The Agents Got Nothing

They had a plausible reason to ask. The CARES Act told SBA to reimburse lenders for processing PPP loans. SBA's first interim final rule then said agent fees would be paid by the lender out of the lender's SBA fee, and it capped what an agent could collect: 1 percent for loans up to $350,000, 0.50 percent for loans above $350,000 and below $2 million, and 0.25 percent for loans of at least $2 million.¹

That sounded like a fee schedule. The agents read it as a payment promise.

The courts read it as a cap.

The fee that looked like a promise

The fight turned on one bureaucratic sentence. In ordinary English, "Agent fees will be paid by the lender" sounds mandatory. In law, it was surrounded by uglier machinery: SBA Form 159, existing Section 7(a) compensation-agreement rules, and the CARES Act's different treatment of lenders and agents.

Congress used mandatory payment language for lenders. SBA "shall reimburse" them. For agents, the Act said they "may not collect" fees above limits set by SBA. The lender had a statutory payment stream. The agent had a ceiling.

Sport & Wheat, a Florida CPA firm, became the anchor case. It said it helped borrowers get PPP loans through ServisFirst, Synovus, The First, and Truist, and that the banks kept the agent share of the SBA processing fee. The alleged unpaid amount was $4,526 across the named lenders. If the agents were right, thousands of PPP helpers had a claim on a slice of lender fees nationwide.¹

Judge T. Kent Wetherell II started with the question directly: were agents entitled to part of the fees paid by the federal government to PPP lenders? His answer was no. The CARES Act did not require lenders to pay agents without an agreement. The SBA rule did not create a private right of action. The old Section 7(a) rules still mattered. If an agent was going to be paid by a lender, the paperwork had to show it.¹

Sport & Wheat had no agreement with the lenders. The borrowers had no agreement with the lenders requiring payment to Sport & Wheat. No Form 159 carried the fee. The court dismissed the amended complaint, and when Sport & Wheat did not secure leave to file a second one, the case itself was dismissed with prejudice three weeks later.¹²

The wave that did not become one case

By August 2020, the Judicial Panel on Multidistrict Litigation had 12 agent-fee actions in 10 districts in front of it, plus notice of 50 related actions in 16 more districts. The defendant list ran past 100 lenders, from community banks to Chase, Bank of America, and Wells Fargo.³

The plaintiffs wanted one industry-wide proceeding. The banks mostly did not. Chase wanted, at most, a Chase-specific MDL. Wells Fargo supported industry-wide centralization. The panel denied transfer for everyone.³

The cases shared a legal question, but not enough common facts. Different lenders had different agent-fee practices. Many cases involved different bank lineups. Many defendants appeared in only one action. An MDL built around the whole industry would require breaking multi-lender cases apart and sending pieces to different judges. The panel left the suits where they were.³

The same legal issue would get decided district by district, often fast, and almost always before discovery could show anything about how banks handled agent relationships.

The big banks got the same answer

American Video Duplicating brought the money-center version in California. The defendants included Citibank, U.S. Bank, JPMorgan Chase, Wells Fargo, Bank of America, Live Oak, and Harvest Small Business Finance. The plaintiffs were service providers who said they helped clients secure PPP loans and that the lenders refused to pay agent fees.⁴

Judge Otis D. Wright II dismissed the first amended complaint in November 2020. The order first found a pleading problem: the plaintiffs had not tied their alleged injuries to specific applications and specific defendants. But the merits ruling was the harder part for the agents. The court said that, by then, every court deciding the issue had held that the CARES Act did not require lenders to pay agent fees without an agreement and did not create a private cause of action to collect them.⁴

The plaintiffs got leave to amend. The case still ended with all claims dismissed with prejudice in February 2021.⁵

Wells Fargo's cleaner case ended even more quietly. T.C. Koziara, PLLC and Fahmia, Inc. sued Wells Fargo in North Carolina. Wells Fargo moved to dismiss in September 2020 on the same question, whether agents are entitled to lender payment when no lender promised to pay them, and cited Sport & Wheat for the answer. The plaintiffs voluntarily dismissed the case less than a month later.⁶⁷

The cases ended without a national settlement or a borrower-facing scandal.

What the agents saw correctly

The agents had reasons to think they were part of the program. PPP was sold as a race. Business owners needed help. Banks were overloaded. The forms were new. Guidance changed. Many applicants went to the person they already trusted with payroll, taxes, books, or paperwork.

That labor had value. In some cases it probably made the difference between a borrower getting in the line and missing the first round. The SBA rule even acknowledged the agent role by setting a fee cap and forbidding agents from charging borrowers or taking money from loan proceeds.

But PPP's legal design did not pay value wherever value appeared. It paid the lender. Everyone else needed contract economics.

Lenders could voluntarily structure agent, referral, or technology arrangements — and some did. The fintech and software layer became meaningful because those arrangements existed outside the bare statute. The agent-fee plaintiffs tried to make the statute itself do that work after the fact. Courts would not.

What the banks won

The holdings did not decide whether any bank's agent practices were fair, and they did not bless every private channel through which PPP moved. They said the agents had no enforceable right to a slice of the lender fee without an agreement, and that the CARES Act/SBA language did not give them a lawsuit to create one.

Whether agents stood inside the legal payment stream depended on whether the program's rules gave them a claim.

Notes

1. Sport & Wheat, CPA, PA v. ServisFirst Bank, Inc., No. 3:20-cv-05425-TKW-HTC (N.D. Fla.), Doc. 87, Order Dismissing Amended Complaint, Aug. 17, 2020. ↩₁ ↩₂ ↩₃ ↩₄
2. Sport & Wheat, CPA, PA v. ServisFirst Bank, Inc., No. 3:20-cv-05425-TKW-HTC (N.D. Fla.), Doc. 93, Order Denying Leave to Amend and Dismissing Case With Prejudice, Sept. 4, 2020. ↩
3. In re Paycheck Protection Program (PPP) Agent Fees Litigation, MDL No. 2950 (J.P.M.L.), Doc. 356, Order Denying Transfer, Aug. 5, 2020. ↩₁ ↩₂ ↩₃
4. American Video Duplicating Inc. et al. v. Citigroup Inc. et al., No. 2:20-cv-03815-ODW-AGR (C.D. Cal.), Doc. 131, Order Granting Defendants' Motions to Dismiss, Nov. 16, 2020. ↩₁ ↩₂
5. American Video Duplicating Inc. et al. v. Citigroup Inc. et al., No. 2:20-cv-03815-ODW-AGR (C.D. Cal.), Doc. 138, Civil Minutes dismissing action with prejudice, Feb. 4, 2021. ↩
6. T.C. Koziara, PLLC et al. v. Wells Fargo & Co. et al., No. 1:20-cv-00588 (M.D.N.C.), Doc. 15, Wells Fargo memorandum of law in support of motion to dismiss, Sept. 15, 2020. ↩
7. T.C. Koziara, PLLC et al. v. Wells Fargo & Co. et al., No. 1:20-cv-00588 (M.D.N.C.), Doc. 18, Notice of Voluntary Dismissal Without Prejudice, Oct. 12, 2020. ↩