Wells Fargo Did Not Submit Smaller PPP Applications Class Action

The Paycheck Protection Program (PPP), meant to deliver relief to small businesses during Covid-19 difficulties, distributes its loan funding through ordinary institutions, including Wells Fargo Bank, NA. The complaint for this class action alleges that Wells Fargo chose to prioritize larger customers instead of following a “first come, first served” policy.

The class for this action is all Wells Fargo Bank small business customers who used Wells Fargo for assistance with and processing of PPP loans administered by the SBA.

The Small Business Administration (SBA) was the government entity chosen to administer the PPP loan program, but banks like Wells Fargo were tasked with accepting and processing applications.

The complaint alleges that Wells Fargo “made misrepresentations to many small business owners that [it] would assist them with their PPP loan applications and submit them for approval.” This is important as small businesses often do not have personnel with the skills to complete complicated paperwork.

However, the complaint claims that without the knowledge of the small businesses they were purportedly helping, Wells Fargo “chose to prioritize select customers and ‘bigger businesses’ for approval to the detriment of” smaller businesses. According to the complaint, the bank “knowingly and negligently chose to accept federal money to process PPP loans while knowing it would not do so or did not have sufficient infrastructure in place to handle the applications submitted…”

The plaintiff in this case, DNM Contracting, Inc., is a small business based in Houston, Texas. DNM began asking Well Fargo about PPP in or around the first week in April 2020. It received e-mails telling it that the bank was not yet accepting applications for the program. Although DNM also asked other institutions about PPP, they said they were only accepting applications from established customers. However, DNM began compiling the document and information that would be needed for its applications.

On April 14, it received an e-mail from Wells Fargo saying that the bank was now accepting PPP applications. The complaint says, “Approximately twenty minutes after receiving the e-mail notification, [DNM] submitted its loan application to [Wells Fargo]. Loans for the PPP program were supposed to be approved on a first-come, first-serve basis.”

Despite this, DNM never received any notification about the status of its application. Eventually, found out that the funding for PPP had been exhausted.

The complaint alleges, “Upon information and belief, [Wells Fargo] did not actually submit [DNM’s] application for approval by the SBA.” It also alleges that the bank “never processed or properly submitted to the SBA the loan applications of many other small businesses that were provided to Wells Fargo when [it] began accepting applications.”

Why did it do this? The complaint claims, “Wells Fargo financially benefitted from servicing its bigger customers that applied for larger loans through the PPP program.”

The complaint alleges fraud and fraudulent inducement, breach of fiduciary duty, and negligence, among other things.

Article Type: Lawsuit
Topic: Government Programs or Benefits
Tags: Covid-19 Related, Unfair Business Practices, Your Bank