Wells Fargo has been sued again over its alleged failure to process applications for taxpayer-funded Paycheck Protection Program (PPP) loans on a first-come, first-served basis.
The small business behind the 34-page proposed class action out of California claims Wells Fargo’s mishandling of PPP loan applications rings “eerily similar” to a laundry list of past misconduct perpetrated by the bank. Much like the bank’s aim in opening fake accounts and doctoring the posting of debit card charges to reap overdraft fees, Wells Fargo’s current tract with regard to handling PPP loan applications serves to maximize the company’s profits at the expense of its customers, the lawsuit alleges.
“In the present PPP loan program context, Wells Fargo failed to process loan applications in the order in which they were submitted, and instead prioritized larger loan applications so as to maximize Wells Fargo’s commissions under the PPP,” the plaintiff, a La Jolla, California restaurant, alleges.
When the PPP was launched as part of the federal CARES Act, Wells Fargo was initially unable to participate given the restrictions on additional lending imposed on the bank by the government over the fake accounts scandal. The suit says, however, that overwhelming demand for PPP loans led the Federal Reserve in April 2020 to lift the restrictions, on a “narrow and temporary” basis, on Wells Fargo’s ability to lend in an effort to process and disburse more money to small businesses.
When the bank’s participation in the PPP was announced, Wells Fargo was allowed to issue up to $10 billion in small business loans and affirmed it would focus its efforts on non-profits and businesses with fewer than 50 employees, the case says.
Although banks that elected to participate in the PPP were required to process loan applications on a first-come, first-served basis, Wells Fargo has intentionally failed to do so, the lawsuit claims. Further still, the case alleges Wells Fargo only desired to take part in the PPP because lenders could pull in commissions of between one and five percent of the overall loan amount. According to the complaint, the PPP program represented an attractive opportunity for the defendant given the loans issued through such were risk-free in that they are guaranteed by the Small Business Administration and the federal government.
“To gain access to this honey pot, Wells Fargo represented that it would abide by the terms of the PPP and assist small businesses with fewer than 50 employees if it were allowed to participate in the program,” the lawsuit reads.
The suit alleges that as a result of Wells Fargo’s apparent conduct, small and minority-owned businesses were shut out of the PPP loan program. Instead, Wells Fargo favored large entities who were already customers and had pre-existing lending relationships with the bank without disclosing such to small businesses, the case says. Moreover, Wells Fargo took to processing PPP applications “in such a manner as to maximize its commissions” while undergoing the least amount of work, the suit scathes.
“Had Wells Fargo complied with the law, small businesses could have (and would have) submitted their PPP applications to other financial institutions that were processing applications on a first-come, first-served basis,” the complaint says.
Wells Fargo is at the forefront of a stable of financial institutions who have been hit with potential class action litigation during the coronavirus pandemic over their alleged failure to process PPP loan applications in accordance with federal first-come, first-served rules. Relatedly, other institutions have been hit with complaints that allege they failed to compensate CPAs, attorneys, consultants and loan brokers who helped businesses prepare their PPP loan applications.
The lawsuit can be read below.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.