Wells Fargo, JPMorgan sued for allegedly shuffling coronavirus small business loan applications
Wells Fargo and JPMorgan chase are being sued by a group of small businesses who allege the companies shuffled loan applications to fulfill larger loans first.
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Wells Fargo disclosed this week that federal and state authorities are investigating its lending practices under a government-backed small business loan program designed to blunt the economic pain of the coronavirus pandemic.
The bank decline to provide additional details about the probes, which it revealed in its quarterly earnings filing with the Securities and Exchange Commission on Tuesday, except that it had received formal and informal inquiries regarding its handling of the $660 billion Paycheck Protection Program. The program was created at the end of March in the $2.2 trillion CARES Act and offers forgivable loans to businesses with fewer than 500 employees at a 1 percent rate.
NATION'S BIGGEST BANKS SUED OVER HANDLING OF PPP LOANS
The disclosures come just a few weeks after the bank, along with three other major banks, was sued for allegedly shuffling program applications and prioritizing borrowers who were seeking larger loan amounts in order to generate bigger loan origination fees.
Wells, the third-largest U.S. bank by assets, was unable to fully participate in the aid program when it first launched in early April, in part because the Federal Reserve had restricted how many loans it could make following the bank’s fake account scandal in which it created millions of accounts for customers without their knowledge.
SMALL BUSINESS RESCUE PROGRAM STILL GRANTING BIG LOANS DESPITE EARLIER SCRUTINY
The central bank lifted the cap for the program’s loans in April, but said Wells would have to send the fees it makes on the loans to either the Treasury Department or to a nonprofit.
As of April 27, Wells Fargo has submitted more than 100,000 PPP applications to the Small Business Administration for review, a spokesperson told FOX Business. Companies with fewer than 25 employees accounted for 90 percent of those applications, and 80 percent generated less than $2 million annually. The average loan size was $110,000.
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