First Horizon, IberiaBank Hit with Class Action Over Alleged Refusal to Pay PPP Agent Fees

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IberiaBank has refused to pay agents who assisted small businesses with preparing and applying for loans under the Paycheck Protection Program (PPP), a proposed class action alleges.

Filed against First Horizon Bank, the successor by merger to IberiaBank, the lawsuit claims the defendant has ignored federal regulations that require PPP agents be paid for their work and instead “kept the PPP Agent Fees for themselves.”

The 32-page lawsuit explains the Paycheck Protection Program, funded initially for $349 billion and later expanded with an additional $310 billion, was enacted under the CARES Act as a means to provide partially forgivable loans to cover payroll for small- and medium-sized businesses impacted economically amid the COVID-19 crisis. Backed by the Small Business Administration and administered by the U.S. Treasury, PPP loans were to be funded by private lenders such as the defendant, the case says. 

According to the lawsuit, SBA regulations also accounted for the use of independent agents—such as attorneys, consultants, accountants, bookkeepers, and employees of the applicants—to assist borrowers with rapidly and efficiently filing applications for PPP loans, which the case relays were to be distributed on a first-come, first-served basis.

“Without the valuable assistance of their Agents, the Borrowers, many of whom are unsophisticated in the banking and lending arena, would be shut out of obtaining PPP funds, undermining the essence of the PPP as designed by Congress,” the lawsuit says.

Importantly, loans initiated under the PPP differed from traditional SBA 7(a) loans in that both lenders and agents were to be compensated for their work in originating the loans, the complaint shares. According to the suit, the PPP incentivized lenders and agents to work together to quickly and efficiently file and process applications by providing compensation from the federal government that was to be split between them, with roughly 80 percent of the fees going to the lender and 20 percent to the agent.

Per the case, nowhere in the CARES Act or SBA regulations does the federal government require that agents be approved by the lender or the SBA in order to collect PPP agent fees, which were to be paid to the agent by the lender from its portion of their origination fees.

Although IberiaBank has been paid its share for funding PPP loans, the bank has refused to pay agents such as the plaintiff, a Tarpon Springs, Florida tax and accounting services firm, who assisted PPP borrowers, the lawsuit alleges.

Per the complaint, IberiaBank declined the plaintiff’s request to remit agent fees unless the firm signed an “onerous” agreement requiring the plaintiff to make “reps and warranties,” limit the bank’s liability, and seek indemnification by the firm in favor of the defendant.

“No such release is required or contemplated by the PPP,” the complaint argues.

The lawsuit contends the plaintiff and proposed class members have not been compensated for their work and their “valuable and necessary contribution to the PPP as intended by Congress.”

The case comes on the heels of a growing trend of proposed class action litigation filed against banks and credit unions who’ve allegedly refused to pay PPP agents.

ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.

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