Pacific Premier Bank has refused to compensate those who helped small businesses prepare and submit their applications for Paycheck Protection Program (PPP) loans, a proposed class action alleges.
Though the nation’s financial institutions were called upon by Congress to swiftly distribute money to small businesses through the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), banks were not required to verify the accuracy of PPP loan applications, the suit begins. Instead, small businesses were given the sole responsibility of filling out and guaranteeing the accuracy of the information submitted to the government for financial relief, the case says.
In order for small businesses to be able to make timely, truthful and accurate applications for PPP assistance, the complaint continues, Congress realized the nation’s accountants, tax preparers, financial advisors, attorneys and other agents would have to step in. Under CARES Act rules, these parties, known as agents, were to be compensated by lenders based on a percentage of the total loan amount issued to a small business. The suit explains:
“For the majority of loans (those under $350,000), the lender would receive an amount equal to 5% of the loan as compensation, and if the borrower used an agent such as a CPA or accountant, the lender was to pay an amount equal to 1% of the loan amount to the agent. In other words, compensation from the federal government to the lender and the borrower’s agent was allocated as 80% to the lender and 20% to the CPA or attorney assisting the small business borrower.”
The lawsuit alleges that Pacific Premier Bancorp and Pacific Premier Bank, one of Southern California’s largest, “decided they do not need to complete the final step of the process” – that is, paying agents who assisted small businesses with their PPP loan applications. According to the plaintiff, a certified public accounting firm, Pacific Premier Bank’s failure to pay PPP application agents evidences a “deliberate scheme” from the very beginning in that the defendants failed to set up a structure or ask any questions to determine whether borrowers utilized an agent in submitting their applications.
“It appears that this scheme was to claim ignorance of the existence of the agent as an excuse not to pay the agent its share of the compensation,” the suit contends. “This refusal is harming accountants, attorneys, and other agents who dropped everything (in the midst of tax season) to assist their customers in filling out these vital loan applications correctly and in compliance with the PPP, and who specifically only allowed to be paid for these services out of the compensation paid to the lender.”
The plaintiff claims that while Pacific Premier Bank has received its compensation—i.e. five percent of the total loan amount remitted to the CPA firm’s client—the firm itself has not received from the defendant the one percent agent fee to which it’s entitled under the CARES Act. Over the two rounds of PPP funding, the defendants processed more than 3,800 loan applications worth more than $1.4 billion, the complaint says, netting Pacific Premier Bank over $40 million in origination fees from which they were to pay prep agents.
The suit joins anumberofothercomplaintsfiled amid the pandemic over lenders’apparentrefusalto pay PPP loan application prep agents for their work, while a slew of other cases allegecertain banks effectively ignored the government’sfirst-come, first-servedrule in handling loan applications. The plaintiff alleges it’s among a large number of other agents whose critical work on behalf of small businesses has gone uncompensated in blatant violation of PPP regulations.
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