Originating Banks Refusal to Pay PPP Agents Class Action

The Paycheck Protection Program (PPP) was intended to provide forgivable loans so that small businesses could keep paying their employees. Included in its terms were provisions for payments to agents who helped small businesses prepare their applications. The complaint for this class action alleges that Bank of America, NA, North Shore Bank, and TD Bank, NA have all refused to pay agents as required by the program.

The PPP is part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, designed to get money to small businesses quickly, so that they would not have to lay off workers or go out of business.

The PPP is administered by the Small Business Administration (SBA). Banks and other lenders could earn a fixed percentage of the loan amount as compensation—for example, for loans up to $350,000, a fee of 5% of the amount of the loan.

The lenders were taking no risks, since the loans were guaranteed and they were not required to verify the accuracy of the small businesses’ application information. The complaint says, “Instead, small businesses seeking PPP funding were required to make specific attestations and certifications under penalty of serious civil and criminal penalties, including imprisonment and hefty fines.”

To prepare such applications, small businesses were likely to need the help of agents, such as accountants, bookkeepers, attorneys, or financial advisors. The PPP provided for compensation for such agents—for example, for loans up to $350,000, a fee of 1% of the amount of the loan. According to the complaint, “The PPP Regulations express require that Agent Fees be paid by the lending institution out of the origination fees the lender would receive from the SBA, and prohibit Agents from collecting fees from applicants or taking fees from the PPP loans.”

Unfortunately, the complaint claims that Bank of America, North Shore Bank, and TD Bank, who have all earned origination fees on such loans, are now refusing to pay these agent fees.

The complaint estimates that Bank of America made “at least $250 million in origination fees from the SBA—and probably received more than that.” Similarly, it claims that “assuming the most conservative estimate, TD Bank received or is eligible to receive at least $84 million in origination fees from the first round of PPP alone.”

Three classes and three subclasses have been defined.

The Bank of America Class is all persons and entities in the US who (1) served as an agent for a person or entity who applied for and received a PPP loan through Bank of America and (2) were not paid an agent fee by Bank of America.

The North Shore Bank and TD Bank classes are similar. Each of the three classes also has a Massachusetts Subclass, for persons and entities in Massachusetts.

Article Type: Lawsuit
Topic: Government Programs or Benefits

Most Recent Case Event

Originating Banks Refusal to Pay PPP Agents Complaint

July 6, 2020

The Paycheck Protection Program (PPP) was intended to provide forgivable loans so that small businesses could keep paying their employees. Included in its terms were provisions for payments to agents who helped small businesses prepare their applications. The complaint for this class action alleges that Bank of America, NA, North Shore Bank, and TD Bank, NA have all refused to pay agents as required by the program.

Originating Banks Refusal to Pay PPP Agents Complaint

Case Event History

Originating Banks Refusal to Pay PPP Agents Complaint

July 6, 2020

The Paycheck Protection Program (PPP) was intended to provide forgivable loans so that small businesses could keep paying their employees. Included in its terms were provisions for payments to agents who helped small businesses prepare their applications. The complaint for this class action alleges that Bank of America, NA, North Shore Bank, and TD Bank, NA have all refused to pay agents as required by the program.

Originating Banks Refusal to Pay PPP Agents Complaint
Tags: Covid-19 Related, Failure to Pay for Work or Services Rendered, Provisions of Government Programs