PNC Bank Favored Large Customers for PPP Loans California Class Action

The Small Business Administration (SBA) is overseeing a Paycheck Protection Program (PPP) to help small businesses keep workers on their payrolls during the Covid-19 pandemic. The loans are intended to be distributed on a first come, first served basis. However, the complaint for this class action alleges that PNC Financial Services Group, Inc. and PNC Bank, NA have “lined [their] own pockets” by putting larger loan applications and those for PNC’s existing customers ahead of those for others.

The class for this action is all eligible persons or entities in California who applied for a loan under the PPP with PNC and whose applications were not processed by PNC in accordance with SBA regulations and requirements or California law.

The loans under the PPP, for up to $10 million, are guaranteed by the SBA. For each loan made under this program, a bank gets a fee of between 1% and 5%.

Unfortunately, the complaint claims that PNC has “benefitted from moving bigger and existing customers to the front of the line for PPP loans.”

The plaintiff in this case, Lincoln Network, Inc., claims it submitted all required documents for a PPP loan to PNC on April 3, 2020, the first day lenders were permitted to accept applications for them. Based on the “first come, first served” rule, its application should have been among the first PNC submitted to the SBA.

However, on April 17, PNC told Lincoln that its application had not been timely submitted. It claimed to be getting “all the [applications] that didn’t make it in ready so as soon as government puts more money in we can submit.” The following day, PNC claimed it was “unable to complete the review and SBA registration process” for Lincoln’s application “before the SBA announced on its website that it is unable to accept new applications for the PPP program because the authorized funding has been fully allocated.”

The complaint claims that SBA lenders “may not, among other things, (i) self-deal; (ii) have a real or apparent conflict of interest with a borrower; (iii) knowingly misrepresent or make a false statement to the SBA; (iv) engage in conduct reflecting a lack of business integrity or honesty; or (v) engage in any activity which taints the bank’s objective judgement in evaluating the loan.”

The complaint reproduces SBA charts showing that the overall average loan size for applications was greater during the first ten days of the program, with smaller loan sizes in applications coming in during the last three days, just before funds ran out. The complaint alleges that this demonstrates that lenders were favoring the larger loan applications.

The complaint alleges violation of California laws, breach of fiduciary duty, and negligence.

Article Type: Lawsuit
Topic: Government Programs or Benefits
Tags: Deceptive Business Practices, Loan-Related Unfair Practices, Provisions of Government Programs, Self-Dealing