refusals to pay PPP agents.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.