Wells Fargo Prioritizes Larger PPP Loans California Class Action

Loans under the Paycheck Protection Program (PPP) were supposed to be distributed to small businesses on a first come, first served basis. However, the complaint for this class action alleges that Well Fargo & Co. and Wells Fargo Bank, NA gave priority to applications asking for larger loans, because these would earn higher fees for it.

The PPP offered $349 billion in government-guaranteed loans for small businesses. The program was under the charge of the Small Business Administration (SBA) and is meant to give small businesses eight weeks of assistance so that they can avoid laying workers off.

The complaint quotes the text of the bill as saying, “[T]he Administrator should issue guidance to lenders and agents to ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in the underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially economically disadvantaged individuals…, women, and business in operation for less than 2 years.”

Wells Fargo claimed to back this priority. The complaint quotes its CEO as saying, “While all businesses have been impacted by this crisis, small businesses with fewer than 50 employees and nonprofits often have fewer resources. Therefore, we are focusing our efforts under the Paycheck Protection Program on these groups.”

However, the complaint alleges that this was not how Wells Fargo handled the applications it received: “Wells Fargo prioritized and front-loaded applications with higher loan amounts. This shown by comparing data from loans processed between April 3, 2020 (when the PPP started) and April 13th and April 16th (when the program ran out of money).”

According to the complaint, Wells Fargo did this because it earned higher fees on those loans.

Wells Fargo’s words matters, the complaint says, because small businesses were entitled to apply only for one loan. If they applied with one bank, they could not then submit another application with another. Had they known that Wells Fargo would prioritize larger businesses, they would have applied with a different lender.

The plaintiffs in this case are two small businesses that submitted loan applications to Wells Fargo but were not able to obtain loans.

The complaint alleges fraudulent concealment and violations of California laws.

The class for this action is all businesses in California that met the criteria to receive a loan under the PPP, between February 15 and June 30, 2020, who submitted a timely application for a PPP loan through Wells Fargo, but whose applications were not processed or who were not issued loans in accordance with SBA Regulations (i.e., on a “first come, first served” basis) and with the stated intent of the CARES Act (i.e., prioritizing small business concerns and entities in underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially economically disadvantaged individuals…”).

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