A class-action lawsuit was recently filed against Wells Fargo, alleging the big bank favored PPP loan applications requesting large loan amounts.
Wells Fargo recently came under fire for how it handled some applications for the Paycheck Protection Program. In fact, a company based in California filed a class-action lawsuit against the bank, alleging “unfair actions against some small businesses seeking government-sponsored coronavirus relief under the PPP.” Last month, a $349 billion forgivable loan plan was approved by the Treasury Department to help small businesses remain in business during the COVID-19 crisis. It was also designed to help small businesses be able to continue paying their employees during the pandemic. However, shortly after it was approved, the fund ran out of money.
The class-action suit was filed on Sunday on behalf of small business owners. It argues that “Wells Fargo unfairly prioritized businesses seeking large loan amounts, while the government’s small business agency has said that PPP loan applications would be processed on a first-come, first-served basis.” The suit further alleged that Wells Fargo focused on businesses seeking larger loan amounts because it would “receive millions of dollars in processing fees.” The suit further states:
“Making matters worse, Wells Fargo concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money.”
Wells Fargo isn’t the only big bank with complaints against it. In fact, a number of small businesses have filed complaints and lawsuits against big banks over concerns that they prioritized some loan applications over others. When asked about the PPP program back on April 5 and how it would address loan applications, Wells Fargo said it was “committed to serving small businesses with fewer than 50 employees under the PPP, which is intended to incentivize American small businesses to avoid laying off workers by offering up to $10 million in forgivable loans.” Charlie Scharf, the CEO of Wells Fargo, added:
“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.”
How did the plaintiffs discover that Wells Fargo allegedly shuffled applications around, though? Well, according to the suit, the allegations are supported by data released by the U.S. Small Business Association. That data “outlines the PPP loans that were processed and indicates when the transactions occurred.” The suit calls into question “a comparison between loans processed at the start of the program – April 3 to April 13 – versus loans processed just before the program ran out of money between April 13 and April 16.” It states:
“In the last three days of the PPP—banks processed loan applications for $150,000 and under at twice the rate of larger loans.”
According to the lawsuit, this allegedly suggests that banks like Wells Fargo “front-loaded applications for the largest loans, otherwise the percentage change of applications submitted in the last three days of the program would be consistent among all application types.”
Before the PPP fund ran dry, more than 1.6 million applications were approved.