The program, which has had broad, bipartisan support, was first enacted in March 2020 as a way to keep workers attached to their jobs. The PPP allowed banks to issue government-backed loans that could be forgiven if businesses maintained their payroll. Banks receive fees for their role. The program closed to new applicants in late May.
In her June letter to the SBA, Warren referenced a class action suit filed by American Video Duplicating Inc. against Citigroup, Wells Fargo, Bank of America and other lenders that alleged “that the banks have systematically failed to pay to agents of borrowers — in most cases accountants — their share of the processing fees established under the program, stiffing agents out of an average of $22,000.” A Bank of America spokesperson noted that all litigation on the issue, including this suit, has ended, citing the December legislation that led to many PPP disputes being resolved. The other banks mentioned did not immediately respond to requests for comment about the suit.
Warren cited initial SBA rules that the so-called agent fees would be paid by the lender followed by later rules that shifted the responsibility to borrowers.
Warren requested data on how many loan applications were submitted with the assistance of an agent and information on why the SBA changed its guidance — in addition to payments made to agents.
Ratliff CPA Firm filed a lawsuit in July 2020, on behalf of the SBA, against First-Citizens Bank & Trust Company, Intuit Inc. and Intuit Financing Inc., Pinnacle Bank and Truist Bank, with the stated purpose “to recover damages and civil penalties arising from a scheme to submit the actual submission of false claims for payment to the Small Business Administration.” A Truist spokesperson did not comment, saying the bank does not discuss pending litigation. The other defendants did not immediately respond to requests for comment.
The Department of Justice declined to join the suit in March.
Dick Harpootlian, co-counsel for Ratliff CPA Firm, said he made a presentation about the suit to both Warren’s office and the SBA in June, prior to Warren’s letter.
His presentation centered around the changing language surrounding the PPP, as banks were originally supposed to pay their agents, but this later caused confusion and was changed by law in December 2020 to say that borrowers were to pay the agents.
“And here’s the thing,” Harpootlian said, “no one will take credit for putting that in the bill… and again, who’s getting screwed? These small businesses that provided services in a very difficult time.”
Harpootlian said if there was a chance of anyone paying attention to the suit, he knew it would be Warren, which is why his team decided to present to her. “Whether it’s overdraft fees or any consumer protection from the banks, she’s been a champion,” he said.
In terms of how much has gone unpaid, Harpootlian in his presentation estimated that, as of Aug. 8, 2020, “given that many large banks refused to pay and given the volume of lawsuits filed, it seems reasonable to suppose that it exceeds $100 million.”
Marc Caputo contributed to this report.