JPMorgan Chase, First Republic Refuse to Pay PPP Agent Fees Class Action

To alleviate some of the economic pressure on small businesses caused by closures to prevent the spread of Covid-19, Congress offered the Paycheck Protection Program (PPP). The government anticipated that small businesses would need the help of agents, such as attorneys and accountants, to prepare their applications, and they provided for such agents to be paid through the lenders for the program. However, many agents are reporting that lenders have refused to pay them. Among the lenders refusing to pay are JPMorgan Chase and First Republic Bank.

The class for this action is all agents who helped a business prepare an application for a PPP loan under the CARES Act. Alternatively, it proposes a California Class.

The PPP provided forgivable loans to cover some expenses of small businesses, such as employee paychecks, for eight weeks. It was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP was to be administered by the Small Business Administration (SBA) and the Treasury, with the loans made through banks and other ordinary lenders.

The complaint alleges that the SBA’s regulations for the program “expressly contemplate and encourage PPP agents to assist small businesses with their Applications…. Specifically, the regulations require that PPP Agents be paid from a portion of the set fees provided to SBA Lenders for processing the PPP Loan.”

According to the complaint, lenders are “generously compensated” for facilitating the PPP loans. For example, for loans of up to $350,000, the SBA pays lenders 5% of the loan amount.

The CARES Act says, “Agent fees will be paid by the lender out of the fees the lender receives from SBA. Agents may not collect fees from the borrower or be paid out of the PPP loan proceeds.” As with the lender fees, the agent fees are based on a percentage of the loan amount. For example, for loans up to $350,000, the agents are to be paid 1% of the loan amount.”

The agent fees are to be paid out of the lender’s fees.

However, a number of lenders, having been paid their lender’s fees, are refusing to pass along the agents’ portions.

The complaint makes a clear point: “Nowhere in the CARES Act or the SBA Regulations does the Federal Government state, or even suggest, that Lender’s approval is required in order for an Applicant to use an Agent.”

The Department of Justice (DOJ) is now beginning to investigate banks for non-payment of agent fees. The complaint alleges that “on May 27, 2020, United Community Bank, Inc. (‘UCB’)[] received a civil investigative demand (‘CID’) … pursuant to the False Claims Act. The CID directed UCB and its affiliated entities ‘to produce certain documents and respond to written interrogatories relating to the PPP loans approved by the Bank, the Bank’s non-payment of fees to agents of borrowers and the Bank’s policies related to payment or non-payment of agent fees.”

Article Type: Lawsuit
Topic: Government Programs or Benefits

Most Recent Case Event

JPMorgan Chase, First Republic Refuse to Pay PPP Agent Fees Complaint

July 22, 2020

To alleviate some of the economic pressure on small businesses caused by closures to prevent the spread of Covid-19, Congress offered the Paycheck Protection Program (PPP). The government anticipated that small businesses would need the help of agents, such as attorneys and accountants, to prepare their applications, and they provided for such agents to be paid through the lenders for the program. However, many agents are reporting that lenders have refused to pay them. Among the lenders refusing to pay are JPMorgan Chase and First Republic Bank.

JPMorgan Chase, First Republic Refuse to Pay PPP Agent Fees Complaint

Case Event History

JPMorgan Chase, First Republic Refuse to Pay PPP Agent Fees Complaint

July 22, 2020

To alleviate some of the economic pressure on small businesses caused by closures to prevent the spread of Covid-19, Congress offered the Paycheck Protection Program (PPP). The government anticipated that small businesses would need the help of agents, such as attorneys and accountants, to prepare their applications, and they provided for such agents to be paid through the lenders for the program. However, many agents are reporting that lenders have refused to pay them. Among the lenders refusing to pay are JPMorgan Chase and First Republic Bank.

JPMorgan Chase, First Republic Refuse to Pay PPP Agent Fees Complaint
Tags: Covid-19 Related, Failure to Pay for Work or Services Rendered, Provisions of Government Programs