Autumn McClain  |  June 25, 2020

Category: Covid-19

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The novel coronavirus has put the world’s population at risk of illness, and the restrictions needed to stem the spread have further strained the world’s economy. In an effort to combat the pandemic’s financial impact, United States lawmakers have passed several relief packages including the Paycheck Protection Program, a provision under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.

Under the CARES Act, businesses can receive low-interest loans to cover certain expenses. Unfortunately, some Paycheck Protection Program lenders have failed to compensate agents who help businesses prepare and submit Paycheck Protection loan applications.

What Are Paycheck Protection Program Lenders?

Paycheck Protection Program lenders are traditional financial institutions like banks that are offering loans to businesses under the program being overseen by the Small Business Association (SBA). To qualify for the program, lenders must be a “federally insured depository institution, federally insured credit union, [or] Farm Credit System institution” according to SBA guidelines.

Lenders are paid “points,” according to Accounting Today, for the loans they give. depending on the loan amount. After the business proves that it spent the loan on approved expenses, the SBA may forgive the loan amount.

Lenders are only part of the equation. The CARES Act establishes the role of agents to help ensure that banks provide loans to businesses outside their own clients. Agents may be accountants, attorneys, or other professionals who help businesses complete these forms.

What Do Paycheck Protection Program Lenders Do?

Paycheck Protection Program lenders provide the capital needed for borrowers to make ends meet during the coronavirus pandemic. Without the business needed to remain open, many small business owners can’t afford to pay employees, leading to layoffs. Layoffs only further compound the problem because more people without jobs mean more people unable to spend money. A lender’s job is to bridge the gap until the economy picks back up.

The SBA wrote to Paycheck Protection Program lenders to stress the importance of assisting businesses in underserved areas, businesses owned by economically and socially disadvantaged individuals, and businesses in operation for fewer than two years.

“Together with our partners, the SBA is asking you to redouble your efforts to assist eligible borrowers in underserved and disadvantaged communities, allowing us to expand economic opportunity,” the letter reads. “SBA is dedicated to sustaining our nation’s small businesses and retaining tens of millions of employees.”

What Are the Duties of Paycheck Protection Program Lenders?

Paycheck Protection Program lenders fulfill a few different requirements in the PPP loan process. Lenders must ensure that businesses have completed all the required paperwork and are expected to make a good-faith effort to check that the information on the loan forgiveness application is correct. Paycheck Protection Program lenders are then required to make a judgment on the borrower’s loan forgiveness application and deliver the decision to the SBA.

Lenders have other duties related to processing these loans. First, lenders are required to pay agents who help borrowers complete the process. The money is intended to come from the “points” lenders gain by providing loans. But according to Accounting Today, 98 percent of lenders aren’t paying agents for their services.

Paycheck Protection Program Lenders and PPP Loans

Paycheck Protection Program lenders are authorized to give loans to cover specific costs, including payroll. Per the program rules, lenders are charged with judging the loan applications as well as applications for forgiveness. If the full amount of the loan is put toward the accepted expenses, that loan may be fully forgiven by the SBA. The loans are intended to help borrowers by giving them the necessary funds without penalizing them for borrowing.

What Regulations Are Stated in the CARES Act?

The regulations of the Paycheck Protection Program are stated under the CARES Act. Passed in March it includes $377 billion earmarked for small business loans. Roughly $350 billion of it is intended for the Paycheck Protection Program, which was initially created to cover 8 weeks of expenses but has since been extended to 24 weeks. Loans are capped at $2 million and must be used to pay rent, mortgage interest, utilities, or payroll.

Regulations of these loans include a fixed interest rate of 1 percent and a maturity of two years for loans submitted before June 5, or five years for loans submitted after that date. Forgiveness for these loans is dependent upon the borrower maintaining or rehiring employees. Loans may not be eligible for full forgiveness if the full-time headcount falls or if wages decrease.

What Can You Do to Get the Compensation You Deserve?

The number of lenders, many of them well-known financial institutions, allegedly failing to pay agents for their work is staggering. A lawsuit filed in California lists more than 10 banks as defendants including Citigroup, Citibank, U.S. Bank, JP Morgan Chase, Wells Fargo, Bank of America, and Paypal Holdings. According to Accounting Today, the number of potential defendants could reach nearly 5,000. There are currently 200 defendants.

“Each lender has to be sued, so we need an agent for each lender,” a lawyer representing agents told Accounting Today. “We’re getting calls from CPAs who have been harmed. Over 5,000 [lenders] made PPP loans, but so far only six or seven have said they will pay the fees. None of them are the large banks.”

This Paycheck Protection Program Lenders Class Action Lawsuit is American Video Duplication Inc., et al. v. Citigroup Inc., et al, Case No. 2:20-cv-03815 in the United States District Court of the Central District of California.

If you’re an agent who hasn’t been paid for the services you provided to businesses seeking PPP loans, you may be eligible to join a class action lawsuit like that described above.

Join a Free CARES Act Class Action Lawsuit Investigation

If you are an agent who helped prepare and/or submit a PPP application but were not paid by the lender as required by the PPP, you may have a legal claim.

Get a Free Case Evaluation

This article is not legal advice. It is presented
for informational purposes only.

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2 thoughts onWhat Are the Duties of Paycheck Protection Program Lenders?

  1. Trishcelia Banks says:

    ONGOING UNPAID EXPENSES FOR ME. I’VE BEEN TRYING TO GET HELP FROM ALL AREAS. NOTHING HAS CHANGED

  2. MONEICIA Nyemina HOLLINGTON says:

    Yes they never help my business

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