JPMorgan Chase, Wells Fargo, Bank of America (BofA) and US Bank have each been the subject of class actions brought against them by small businesses alleging unfair practices in processing Paycheck Protection Program loans. (PPP), according to Bloomberg.
The lawsuits accuse the banks of prioritizing higher-value loan applications, rather than processing applications on a first-come, first-served basis – which the PPP intended to do – leaving thousands of people behind. businesses without access to loans. PPP funding was exhausted within two weeks of being made available, but in the three days before it dried up, banks reportedly processed loan applications of $ 150,000 at less than twice the rate on larger loans. .
The lawsuits claim that the largest loans were made upstream so that banks could collect higher commissions from the government, which pays banks to process the loans: fees range from 5% for one loan less. $ 350,000 at 1% for a loan over $ 2 million.
While the preferential treatment that banks give to requests for larger loans is not entirely illegal, they should be aware of how their procedures are viewed. BofA was sued separately for preferential treatment by prioritizing PPP loans for its existing clients – a federal judge ultimately confirmed BofA’s ability to impose these enforcement restrictions, and it is possible that the same conclusion could be drawn at About the latest round of lawsuits.
As the government prepares to allocate more funds to PPP loans, banks will have an opportunity to help more businesses – Chase, for example, has issued $ 14 billion in loans, but claims to have around $ 26 billion overdue if Congress gets more funding. But in order to take full advantage of this opportunity to build trust and loyalty among the clients they serve, banks will need to be as transparent as possible about handling their requests and distributing funds, or they risk new ones. accusations of underhand practices or lack of sympathy during a time of immense need.
Want to read more stories like this? Here’s how to get there:
- Business Insider Intelligence analyzes the banking industry and provides in-depth analyst reports, proprietary forecasts, customizable charts, and more. >> Check if your company has access to BII Enterprise membership
- Subscribe to Bank briefing, the Business Insider Intelligence expert newsletter designed for today’s (and tomorrow’s) decision-makers in the financial services industry, delivered to your inbox 6 times a week. >> To start
- Explore related topics in more depth. >> Visit our report store
- Current subscribers can log in to read the briefing here.