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President's Page by Jennifer Lorenz

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. Among its many components, the CARES Act established the Paycheck Protection Program (“PPP”), a loan program that made $349 billion available to small businesses using the Small Business Administration (“SBA”).

The PPP loan was designed to incentivize small businesses to keep their workers on the payroll.According to the SBA, it will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

However, Bank of America, Wells Fargo, JP Morgan Chase and US Bank have been sued in a series of lawsuits for allegedly failing to process PPP loans on a first-come first-served basis and prioritizing PPP loan applications for their own benefit.In the Southern District of Texas, a Complaint against Wells Fargo Bank, N.A. was filed on April 11, 2020 by business owner Edward Scherer.

The Complaint alleges that “At an unprecedented time of severe national need, Wells Fargo chooses privileged discriminatory policies driven by corporate greed over the recognized and urgent needs of America’s small businesses.” The Complaint further alleges that “Nothing in the CARES Act authorizes or permits the Defendant to pick and choose who would gain access to, or benefit from, the federally backed lending program. And, the priority of access to these limited funds is material – the demand is overwhelming as America responds to the economic tsunami of COVID-19 upon small businesses. There is no justification for requiring small businesses who did not have a Wells Fargo business checking account as of February 15, 2020, to go to the end of the line and suffer the inevitable consequences of the first-come-first served system that has been implemented under the CARES Act. It is no secret that the overwhelming and immediate demand for assistance under the CARES Act will cause the allocated $349 billion to quickly run out."

Similar Complaints have been filed against Bank of America, JP Morgan Chase and U.S. Bancorp., each by different Plaintiffs, but with similar allegations.A Complaint against Bank of America Corporation, Bank of America N.A. specifically alleges that “BofA has, once again, prioritized corporate greed at the expense of its small business customers."

A Complaint against JPMorgan Chase& Co., JPMorgan Chase Bank, N.A., alleges, “As a result of Chase’s dishonest and deplorable behavior, however, thousands of small businesses that were entitled to loans under the PPP were left with nothing because Chase chose to maximize its loan origination fees rather than comply with the rules of the program and serve the needs of its small business customers.”Click here for citation. A Complaint against U.S. Bancorp., U.S. Bank, N.A., alleges that “Rather than processing Paycheck Protection Program (“PPP”) applications on a first-come, first-served basis as required by the rules governing that program, U.S. Bank prioritized loan applications seeking higher loan amounts because processing those applications first generated larger loan origination fees for the banks."

After just 14 days the PPP loan program's initial$349 billion was exhausted. On April 21, 2020 Senate passed a new $470 billion package allotting $370 billion more for SBA loans. The new package adds $310 billion to the PPP loan program that is still run directly through the lenders to help small businesses fund payroll costs. The new round of funding for these PPP loans is supposed to be offered on a first come first serve basis.

As always, please contact me at Jlorenz@dietzedavis.com if I can be of any assistance or if you have any helpful suggestions. There will be more information for attorneys in the webinar on Friday, April 10. I look forward to virtually seeing you then!

Stay Healthy and Safe!

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