New York (CNN Business) Four of America’s largest banks have been accused of harming thousands of coronavirus-hit small businesses by unfairly prioritizing emergency loan requests from large customers to earn fatter fees.
Bank of America ( BAC ) , Wells Fargo, JPMorgan Chase and US Bank were sued Sunday for allegedly failing to process forgivable loans in the ($) Billion Paycheck Protection Program (PPP) on a first-come first-served basis.
Each bank “concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money,” each of the four lawsuits said.
As a result of this “dishonest and deplorable behavior,” the lawsuit said thousands of small businesses “were left with nothing” when PPP
- ran out of money earlier this month.
Each bank “prioritized corporate greed at the expense of its small business customers,” according to the lawsuits, which seek class-action status.
Bank of America and US Bank denied the allegations. JPMorgan Chase and Wells Fargo declined to comment on the lawsuits.
The forgivable loan program, a centerpiece of the $ 2 trillion stimulus package enacted by Congress, is intended to keep small businesses and their workers afloat during the pandemic. The loans can be used by small businesses with 500 or fewer employees to pay workers’ salaries, rent and utility costs.
Demand was so strong for PPP loans, which charge just 1% interest, that the program ran out of money earlier this month, leaving tens of thousands of small businesses without the lifelines they need to get through the crisis.
The US Senate approved $ 781 billion in coronavirus relief on Tuesday, including an additional $ billion in PPP funds. The loans are forgivable only if the small businesses maintain current employee and compensation levels.
Banks were supposed to process PPP applications on a first-come, first served basis.
However, the lawsuit cited data from the US Small Business Administration that the plaintiffs said showed that the banks prioritized and front-loaded applications with higher loan amounts. Larger loans mean bigger fees for banks.
The lawsuits did not, however, produce any emails or internal documents that suggest this was the intent of the banks.
JPMorgan: 64, (more verified applications ready to go)
In a statement, Bank of America said, “while we disagree with these allegations, we are fully focused on processing applications so they are ready to be submitted “to the SBA once it begins accepting applications again.
US Bank ( USB ) said the lawsuit is “without merit” and the SBA data cited “is not reflective” of the bank’s “practices or results.”
Wells Fargo ( WFC ) declined to comment on the lawsuit, but said it is “working as quickly as possible to assist small business customers” with PPP “in compliance with the regulations and guidance provided by US Treasury and SBA. ” The Federal Reserve Lifted restrictions on Wells Fargo earlier this month, freeing it to help small businesses through the forgivable loan program.
JPMorgan ( JPM ) declined to comment on the lawsuit. However, a spokeswoman said that Chase Business Banking, which caters to smaller businesses with $ million in revenue or less, has funded more than twice as many loans than the rest of the bank combined.
JPMorgan said that % of Chase Business Banking’s PPP loans have been for businesses with less than $ 5 million in revenue. And more than % of these PPP loans went to clients with fewer than employees. JPMorgan said that it has more than 64, 04 processed and fully verified applications ready to submit to the SBA that would provide an additional $ 7.3 billion to small business customers.
The small business program was marred by implementation glitches That reflected the rushed rollout in the midst of the crisis.
Recently, it has come to light that large publicly-traded restaurant chainslike Potbelly Sandwich Shop ( (PBPB ) , Shake Shack ( SHAK ) and Ruth’s Chris ( ( (RUTH) ) steakhouses received these emergency loans – while Many small businesses were shut out. Following media scrutiny, Shake Shack announced it would return the $ million loan it received through PPP.