Court dismisses loan agents' case seeking cut of banks' PPP processing fees (Banking Dive, 2020-11-18)

Summary

A Banking Dive article by Dan Ennis, published Nov. 18, 2020, reports that a federal judge in California granted a motion by Bank of America, Citi, JPMorgan Chase, Wells Fargo and U.S. Bank to dismiss a case loan agents brought, claiming they were owed fees for helping small businesses apply for PPP loans. It says the judge gave plaintiffs 21 days to refile, and quotes Judge Otis Wright II that the Court cannot say any amendment would be futile. The article says the lawsuit was filed in June by American Video Duplicating, Tush Law Ltd. and Kenneth M. Hahn, and that the allegations were "too generalized" to be linked to a specific defendant bank.

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Dive Brief

Court dismisses loan agents' case seeking cut of banks' PPP processing fees

Published Nov. 18, 2020

Dan Ennis Senior Editor

Dive Brief:

- A federal judge in California on Monday granted Bank of America, Citi, JPMorgan Chase, Wells Fargo and U.S. Bank motion to dismiss a case loan agents brought, claiming they were owed fees for helping small businesses apply for Paycheck Protection Program (PPP) loans this year.
- However, the judge is giving plaintiffs 21 days to refile their complaint.
- “[B]ecause Plaintiffs could conceivably allege more facts to support a proper claim for agent fees, the Court cannot say any amendment would be futile,” Judge Otis Wright II wrote Monday in his order.

Dive Insight:

The lawsuit, filed in June by American Video Duplicating, Tush Law Ltd. and Kenneth M. Hahn (under the business name Cal State financial), alleges agents are entitled to receive up to 1% of the fees the U.S. government paid lenders for processing the PPP loans, under the guidelines of the CARES Act and the Small Business Administration (SBA). The plaintiffs provided consulting, legal, accounting or tax preparation services to PPP applicants.

Wright, of the U.S. District Court for the Central District of California, said Monday the plaintiffs' allegations were "too generalized" to be linked to a specific defendant bank. He added that the CARES Act doesn't give cause to recover agent fees unless there is an agreement between an agent and a bank or other lender.

The case is one of dozens filed amid the hasty rollout of the PPP this year. Courts in New York, Texas and Florida have ruled that banks aren't obligated to share processing fees.

Small-business owners, too, have sued banks , claiming they were shut out of the first-come, first-served application process because banks prioritized existing customers or larger loans — and the heftier processing fees attached.

Filed Under: Commercial, Regulations & Policy

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