Last week, the publishers of Banking Exchange received several complaints from businesses alleging that large banks exploited the Paycheck Protection Program by prioritizing larger businesses.
The claims were backed up this week by class action lawsuits against JP Morgan in California. The lawsuit alleges unfair business practices by prioritizing borrowers who were seeking larger loan amounts rather than a good faith effort to take business on a first come first serve basis.
The two companies could not be more different, other than the size of the businesses. One of the businesses focus on cybersecurity, and the other on event planning. Banking Exchange readers at small businesses also complained that their experience was similar, with a number claiming that they had filled out the form within the hour it was offered and received multiple notes telling Chase Small Business customers not to try and contact them or to visit a branch as they would not be helped.
As a result, Chase and other banks could collect large processing fees in the billions by taking the higher loan amounts first, according to the suits filed. Community banks have not had similar incidents reported, but some of the larger banks such as Wells Fargo and Bank of America have had similar complaints brought against them.
The accusations are particularly egregious because spokespeople from large banks had already stated that the banks would favor their own small business clients, and so this was done to businesses that had already chosen banks such as JP Morgan Chase as the bank of record for the business.
JP Morgan Chase customers are still told that they are not able to speak to any customer service people or receive any service at a physical bank location. The lawsuits are also claiming false advertising as JP Morgan Chase sent out multiple messages to Chase Small Business customers claiming the bank would process applications on a first come, first serve basis but by the time the businesses were allegedly reshuffled, the smallest business missed out on the opportunity.
The PPP loans were part of the government’s first round of the $349 billion emergency small business lending program meant to keep businesses going during the pandemic. Unless a small business either had a payroll seven figures deep or it used a regional bank, America’s smallest businesses were shut out, according to the lawsuits.
- Fed’s Quarles says stress testing innovations helped steer banks through Covid-19 crisis
- Wells Fargo sells $600bn fund arm to private equity firms
- PPP Delivers $140B in 2021 as Biden Prioritizes ‘Mom and Pop’ Businesses
- First National Strikes Merger Agreement with The Bank of Fincastle
- US Banks Resilient Despite Pandemic